Bona fide belief and reasonable cause defeated return-filing penalty where taxable income had not crystallised by the due date.

Penalty for delay in filing the return was treated as not exigible where the assessee had a bona fide belief that no taxable income had arisen by the due date under section 139(1). The return was filed voluntarily, the capital gains position had not fully crystallised because acquisition compensation was still pending, and the explanation that further compensation would be assessable on receipt was accepted as reasonable cause. On that basis, the penalty under section 271(1)(a) was held unsustainable and cancelled in favour of the assessee.

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Issues: Whether penalty for delay in filing the return under section 271(1)(a) of the Income-tax Act, 1961 was exigible when the assessee had a bona fide belief that no taxable income arose by the due date under section 139(1).

Analysis: The assessee's business income was small, and the capital gains position was linked to acquisition compensation that had not fully crystallised by the due date. The return was filed voluntarily, and the explanation that the further compensation would be assessable in the year of receipt was treated as bona fide. In these circumstances, the delay was held to be supported by reasonable cause.

Conclusion: The penalty was not sustainable and was cancelled in favour of the assessee.

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