Bona fide delay in filing return justified cancellation of penalty under income-tax law

Penalty under section 271(1)(c) was held unsustainable where the assessee's delayed return was found bona fide, in light of his illiteracy, the explanation about funds brought from abroad, and the later filing of returns after search. The power to levy penalty is discretionary, and the appellate authority may examine the full factual matrix to decide whether the penalty should be maintained. On the facts recorded, the Tribunal's view that no penalty was leviable disclosed no error of law or jurisdiction, so the cancellation of penalty was upheld against the Revenue.

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Issues: Whether the Tribunal was right in cancelling the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1981-82.

Analysis: The assessee's failure to file the return earlier was accepted as bona fide, having regard to his illiteracy, the explanation regarding funds brought from abroad, and the returns later filed after search. The power to levy penalty under section 271(1)(c) is discretionary, and the appellate authority may examine the entire facts to determine whether the penalty should be sustained. On the facts found, the Tribunal's conclusion that penalty was not leviable did not suffer from any error of jurisdiction or of law.

Conclusion: The Tribunal was right in cancelling the penalty, and the question was answered against the Revenue and in favour of the assessee.

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