Audit penalty under Income-tax law depends on maintained books, turnover threshold, strict limitation, and proof of reasonable cause.

Penalty limitation under the Income-tax Act is computed strictly under section 275 with reference to the statutory completion and appellate-order framework, and the Tribunal's contrary limitation view was incorrect. The article also explains that where the assessee maintained party-wise registers, cash sales records and purchase registers, books of account existed, so section 271B could apply for failure to get the accounts audited; section 271A is confined to cases where no books are maintained at all. It further notes that no reasonable cause was proved under section 273B, because the audit obligation under section 44AB depends on turnover and books of account, not on the income being commission-based.

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Issues: (i) whether the penalty proceedings under section 271B of the Income-tax Act, 1961 were barred by limitation under section 275 of the Income-tax Act, 1961; (ii) whether penalty was leviable under section 271B of the Income-tax Act, 1961 or only under section 271A of the Income-tax Act, 1961 on the footing that no books of account were maintained; and (iii) whether the assessee had reasonable cause under section 273B of the Income-tax Act, 1961 for not getting the accounts audited as required by section 44AB of the Income-tax Act, 1961.

Issue (i): whether the penalty proceedings under section 271B of the Income-tax Act, 1961 were barred by limitation under section 275 of the Income-tax Act, 1961

Analysis: The period of limitation for imposing penalty had to be computed with reference to the statutory scheme in section 275, which links the outer limit to the completion of the relevant proceedings and the date of receipt of appellate orders, whichever expires later. The show-cause notice and penalty order were both within the permissible time under the applicable clause, and the Tribunal had applied an incorrect limitation basis.

Conclusion: The finding of limitation was rejected and the issue was decided in favour of the Revenue.

Issue (ii): whether penalty was leviable under section 271B of the Income-tax Act, 1961 or only under section 271A of the Income-tax Act, 1961 on the footing that no books of account were maintained

Analysis: The assessee had maintained party-wise registers, cash sales records, and purchase registers, which constituted books of account within the statutory definition. The legal distinction is that section 271A is attracted only where no books at all are maintained, whereas where books exist but are not audited as required, section 271B can operate. The Tribunal's conclusion that no books were maintained was unsustainable on the record.

Conclusion: Penalty under section 271B was held to be attracted, and the alternative view under section 271A was rejected in favour of the Revenue.

Issue (iii): whether the assessee had reasonable cause under section 273B of the Income-tax Act, 1961 for not getting the accounts audited as required by section 44AB of the Income-tax Act, 1961

Analysis: Section 44AB mandates audit where turnover exceeds the prescribed threshold. The assessee's belief that only commission receipts below the threshold mattered did not excuse non-compliance, since the statutory test turned on turnover and the existence of books of account, not on the character of income as commission. Ignorance of the legal requirement was not accepted as sufficient cause.

Conclusion: No reasonable cause was established under section 273B, and the issue was decided in favour of the Revenue.

Final Conclusion: The Tribunal's order was set aside, and the penalty order as affirmed in first appeal was restored, with all substantial questions answered against the assessee.

Ratio Decidendi: Where the assessee maintains books of account and turnover crosses the audit threshold, failure to get those accounts audited attracts section 271B unless sufficient cause is proved, and limitation must be computed strictly according to section 275's penalty framework.

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