Reasonable cause for late return filing may arise from incomplete prior-year accounts, limiting penalty exposure under tax law.

Incomplete finalisation of the earlier year's accounts can constitute reasonable cause for delay in filing the subsequent year's return under section 271(1)(a) of the Income-tax Act, 1961. On that basis, delay up to the filing of the preceding year's return, with a limited further allowance to complete the accounts, was treated as excusable for the assessment year 1973-74, leaving penalty only for the remaining period. For assessment year 1974-75, the return was filed soon after the prior year's return, so no substantial delay survived and the penalty was cancelled.

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Issues: Whether delay in filing the return for the subsequent assessment years was liable to penalty under section 271(1)(a) of the Income-tax Act, 1961, and whether the pendency of accounts of the earlier year constituted reasonable cause for the delay.

Analysis: The incomplete finalisation of the earlier year's accounts was accepted as a reasonable cause for the delayed filing of the return for the next year. The delay for the assessment year 1973-74 was excused up to the filing of the return for the preceding year, with an additional allowance of two months for completing the accounts, resulting in penalty only for eight months. For the assessment year 1974-75, the return was filed soon after the return for the preceding year, and no substantial delay survived.

Conclusion: The penalty was sustained only partly for the assessment year 1973-74 and cancelled for the assessment year 1974-75.

Ratio Decidendi: Incomplete completion of the earlier year's accounts can constitute reasonable cause for delay in filing the return for the subsequent year under section 271(1)(a) of the Income-tax Act, 1961.

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