Bona fide belief and reasonable cause defeated late-filing penalty for return delay on compensation from acquired agricultural land.

Penalty for delayed return filing was held unwarranted where the assessee showed reasonable cause based on a bona fide belief that compensation received on compulsory acquisition of agricultural land was not taxable. The connected proceedings had also treated the underlying capital gain as non-taxable, which supported the explanation and negatived any contumacious conduct. On that basis, penalty under section 271(1)(a) was deleted and the deletion was upheld in favour of the assessee.

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Issues: Whether penalty under section 271(1)(a) was leviable for delayed filing of the return where the assessee entertained a bona fide belief that the compensation received on acquisition of agricultural land was not taxable.

Analysis: The return was filed belatedly, but the delay was found to be attributable to the assessee's reasonable and bona fide belief that no tax was payable on the compensation arising from compulsory acquisition of agricultural land. The underlying capital gain itself had also been held not taxable in the connected proceedings, supporting the assessee's explanation for the delay and showing absence of contumacious conduct.

Conclusion: Penalty under section 271(1)(a) was not justified and its deletion was upheld in favour of the assessee.

Ratio Decidendi: Where a delayed return is filed under a bona fide and reasonable belief that no taxable income arises, penalty for late filing is not warranted if reasonable cause is shown.

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