Penalty for initial non-compliance was deleted after later substantial compliance and acceptance of returned income in assessment.

Penalty under section 272A(1)(d) of the Income-tax Act was held unjustified where the assessee initially failed to comply with notices under section 142(1) but later furnished detailed replies and supporting documents that were verified and accepted by the Assessing Officer. As the assessment was completed under section 143(3) by accepting the returned income and without any adverse inference, the earlier non-compliance was treated as effectively regularised and condoned in the course of assessment. The penalty was deleted and the connected appeals were allowed in favour of the assessee.

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Issues: Whether penalty under section 272A(1)(d) of the Income-tax Act, 1961 was sustainable for initial non-compliance with notices under section 142(1) when the assessee later furnished the required details and the assessment was completed under section 143(3) accepting the returned income.

Analysis: The assessment records showed that the assessee initially failed to comply with certain notices, but subsequently filed a detailed reply with supporting documents, which were verified and found tenable by the Assessing Officer. The assessment was ultimately completed under section 143(3) without any adverse inference and by accepting the returned income. On these facts, the non-compliance stood sufficiently regularised in the course of assessment, and the later acceptance of the details indicated that the Assessing Officer had effectively condoned the earlier absence.

Conclusion: The penalty under section 272A(1)(d) was not justified and was directed to be deleted. The issue was decided in favour of the assessee.

Final Conclusion: The connected appeals were allowed and the penalty levied for the alleged non-compliance was set aside.

Ratio Decidendi: Where the assessee subsequently makes substantial compliance with the requisitions and the assessment is completed under section 143(3) accepting the returned income, the earlier default in attendance or compliance may be treated as condoned and penalty for such default is not warranted.

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