Wilful default in delayed return filing requires a reasoned rejection of the assessee's explanation before prosecution can proceed.

Prosecution for delayed filing of an income-tax return under Section 276CC cannot rest on a non-speaking rejection of the assessee's explanation. Where the assessee attributes the delay to illness and lack of knowledge and denies wilful default, the competent authority must apply its mind to that explanation and record reasons on the question of wilfulness before prosecution is sustained. A cryptic statement that the reply is unsatisfactory is insufficient. In the present matter, the discharge rejection was quashed because the order did not show any reasoned consideration of the explanation or surrounding circumstances.

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Issues: Whether the rejection of the discharge petition and the initiation of prosecution under Section 276CC of the Income-tax Act, 1961 were sustainable when the assessee's explanation for belated return filing had been recorded but not dealt with by a reasoned order.

Analysis: The assessee had explained that the return was filed belatedly due to ill health and lack of knowledge, and that the default was neither wilful nor intentional. Before prosecution for failure to file the return within time, the authority was required to apply its mind to that explanation and record a reasoned finding on whether the delay was wilful. The order dated 31.03.2011 merely stated that the reply was not satisfactory, but it did not disclose any reasons showing consideration of the assessee's explanation or the surrounding circumstances. Such a cryptic rejection could not sustain prosecution for an offence that turns on wilful failure.

Conclusion: The rejection of discharge was unsustainable and was quashed; the petitioner's challenge succeeded.

Ratio Decidendi: Where prosecution for delayed filing of return depends on wilful default, the competent authority must reject the assessee's explanation by a reasoned order, and a cryptic or non-speaking rejection is insufficient to sustain criminal prosecution.

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