Reasonable cause for delayed tax audit and return filing defeated penalty where books remained in departmental custody.

Reasonable cause existed for delay in filing the return and completing the tax audit where the assessee's books were impounded by the Department and remained in its custody. The assessee sought photostat copies, but they were supplied only later; the audit and return filing followed thereafter. On these facts, the delay was attributable to the Department rather than the assessee, so penalty under section 44AB of the Income-tax Act, 1961 was not justified.

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Issues: Whether the assessee had reasonable cause for the delay in filing the return and getting the accounts audited so as to avoid penalty under section 44AB of the Income-tax Act, 1961.

Analysis: The books of account had been impounded by the Department and remained in its custody. The assessee had sought photostat copies, but they were furnished only much later, after which the accounts were audited and the return filed. On these facts, the delay was attributable to the Department rather than to the assessee, and the penalty could not be sustained.

Conclusion: The finding of reasonable cause was upheld and the penalty was held to be unjustified, in favour of the assessee.

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