Bona fide and reasonable cause defeats penalty for delayed audit report filing under section 44AB.

Penalty for delayed furnishing of the audit report under section 44AB was held unsustainable where the assessee showed bona fide and reasonable cause under section 273B. The Tribunal accepted that the audit had been completed before the due date, one partner needed to sign the papers at Mumbai, and the assessee acted under a genuine understanding that only obtaining the audit report was required. In the changed statutory setting after the 1 July 1995 amendment, the short delay was treated as a technical breach covered by section 273B, so penalty was deleted.

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Issues: Whether penalty for late furnishing of the audit report under section 44AB of the Income-tax Act, 1961 was exigible in the absence of reasonable cause under section 273B of the Income-tax Act, 1961.

Analysis: The delay in filing the audit report was explained by the assessee on the basis that the audit had been completed before the due date, one partner had to sign the documents at Mumbai, and the assessee had proceeded under a bona fide understanding that only obtaining the audit report was required. The Tribunal held that, in the changed statutory setting after the amendment with effect from 1-7-1995, the explanation disclosed an honest and reasonable cause for the short delay. The conduct was treated as a technical breach falling within the scope of section 273B.

Conclusion: Penalty was not sustainable and was deleted in favour of the assessee.

Ratio Decidendi: Where the assessee shows a bona fide and reasonable cause for delayed compliance with section 44AB, the penalty is not leviable by reason of section 273B.

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