Reasonable cause shields penalty where a bona fide belief excluded applicability of the income-tax return filing provision.

Penalty under section 272A(2)(e) applies only where a return was required under section 139(4A), and section 273B protects an assessee that shows reasonable cause. The assessee claimed a bona fide belief that section 139(4A) did not apply because its income was exempt under section 10(23C)(iiiab) and it was substantially financed by the Government. The statutory scheme was read as not extending section 139(4A) to that class of institutions in the manner urged by the Revenue, and the belief was treated as bona fide and reasonable. The penalty was therefore not justified and was deleted.

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Issues: Whether penalty under section 272A(2)(e) of the Income-tax Act, 1961 was leviable for failure to furnish the return of income, or whether the assessee had shown reasonable cause by establishing a bona fide belief that section 139(4A) of the Income-tax Act, 1961 was not applicable because its income was exempt under section 10(23C)(iiiab) of the Income-tax Act, 1961.

Analysis: Penalty under section 272A(2)(e) is attracted only where the return was required to be furnished under section 139(4A), and section 273B saves the assessee from penalty if reasonable cause is shown. The assessee's case was that it was substantially financed by the Government and, on that basis, believed that section 139(4A) did not apply to it. The statutory scheme was examined and it was found that section 139(4A) contains no specific reference to institutions covered by section 10(23C)(iiiab), while the reference in section 2(24)(iia) did not extend to that clause in the manner suggested by the Revenue. On that basis, the assessee's belief was treated as bona fide and reasonable.

Conclusion: The penalty was not justified and was deleted.

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