Section 271B penalty cannot stand where no books of account were maintained and therefore no audit was possible.

Penalty under section 271B was held unsustainable where the assessee had not maintained any books of account. The reasoning was that audit obligation presupposes existing accounts to audit; if no books exist, the default is non-maintenance of accounts rather than failure to obtain an audit report. Relying on cited precedent, the Tribunal cancelled the penalty in favour of the assessee.

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Issues: Whether penalty under section 271B could be sustained when the assessee had not maintained books of account.

Analysis: The assessee admitted that no books of account were maintained. The statutory penalty under section 271B is attracted for failure to get accounts audited, but the requirement of audit presupposes the existence of books of account. Where no books exist, there is nothing to audit, and the default, if any, lies in non-maintenance of accounts rather than in failure to obtain an audit report. The view taken was supported by the cited precedent.

Conclusion: The penalty under section 271B was not sustainable and was cancelled in favour of the assessee.

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