Extension requests and silence from tax authorities may establish reasonable cause for delayed wealth-tax returns, but only for the covered period.

Applications for extension of time to file wealth-tax returns may establish reasonable cause for delay where the Revenue does not reply, but only for the period actually covered by the request. The note states that for assessment year 1970-71, reasonable cause was recognised up to 31 March 1971, while penalty remained for the later unexplained default. For assessment year 1975-76, the extension request covered the filing date and cancellation of penalty was sustained. It also notes that the penalty for continuing default is to be computed under the law in force on the date the assessment is completed, when the penalty becomes exigible.

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Issues: (i) Whether penalty for delay in filing the wealth-tax returns for assessment years 1970-71 and 1975-76 was leviable where applications for extension of time had been made and no reply was received from the Wealth-tax Officer. (ii) Whether, for the default in assessment year 1970-71, the penalty for the three months' delay had to be computed with reference to the law as it stood on the date when the assessment was completed.

Issue (i): Whether penalty for delay in filing the wealth-tax returns for assessment years 1970-71 and 1975-76 was leviable where applications for extension of time had been made and no reply was received from the Wealth-tax Officer.

Analysis: The applications for extension of time were treated as material for deciding whether the assessee had reasonable cause for the delay. Non-reply by the Wealth-tax Officer to an application for extension was treated as significant, and the filing of the extension requests, though not signed by the assessee personally, was held not to be fatal where the surrounding circumstances showed an attempt to seek further time. For assessment year 1970-71, the assessee was held to have reasonable cause only up to 31 March 1971, but not for the subsequent period of delay, since no further extension was proved and no sufficient reason was shown for the later default. For assessment year 1975-76, the assessee was found to have applied for extension up to the date on which the return was filed, and the cancellation of penalty was therefore sustained.

Conclusion: Penalty was not leviable for assessment year 1975-76, but for assessment year 1970-71 the assessee had no reasonable cause for the later period of delay and penalty survived for that part.

Issue (ii): Whether, for the default in assessment year 1970-71, the penalty for the three months' delay had to be computed with reference to the law as it stood on the date when the assessment was completed.

Analysis: The penalty provision was held to operate in the light of the legal position prevailing when assessment was completed, because the question of imposition of penalty arises after assessment and the amended provision then applies. On that basis, the rate of penalty for the continuing default was directed to be worked out according to the law in force on the date of completion of assessment for the relevant year.

Conclusion: The penalty for the three months' default in assessment year 1970-71 was to be computed according to the law as it stood on the date of completion of assessment.

Final Conclusion: The appeal succeeded only in part: the cancellation of penalty for assessment year 1975-76 was upheld, while penalty for assessment year 1970-71 was sustained for the post-31 March 1971 period and remitted for computation on the applicable legal basis.

Ratio Decidendi: Where an assessee has applied for extension of time and the revenue does not respond, the existence of reasonable cause may be recognised for the period covered by the application, but penalty for the continued default thereafter depends on whether sufficient cause is shown for the subsequent delay and is computed under the law applicable when the penalty becomes exigible after assessment.

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