Reasonable cause for delayed return filing defeated penalty where accounts could not be finalised in time.

Penalty for delayed filing of a return was held to be unjustified where the assessee showed reasonable cause for the delay. The return was filed two months late, but the assessee had sought extension and explained that accounts could not be finalised because the accountant was ill and absent, and business had expanded. The explanation was accepted as sufficient because time was needed to finalise the accounts and determine income before filing a correct return. Accordingly, penalty under section 271(1)(a) was cancelled.

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Issues: Whether penalty under section 271(1)(a) of the Income-tax Act was exigible for the assessee's delayed filing of the return, having regard to the explanation of reasonable cause.

Analysis: The return for the relevant assessment year was filed after the due date but within a delay of two complete months. The assessee had sought extension of time, and the explanation was that the accounts could not be finalised because of the illness and absence of the accountant and the increase in business. In such circumstances, time was required to finalise the accounts and ascertain the income before filing a correct return. The explanation was accepted as a reasonable cause for the delay.

Conclusion: Penalty was not exigible and was cancelled.

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