Penalty for non-compliance with tax notices restricted where later participation showed reasonable cause for one default.

Penalty under section 272A(1)(d) for non-compliance with section 142(1) notices was examined on a default-wise basis. The first lapse was treated as explained because the assessee later appeared before the Assessing Officer and sought adjournment, showing participation in the proceedings and supporting reasonable cause; penalty was deleted for that default. The second lapse was unsupported by any material or satisfactory explanation, so reasonable cause was not established and penalty was sustained for that non-compliance. The result was a restriction of the penalty to the second default only.

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Issues: Whether penalty under section 272A(1)(d) of the Income-tax Act, 1961, for non-compliance with notices under section 142(1) was leviable in full or required restriction in the facts of the case.

Analysis: The assessee did not comply with two notices issued under section 142(1). For the first notice, the record showed that the assessee subsequently appeared before the Assessing Officer and sought adjournment, indicating participation in the proceedings and supporting the existence of reasonable cause for the initial default. In these circumstances, penal action was not warranted mechanically and the benefit of doubt was extended for the first lapse. For the second notice, no material or satisfactory explanation was produced to show reasonable cause for continued non-compliance, and the default remained unexplained.

Conclusion: The penalty was deleted for the first default and sustained for the second default, resulting in restriction of the penalty to Rs. 10,000/-.

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