Delay in filing tax audit report accepted as reasonable cause and penalty under Section 271B deleted as no prejudice shown.

Penalty under Section 271B for delayed filing of the tax audit report may be deleted where the delay is supported by reasonable cause and no prejudice to revenue is shown; the tribunal accepted evidence of the managing partner's death and condoned delay, following precedent to delete the penalty. The operative effect is that imposition of the penalty was set aside and the appeal allowed to the extent of deleting the Section 271B penalty against the assessee.

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Issues: (i) Whether the penalty of Rs. 1,50,000 levied under Section 271B of the Income-tax Act, 1961 for failure to file the tax audit report within the prescribed time can be sustained.

Issue (i): Whether the penalty of Rs. 1,50,000 levied under Section 271B of the Income-tax Act, 1961 for failure to file the tax audit report within the prescribed time can be sustained.

Analysis: The assessment for the year in question was completed without any addition and no prejudice to revenue is shown to have arisen from the delayed submission of the tax audit report. The appellant attributed delay to the death of the managing partner and produced evidence for condonation of delay; the Tribunal found reasonable cause for admitting the appeal. The Tribunal followed the decision of the Hon'ble Kerala High Court in Chavakkad Service Co-op. Bank Ltd. which deleted the penalty in identical circumstances.

Conclusion: The penalty of Rs. 1,50,000 levied under Section 271B of the Income-tax Act, 1961 is deleted in favour of the assessee.

Final Conclusion: The appeal is allowed to the extent of deleting the penalty levied under Section 271B of the Income-tax Act, 1961.

Ratio Decidendi: Where delayed filing of the tax audit report is supported by reasonable cause and no prejudice to revenue is established, penalty under Section 271B of the Income-tax Act, 1961 may be deleted.

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