Penalty under section 271B not sustainable where no books of account were maintained and audit report could not be furnished.

Penalty under section 271B was held unsustainable where the assessee claimed that no books of account were maintained and, therefore, no audit report under section 44AB could be furnished. The Tribunal accepted that, if any default existed, it lay in non-maintenance of books and fell within section 271A rather than section 271B. It further found that the Revenue did not establish with convincing evidence that books were in fact maintained for the relevant year, and it preferred the jurisdictional view that section 271B does not apply in the absence of books of account. The penalty was deleted.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 was leviable where the assessee claimed that no books of account were maintained and, consequently, no audit report under section 44AB was furnished.

Analysis: The assessee's explanation was that the default, if any, was only of non-maintenance of books and that penalty, if warranted, lay in the domain of section 271A rather than section 271B. The Tribunal found that the Revenue failed to establish with convincing evidence that books of account were in fact maintained for the relevant year. It accepted the assessee's reliance on jurisdictional authority holding that section 271B is not attracted when books of account are not maintained, and declined to prefer contrary non-jurisdictional decisions relied upon by the Revenue.

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

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