Protective assessment treated as substantive, and penalty for delayed return upheld where no reasonable cause was shown.

Penalty under section 271(1)(a) was attracted where an assessment initially made on a protective basis had, in substance, become a substantive assessment because no other person was assessed on that income. The court also found that the assessee failed to establish reasonable cause for the delay in filing the return, which supported the levy of penalty. The first referred question was not pressed and remained unanswered, while the surviving issue was decided against the assessee and in favour of the Department.

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Issues: Whether penalty under section 271(1)(a) of the Income-tax Act, 1961 was leviable where the assessment, though originally made on a protective basis, was treated as a substantive assessment and no reasonable cause for delay in filing the return was established.

Analysis: The first referred question was not pressed and was left unanswered. On the second question, the assessment made on the basis of the return filed by the assessee was held to have assumed the character of a substantive assessment, since no assessment had been made in the hands of any other person in respect of that income. In such circumstances, the statutory condition for penalty under section 271(1)(a) was satisfied. The concurrent finding that the assessee offered no reasonable explanation for the delayed return supported the levy of penalty.

Conclusion: The levy of penalty was valid and the answer to the second question was in the affirmative, against the assessee and in favour of the Department.

Final Conclusion: The reference was answered only on the surviving issue, and the penalty under section 271(1)(a) was upheld on the footing that the assessment had become substantive and the delay remained unexplained.

Ratio Decidendi: Where no assessment is made in the hands of any other person for the same income, an assessment initially made on a protective basis may be treated as a substantive assessment, and penalty for delayed filing of the return is attracted in the absence of reasonable cause.

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