Reasonable cause for delayed tax audit report defeated penalty under section 271B on the facts.

Penalty under section 271B was held not sustainable where the assessee obtained the audit report after the stipulated time but demonstrated reasonable cause for the delay in obtaining it under section 44AB. The extended prescribed date for the first year of operation showed that the time-limit was not treated as immutable, and the audit requirement served tax administration purposes while depending on a prescribed accountant, limiting the assessee's control over timing. On these facts, the appellate finding of sufficient cause was accepted and the delay was not regarded as an undue default warranting penalty.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 was leviable for delay in obtaining the audit report under section 44AB, and whether the assessee had shown reasonable cause for the delay.

Analysis: The assessee obtained the audit reports though beyond the stipulated time. The prescribed date under section 44AB was extended by CBDT for the first year of its operation, showing that the time-limit was not immutable. The purpose of the audit requirement was to aid tax administration and the audit had to be conducted through a prescribed accountant, so the assessee could not fully control the timing. On the facts, the appellate finding of sufficient and reasonable cause was accepted, and the delay was not treated as an undue default warranting penalty.

Conclusion: Penalty under section 271B was not sustainable and was rightly cancelled in favour of the assessee.

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