Reasonable cause for delayed return filing defeats penalty where business disruption explains the default.

Penalty for late filing of a return under section 271(1)(a) was held unsustainable where the assessee showed reasonable cause for the delay. The delay arose in the context of business disruption and diversion of the partners' attention, and the surrounding circumstances indicated that the business was not being properly managed. The Tribunal noted that penalty for delayed filing is not automatic merely because the return was filed late. On those facts, reasonable cause was established and the penalty was cancelled in favour of the assessee.

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Issues: Whether penalty for late filing of the return under section 271(1)(a) of the Income-tax Act, 1961 was sustainable when the assessee showed reasonable cause for the delay.

Analysis: The delay in furnishing the return was found to have occurred in the background of disruption in the business and diversion of the partners' attention, supported by surrounding circumstances showing that the business was not being properly managed. On these facts, the Tribunal held that the assessee had established reasonable cause for not filing the return within time. It also noted that penalty under section 271(1)(a) is not an automatic consequence of delay alone.

Conclusion: The penalty was not justified and was cancelled, in favour of the assessee.

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