Wilful default under income-tax law requires mens rea; delayed return filing after extension did not justify prosecution.

Failure to file income-tax returns within the original time did not constitute wilful default where the returns were required after search and seizure, the time for compliance had been extended before the complaint, and the evidence did not show conscious disregard of the notice. The court treated the absence of mens rea as material and noted that the respondents ultimately filed the returns, which supported the view that the default was not deliberate. Prosecution under section 276C of the Income-tax Act, 1961 was therefore not sustainable, and the respondents succeeded.

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Issues: Whether the respondents' failure to file income-tax returns within the time allowed amounted to wilful default attracting prosecution under section 276C of the Income-tax Act, 1961.

Analysis: The returns were required after search and seizure of the account books, and time had been extended before the complaint was filed. The question was whether the delay still reflected a deliberate breach or conscious disregard of the notice. On the evidence, the absence of mens rea could not be treated as unreasonable, and the conduct of the respondents in ultimately filing the returns supported the view that the default was not wilful.

Conclusion: The failure to file the returns within the original time did not amount to wilful default, and prosecution under section 276C was not sustainable. The decision was in favour of the respondents.

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