Penalty for non-compliance with tax notices requires deliberate defiance or absence of reasonable cause.

Penalty for non-compliance with notices under section 142(1) was treated as a procedural measure under section 271(1)(b), intended to secure compliance rather than punish every default. The text states that such penalty is ordinarily not warranted unless the assessee acted in deliberate defiance of law, with contumacious, dishonest conduct, or conscious disregard of legal obligation. On the facts described, the explanation that the notices were not effectively received or noticed, together with the absence of deliberate default, was accepted as reasonable cause. The penalty was therefore deleted and the issue was decided in favour of the assessee.

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Issues: Whether the penalty under section 271(1)(b) of the Income-tax Act, 1961 was sustainable for non-compliance with notices issued under section 142(1) of the Income-tax Act, 1961, and whether the assessee had shown reasonable cause for the default.

Analysis: The penalty under section 271(1)(b) is an administrative and procedural penalty intended to secure compliance with statutory notices. It is not ordinarily to be imposed unless the defaulting party acted deliberately in defiance of law, was guilty of contumacious or dishonest conduct, or acted in conscious disregard of legal obligation. On the facts, the explanation that the notices were not effectively received or noticed, coupled with the absence of deliberate defiance and the surrounding circumstances, was accepted as sufficient cause for the non-compliance.

Conclusion: The penalty was not justified and was deleted; the issue was decided in favour of the assessee.

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