Reasonable cause for delayed return filing defeated penalty where the assessee's explanation was not controverted and was rejected without supporting inquiry.

Penalties for delayed filing of returns under section 271(1)(a) were held unwarranted where the assessee explained the delay by stating that its accountant had not completed the accounts and that the business was newly started and inexperienced. The explanation was rejected without calling for supporting material or giving an opportunity to meet the perceived deficiency, and the Revenue did not controvert the explanation. On those facts, there was no basis to conclude that the delay was without reasonable cause, so the penalties were cancelled.

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Issues: Whether penalties imposed for delayed filing of returns under section 271(1)(a) of the Income-tax Act, 1961 were justified in the absence of reasonable cause.

Analysis: The returns were admittedly filed beyond time, but the assessee had explained the delay by stating that the accountant had failed to complete the accounts and that the firm was inexperienced and newly started. The explanation was rejected merely by disbelieving it, without calling for supporting material or affording an opportunity to meet the perceived deficiency. On the facts, there was no material to conclude that the delay was without reasonable cause, and the explanation regarding the accountant was not controverted by the Revenue.

Conclusion: The penalties were not warranted and were cancelled in favour of the assessee.

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