Reasonable cause defeats section 271B penalty where disputed receipts are outside regular books and audit default is not automatic.

Penalty under section 271B is not automatic and is controlled by the reasonable-cause protection in section 273B. Where the assessee maintained regular books and the additions arose from accommodation entries and unaccounted commission income detected during assessment, the relevant accounts for section 44AB were the books kept in the ordinary course of business, not the disputed receipts. As the lower authorities did not properly consider the assessee's explanation and reasonable cause was shown, the penalty was held unjustified and deleted.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 was leviable where the assessee's explanation was that the unaccounted receipts detected during assessment did not represent regular turnover and reasonable cause existed for the alleged failure to get accounts audited under section 44AB.

Analysis: The penalty provision in section 271B is discretionary, as it uses the expression "may", and its operation is controlled by section 273B, which prohibits penalty where reasonable cause is shown. The Tribunal noted that the assessee's regular books were maintained and that the additions were made on account of accommodation entries and unaccounted commission income discovered during assessment. It further held that, for the purpose of section 44AB, the relevant accounts are those maintained in the regular course of business, and that the explanation offered by the assessee was not properly considered by the lower authorities.

Conclusion: Penalty under section 271B was not justified and was deleted.

Final Conclusion: The assessee succeeded in challenging the penalty, as the alleged default was held to be covered by the reasonable-cause exception and the levy was treated as non-automatic.

Ratio Decidendi: Penalty under section 271B is not automatic and cannot be imposed where the assessee establishes reasonable cause under section 273B, particularly when the disputed receipts are not shown to form part of the regular books of account maintained in the ordinary course of business.

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