JUDGMENT B.P. Jeevan Reddy, C.J.
1. Under Section 256(2) of the Income-tax Act, 1961, the Tribunal has stated the following two questions :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal had any material to arrive at the conclusion that the assessce was prevented by reasonable cause within the terms of Section 271(1)(a) of the Income-tax Act, 1961 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty imposed under Section 271(1)(a) of the Act ?"
2. The assessee is an individual. For the assessment years 1970-71 and 1971-72, returns had to be filed on or before September 30, 1970, and September 30, 1971, respectively. They were, however, actually filed on September, 5, 1973. For this delayed filing of returns, penalty proceedings were taken under Section 271(1)(a) of the Income-tax Act. Penalties were, accordingly, levied by the Income-tax Officer, and they were confirmed in appeal. On further appeal, however, the Tribunal deleted the penalties whereupon the Revenue obtained this reference.
3. From the order of the Tribunal, it appears that on August 29, 1973, there was a settlement which is evident from the order of the Commissioner of Income-tax dated August 29, 1973. The order states that the assessee offered to accept the income of Rs. 90,000 spread over four years equally, i.e., over the years 1973-74, 1972-73, 1971-72 and 1970-71. Evidently, in pursuance of this settlement, he filed returns a week later. The Tribunal was of the opinion that the assessee was under a bona fide belief that his income was not above the taxable limit and the fact that he agreed to a settlement is not indicative of any wilfulness on his part. We cannot say that the view taken by the Tribunal is unreasonable. With a view to buy peace, the assessee may have agreed to file the return showing an income of Rs. 22,500 though his income, in reality, may be below the taxable limit.
4. Learned standing counsel for the Revenue relied upon a decision of the Supreme Court in Gujarat Travancore Agency v. CIT [1989] 177 ITR 455. The Supreme Court held that, in a case under Section 271(1)(a), mens rea is not to be established. There can be no quarrel about this proposition. The question, however, is whether, in this case, it can be said that the assessee had failed to furnish a return of total income without reasonable cause. His bona fide belief was a reasonable cause and the mere fact that he agreed to a settlement does not necessarily militate against his bona fide belief.
5. For the above reasons, the questions are answered in the affirmative, i.e., in favour of the assessee and against the Revenue. No costs.