Audit penalty under section 271B failed where seized records were not regular books and reasonable cause was shown.

For penalty under section 271B, the relevant "accounts" under section 44AB were treated as books of account maintained in the regular course of business, meant to furnish credible tax data. Seized annexures and unofficial records, though usable for assessment, were not treated as regular books for fastening audit-default liability. The tribunal also accepted reasonable cause, noting that the seized material had not been supplied in time and the assessee's explanation was bona fide. On that basis, the alleged failure to obtain audit was not established and the penalty was held unsustainable.

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Issues: Whether penalty under section 271B was exigible for failure to get accounts audited under section 44AB when the turnover limit was crossed only by reference to additional sales found in seized documents not maintained in the regular course of business, and whether reasonable cause existed for the default.

Analysis: The accounts referred to in section 44AB were held to mean books of account maintained in the regular course of business and intended to provide credible data for tax purposes. Seized annexures and unofficial records, though relevant for assessment, were not treated as the assessee's regular books of account for the purpose of fastening liability under section 271B. The ruling also accepted that the assessee had a bona fide explanation since the seized material had not been supplied in time, supporting the plea of reasonable cause. On that footing, the alleged default in not obtaining audit was not made out.

Conclusion: Penalty under section 271B was not sustainable, and the assessee succeeded.

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