Head punches not allowed? I'm going to get a little long in my post, as there is a lot involved in Rat's simple question. Since it seems obvious that not only were head punches taught in early TMA, so were eye gouges, hair pulls, throat strikes, etc., I will assume you are speaking of modern organized competition.
In the 1960's and 70's, where GLOVES AND HEADGEAR WERE NOT IN PLAY (even a shin or arm pad would bring humiliation to the wearer), not only were head shots definitely allowed, "kiss" CONTACT WAS ALLOWED for black and sometimes brown belts. "Kiss" being defined as contact not breaking any bones or teeth, cuts not requiring stitches, or causing the head to noticeably snap back. (These being the outside edge of the envelope. Depending on the judge, lesser offenses may have also resulted in a warning, penalty point, or disqualification.) Often green (intermediate) belts were also allowed to go for the head, but no kind of contact was the rule.
So, there was RISK in sparring, a risk that had to be taken into account if you valued your good looks. This fact meant you could not just wade in attacking willy nilly. Timing, finesse and tactics were required to a higher degree than if contact head shots were not allowed. Pure aggressiveness and power were not enough. Plus, having an additional high target zone meant a more varied selection of techniques. Imagine all the fun if the baseball strike zone was expanded another foot higher.
Now, how could kiss contact rules work without most competitors getting disqualified in their zeal to win? The answer - CONTROL - the ability to have full control of your technique so you could stop it exactly where you wanted. This was a skill inherent to karate practice in those and earlier decades. But in the mid 70's, this began to change in some tournaments.
Joon Rhee (an early TKD pioneer and personality in the USA) introduced the use of plastic foam pads for the hands and feet (Mid 70's) much to the dismay of most early competitors. It actually caused more injuries, IMO. Two reasons for this. Physically, the pads added about 2 inches to the fist's reach. So, for those of us using control to stop our punch a half inch from the opponent's face, that extra one and a half inches got impacted into the opponent's face. Mentally, the pads gave a false sense of safety and some fighters felt that the concept of control was no longer applicable. People got sloppy.
Perhaps many competitors no longer have the skills to be allowed to go for the head, much less being allowed "kiss" contact.
With the spread of MA competition and various organizations putting on tournaments, it seems that there several sets of rules, nowadays. I understand grabs and sweeps (once a popular sparring tactic) are now prohibited by some organizations, as well as head shots. Liability issues and social norms may be the culprits. No doubt, if I were to compete today, I'd be disqualified every time (but it would sure be fun!)