Audit compliance under section 44AB prevented penalty under section 271B despite later filing of the report

Penalty under section 271B was not leviable where the assessee had obtained the statutory audit before the due date under section 44AB and filed the audit report with the return later. The court noted that, for the relevant assessment year, section 44AB required only that the accounts be audited by the specified date; there was then no obligation to furnish the audit report to the Assessing Officer before that date. As the default necessary to trigger penalty was absent, the assessee succeeded.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961, could be levied where the assessee had got its accounts audited before the specified date under section 44AB and filed the audit report along with the return, though after the specified date.

Analysis: During the relevant assessment year, section 44AB required only that the accounts be audited by the specified date; there was then no statutory requirement to furnish the audit report to the Assessing Officer before that date. Penalty under section 271B was attracted only on failure to get the accounts audited as required under section 44AB. The obligation to furnish the report to the Assessing Officer was introduced later by amendment with effect from 1 July 1995.

Conclusion: Penalty under section 271B was not leviable on these facts, and the assessee succeeded.

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