Reasonable cause and bona fide belief can nullify penalty for non-filing and alleged concealment of income.

Reasonable cause and bona fide belief can defeat penalty where non-filing of a return and alleged concealment are not shown to involve deliberate or wilful disregard of law. The assessee attributed the default to family circumstances and to a genuine belief that capital gains were not taxable on the sale of gold ornaments obtained on maturity of National Defence Gold Bonds. ITAT Ahmedabad accepted that explanation as sufficient reasonable cause and held that the penalty provisions could not be sustained on those facts. The penalties under sections 271(1)(a) and 271(1)(c) were cancelled.

---

---

Issues: Whether penalties for non-filing of return and concealment of income were sustainable in the presence of reasonable cause and bona fide belief.

Analysis: The assessee's explanation was that the omission to file the return and the consequent tax default arose from family circumstances and a bona fide belief that capital gains was not chargeable on the sale of gold ornaments obtained on maturity of National Defence Gold Bonds. The Tribunal accepted these facts as constituting reasonable cause and relied on the principle that penalties are not warranted where the default is not attended by deliberate or wilful disregard of law.

Conclusion: The penalties under section 271(1)(a) and section 271(1)(c) were cancelled.

---