Reasonable cause defeats tax audit penalty where interest income is excluded from turnover and bona fide belief is accepted.

Penalty for failure to obtain tax audit under section 271B was held not sustainable where the assessee's sales remained below the audit threshold after excluding interest income, and the interest receipt was treated as other income rather than business turnover. The assessee had acted on a bona fide belief that audit was required only when business turnover or business receipts crossed the prescribed limit, and this was accepted as reasonable cause under section 273B. On that basis, the default was covered by sufficient cause and the penalty was deleted.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 was leviable for failure to get accounts audited, and whether the assessee had shown reasonable cause under section 273B of the Income-tax Act, 1961.

Analysis: The assessee's sales were below the audit threshold if interest income was excluded, and the interest receipt was treated as other income rather than business turnover. The assessee acted on a bona fide belief that audit was required only when business turnover or business receipts exceeded the prescribed limit. In these circumstances, the default was held to be covered by sufficient cause within the meaning of section 273B.

Conclusion: The penalty under section 271B was not sustainable and was deleted.

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