Reasonable cause for delayed return filing can justify deletion of penalty where the assessee held a bona fide belief about taxable income.

Penalty for delayed return filing under section 271(1)(a) depends on whether the assessee had reasonable cause for the delay. The Tribunal found that the assessee filed the returns late after a settlement, but genuinely believed his income was below the taxable limit until that settlement. Absence of mens rea was not decisive, yet reasonable cause remained material. On those facts, the assessee's bona fide belief constituted reasonable cause, so deletion of the penalty was upheld.

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Issues: Whether the assessee had shown reasonable cause for the delayed filing of returns so as to justify deletion of penalty under section 271(1)(a) of the Income-tax Act, 1961.

Analysis: The returns were filed late after a settlement under which the assessee agreed to disclose income over the relevant years. The Tribunal found that the assessee genuinely believed that his income was below the taxable limit and that the subsequent settlement did not negate that belief. In proceedings under section 271(1)(a), absence of mens rea is not decisive, but the existence of reasonable cause remains material. On the facts found, the bona fide belief of the assessee constituted reasonable cause for the delay.

Conclusion: The deletion of penalty was justified and the question was answered in favour of the assessee and against the Revenue.

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