Penalty for failure to furnish audit report upheld where reasonable cause was not proved and affidavit evidence was found unreliable.

Penalty for failure to furnish the audit report under section 271B was sustained because the assessee did not establish reasonable cause for the default. The explanation based on an affidavit was rejected as unreliable: it was not produced before the Assessing Officer, the deponent was not shown to be a qualified chartered accountant, and the statements were internally inconsistent. Since audit under the Act must be conducted by a qualified chartered accountant, the asserted difficulty in completing the work did not justify non-furnishing of the report.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 was leviable for failure to furnish the audit report, and whether the assessee established reasonable cause for the default.

Analysis: The assessee admitted maintenance of books of account but relied on an affidavit stating that the books were given to an accountant who could not complete the work. The explanation was found unreliable because the affidavit was not produced before the Assessing Officer, the deponent was not shown to be a qualified chartered accountant, and the statements in the affidavit were internally inconsistent. Since audit under the Act could be conducted only by a qualified chartered accountant, the asserted cause was not accepted as a valid justification for non-furnishing of the audit report.

Conclusion: The penalty under section 271B was rightly sustained and the assessee failed to prove reasonable cause.

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