Reasonable cause defeats trade tax penalty where brief delay in payment is explained by financial distress and later compliance.

Penalty under section 15A(1)(a) of the U.P. Trade Tax Act, 1948 applies only where tax is not deposited without reasonable cause, and a short delay may be excused if the explanation is credible. The assessee showed continuous losses, financial distress, and a four-day delay in payment, with the tax later paid in full. The explanation was accepted as plausible and no contumacious default was found. On these facts, the Allahabad HC held that penal action was not warranted and the penalty was liable to be set aside.

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Issues: Whether penalty under section 15A(1)(a) of the U.P. Trade Tax Act, 1948 was justified for a short delay in payment of tax where the assessee had shown financial distress and had subsequently paid the tax.

Analysis: Penalty under section 15A(1)(a) is attracted only where the dealer fails to deposit the tax due without reasonable cause. The assessee had suffered continuous losses, was in financial difficulty, and the delay in deposit was only of four days. The explanation offered was found to be plausible, and the subsequent payment of tax supported the absence of contumacious default. On these facts, the case for penal action was not made out.

Conclusion: The penalty was not justified and was liable to be set aside.

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