Reasonable cause for delayed tax audit barred penalty where statutory audit was postponed by late auditor appointment.

Penalty under section 271B was considered in the context of delay in completing audit under section 44AB where a co-operative society's accounts were required to be audited by the Registrar under the Rajasthan Co-operative Societies Act, 1965. The late appointment of the statutory auditor caused the delay, and the assessee had no control over that process. For the relevant assessment years, reasonable cause excluded penalty, and the later amendment extending the default to non-furnishing of the audit report with the return did not apply. The penalty was therefore not leviable and its deletion was upheld.

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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 furnish the audit report in time under section 44AB, where the delay in audit was caused by the statutory auditor being appointed late under the Rajasthan Co-operative Societies Act, 1965.

Analysis: Section 44AB requires compulsory audit within the prescribed time, but it also recognises compliance where audit is undertaken under another law. The assessee was a co-operative society whose accounts were required to be audited by the Registrar under section 68 of the Rajasthan Co-operative Societies Act, 1965. The delay in getting the audit done arose from the Registrar's late appointment of auditors and was beyond the assessee's control. On the law applicable to the assessment years in question, penalty under section 271B could not be imposed where the failure was with reasonable cause. The later amendment enlarging the default to cover non-furnishing of the report along with the return was not applicable to these years.

Conclusion: Penalty under section 271B was not leviable and the deletion of penalty was upheld in favour of the assessee.

Ratio Decidendi: Where non-compliance with the audit requirement under section 44AB occurs because statutory audit under another law is delayed for reasons beyond the assessee's control, penalty under section 271B is not warranted for the relevant years when reasonable cause exists.

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