Reasonable cause for late return filing defeats penalty when tax work was entrusted to a regular practitioner.

Penalty under section 271(1)(a) for late filing was held unsustainable where the assessee had entrusted tax compliance to a regular income-tax practitioner and the return was not filed because the practitioner failed to act. Although the return was neither filed within time under section 139(1) nor in response to notice under section 148, and assessment proceeded under section 144, the Tribunal treated the assessee's conduct as prudent and reasonable. On those facts, the default was not characterised as wilful neglect, gross neglect, or a flagrant violation of law, and reasonable cause was accepted.

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Issues: Whether penalty under section 271(1)(a) of the Income-tax Act, 1961 was leviable for failure to file the return within time where the assessee had entrusted the matter to a regular income-tax practitioner.

Analysis: The return was not filed within the time prescribed under section 139(1) and was also not filed in response to the notice under section 148, leading to assessment under section 144 and initiation of penalty proceedings. The assessee's explanation was that all tax matters were handled by a regular practitioner, to whom the relevant papers had been handed over, and the practitioner failed to file the return. The Tribunal accepted this as a prudent and reasonable course of conduct, and held that the default occurred because the professional failed to take the necessary steps. In these circumstances, the failure could not be characterised as wilful neglect, gross neglect, or flagrant violation of law.

Conclusion: The assessee had reasonable cause for the default, and the penalty under section 271(1)(a) was not sustainable.

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