Reasonable cause for late return filing accepted where flood damage disrupted records and accounts were bona fide reconstructed.

Delay in filing a return may be excused where genuine disruption of records prevents timely compliance and the assessee makes bona fide efforts to reconstruct the accounts. The Tribunal found that flood damage had destroyed records, the assessee had sought extensions and informed the department of the difficulty, and it had been actively reconstructing the accounts with no motive to postpone filing. Rejection of the extension request did not, by itself, negate reasonable cause for the whole period of default. On those facts, reasonable cause existed for the entire delay and penalty under section 271(1)(a) was cancelled.

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Issues: Whether the assessee had reasonable cause for the delay in filing the return so as to escape penalty under section 271(1)(a).

Analysis: The return was due on 29 June 1968, but the assessee sought extensions, informed the department of losses caused by heavy floods, and showed that its records were damaged and had to be reconstructed. The Tribunal found that from 1 October 1968 onwards the assessee was making sincere efforts to reconstruct the accounts and had no motive to delay the return. The rejection of the extension request did not, by itself, negate reasonable cause for the entire period of default.

Conclusion: The assessee was held to have reasonable cause for the entire delay, and the penalty was cancelled.

Final Conclusion: The appeal succeeded and the penalty for late filing of the return was deleted.

Ratio Decidendi: Where delay in filing a return is attributable to genuine disruption of records and bona fide efforts to reconstruct accounts, the entire period of delay may constitute reasonable cause and penalty is not leviable.

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