Penalty under section 271B raised a substantial question of law where the audit report was obtained within time and compliance was claimed.

A substantial question of law was found to arise on the levy of penalty under section 271B where the audit report was stated to have been obtained within time and the return-filing requirements were otherwise complied with. The applicant sought a reference under section 256(2) on whether penalty could still be imposed on those facts. The Court held that the facts and circumstances disclosed a referable question of law and directed the Tribunal to draw up the statement of facts and refer the framed question to the Court for opinion.

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Issues: Whether a substantial question of law arose for reference on the levy of penalty under section 271B of the Income-tax Act, 1961, where the audit report was stated to have been obtained within time.

Analysis: The applicant sought a reference under section 256(2) on the question whether penalty under section 271B could be levied despite timely procurement of the audit report and compliance with the return-filing requirements. The Court found that the facts and circumstances disclosed a substantial question of law requiring reference.

Outcome: The Tribunal was directed to draw up the statement of facts and refer the framed question of law to the Court for opinion.

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