Delayed return penalty limited to months of unexplained default where reasonable cause covered the rest of the delay.

Penalty for delayed filing under section 271(1)(a) is linked to the period of default and may be quantified month by month at the prescribed rate. Where reasonable cause is shown for part of the delay, the penalty can be confined only to the months for which the assessee failed to show such cause. On the facts noted, the Tribunal found reasonable cause for the entire delay except three months, and that finding was not challenged for the remaining period. The penalty was therefore properly restricted to three months of unexplained default.

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Issues: Whether the penalty under section 271(1)(a) could be restricted to the months for which the assessee had no reasonable cause for delay in filing the return.

Analysis: Penalty under section 271(1)(a) is linked to the period of default and is quantified month by month at the prescribed rate. Where the Tribunal has found that the assessee had reasonable cause for the delay for the entire period except three months, the penalty can be sustained only for those three months of unexplained default. The factual finding on reasonable cause for the remaining period was not challenged in the reference.

Conclusion: The reduction of penalty to three months was justified and the question was answered against the Department, in favour of the assessee.

Ratio Decidendi: Penalty for delayed filing under section 271(1)(a) can be levied only for the months of default for which no reasonable cause is shown.

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