Section 271B penalty sustained where contemporaneous survey statement contradicted later claim that the audit report was ready on time.

Penalty under section 271B of the Income-tax Act was sustained because the assessee failed to prove that the tax audit report had been completed by the due date or that reasonable cause existed for non-production. A contemporaneous statement recorded during survey showed that the report was not with the managing partner and was "not ready" on 24 November 1992, which directly conflicted with a later affidavit claiming completion in October 1992. The court accepted the contemporaneous evidence over the later explanation and held the alleged compliance and cause for default unproved, so the penalty challenge failed.

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Issues: Whether the penalty under section 271B of the Income-tax Act, 1961 was unsustainable on the ground that the tax audit report had been completed in time and that there was reasonable cause for its non-production.

Analysis: The assessee's contemporaneous statement recorded during survey showed that the audit report was not with the managing partner and, more importantly, that it was "not ready" on 24 November 1992. This directly contradicted the later affidavit suggesting completion of audit in October 1992. On the evidence, the claim that the report was ready by the due date was not accepted, and the explanation for non-compliance was found unproved.

Conclusion: The penalty under section 271B was upheld and the assessee's challenge failed.

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