Bona fide delay explanation under the compulsory deposit scheme can defeat penalty where the explanation is reasonable and non-improbable.

Penalty for delayed payment under the compulsory deposit scheme is not automatic. Where the statute gives the assessee an opportunity to explain the delay, the explanation must be assessed on its merits, and penalty should not be imposed mechanically. Here, the assessee paid before the date believed applicable and offered a bona fide explanation based on an extended time limit; the record did not show the explanation to be an afterthought or inherently improbable. In the first year of the scheme, with different due dates for different classes of taxpayers, the explanation was accepted as reasonable, and the penalty was deleted.

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Issues: Whether penalty for delayed payment of compulsory deposit was exigible where the assessee offered an explanation of bona fide belief about the extended time limit.

Analysis: Section 10(3) contemplates an opportunity to explain the delay, and penalty is not to be levied mechanically. The assessee had made the payment before the date believed to be applicable, and the record did not show that the explanation was an afterthought or otherwise improbable. In the first year of operation of the compulsory deposit scheme, with different due dates applying to different classes of taxpayers, the explanation was accepted as reasonable.

Conclusion: The penalty was not exigible and stood deleted.

Final Conclusion: The appeal succeeded and the penalty imposed for delayed payment of compulsory deposit was cancelled.

Ratio Decidendi: Penalty under the compulsory deposit scheme is not automatic; where the statute affords an opportunity to explain the delay and the explanation is bona fide and not shown to be improbable, penalty should not be imposed.

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