Reasonable cause defeats penalty where audit under another law was delayed beyond the assessee's control.

Where a cooperative society's accounts are audited under another law, compliance with the proviso to Section 44AB of the Income-tax Act is satisfied if the audit is conducted under that law and the report is furnished in the prescribed manner before the specified date. The fact that the audit report was completed late, because the assessee had no control over the statutory auditor's appointment and completion of audit, constituted reasonable cause under Section 273B. Penalty under Section 271B was therefore not sustainable, and relief from the penal consequence followed.

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Issues: Whether penalty under Section 271B of the Income-tax Act, 1961 was exigible where the assessee's accounts were audited under the U.P. Cooperative Societies Act, 1965 but the audit report was completed after the specified date, and whether the delay was protected by Section 273B of the Income-tax Act, 1961 on the ground of reasonable cause.

Analysis: The respondent was a cooperative society whose accounts were required to be audited under Section 64 of the U.P. Cooperative Societies Act, 1965. Under the proviso to Section 44AB of the Income-tax Act, 1961, where accounts are required to be audited under any other law, it is sufficient compliance if the audit is carried out under that law and the report is furnished in the prescribed manner before the specified date. The turnover had crossed the statutory threshold, but the delay in completion and signing of the audit report arose because the assessee had no control over the appointment and completion of the audit by the statutory auditor. Those facts constituted reasonable cause within Section 273B.

Conclusion: Penalty under Section 271B was not sustainable, and the assessee was entitled to relief under Section 273B.

Final Conclusion: The dismissal of the appeal left intact the deletion of penalty, as the assessee's failure to meet the audit timeline was held to be supported by reasonable cause.

Ratio Decidendi: Where an assessee is already subject to audit under another law and the delay in completing the audit or furnishing the report is beyond its control, the penal consequence under Section 271B of the Income-tax Act, 1961 is excluded by Section 273B if reasonable cause is shown.

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