Tax audit penalty under section 271B cannot be imposed when turnover stays below the section 44AB threshold.

Penalty under section 271B is not sustainable where the assessee's turnover remains below the threshold that triggers the tax audit obligation under section 44AB, because the foundational duty to obtain and furnish a tax audit report does not arise. On the facts, the turnover was found to be below the prescribed limit, so failure to furnish an audit report could not attract penalty. Non-compliance before the first appellate authority did not affect that merits-based conclusion.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 was leviable when the assessee's turnover was below the monetary threshold prescribed under section 44AB of the Income-tax Act, 1961.

Analysis: The assessee's turnover for the relevant assessment year was found to be below the limit that triggered the audit obligation under section 44AB. On that basis, the statutory requirement to obtain and furnish the tax audit report was not attracted. Since the foundational obligation to get the accounts audited was absent, failure to furnish such audit report could not sustain a penalty under section 271B. The appellate non-compliance before the first appellate authority did not alter the merits of the controversy.

Conclusion: Penalty under section 271B was not leviable and was directed to be deleted, in favour of the assessee.

Ratio Decidendi: Penalty under section 271B cannot be imposed where the assessee was not under a mandatory obligation to undergo tax audit under section 44AB because the turnover remained below the prescribed threshold.

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