Reasonable cause for audit delay defeats penalty where auditor appointment was beyond the co-operative society's control.

Penalty under section 271B was held unwarranted where a co-operative society could not complete the statutory audit before the due date because the Registrar had not appointed the auditor required under the Co-operative Societies Act, 1965. Although failure to obtain audit under section 44AB ordinarily attracts penalty, the assessee had repeatedly sought appointment of the statutory auditor and no fault was shown on its part. The delay being attributable to non-appointment of the auditor beyond the assessee's control constituted reasonable cause, so penalty was not justified.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 was justified where the assessee, a co-operative society, could not complete the audit before the specified date because the auditor had not been appointed by the Registrar under the governing co-operative law.

Analysis: The audit requirement under section 44AB had to be complied with by getting the accounts audited before the specified date, and failure to do so would ordinarily attract penalty under section 271B. However, the assessee was bound to get its accounts audited only by the auditor appointed by the Registrar under the Co-operative Societies Act, 1965. The record showed repeated requests for appointment of the auditor and no material establishing any fault on the part of the assessee. The delay resulted from non-appointment of the statutory auditor, which was beyond the assessee's control, and thus constituted reasonable cause.

Conclusion: Penalty under section 271B was not justified and the assessee succeeded.

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