Penalty for late return filing was deleted where income was below taxable limit and no notice under section 139(2) was served.

Penalty for failure to file a return within time was held unjustified where the return originally showed income below the taxable limit, no notice under section 139(2) had been served during the assessment year, and the return was later filed in response to notice under section 148. On those facts, there was no obligation to file a voluntary return under section 139(1), and the later disallowances increasing assessed income did not conclusively establish knowledge of taxable income. The assessee was given the benefit of doubt on reasonable cause, so penalty under section 271(1)(a) was deleted.

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Issues: Whether the assessee was liable to penalty for failure to file a return within time under section 139(1), and whether the default was without reasonable cause so as to attract section 271(1)(a).

Analysis: The return filed by the assessee disclosed income below the taxable limit, no notice under section 139(2) had been served during the assessment year, and the return was filed within time in response to notice under section 148. On these facts, the assessee could not be said to have had an obligation to file a voluntary return under section 139(1). The subsequent disallowances enhancing the assessed income were not considered sufficient to fix knowledge of taxable income on the assessee with certainty, and the assessee was given the benefit of doubt on the question of reasonable cause.

Conclusion: Penalty under section 271(1)(a) was not justified and was deleted.

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