Penalty under section 271A fails where books are maintained and only their completeness or correctness is questioned.

Penalty under section 271A was held unsustainable where the assessee had maintained books of account and the alleged defect concerned only their timeliness, correctness, or completeness, not a total failure to keep books. The books were audited under section 44AB and the audited financial statements were available before the authorities, supporting the view that the statutory maintenance requirement had substantially been met. The ruling also applied the principles of reasonable cause and bona fide belief under section 273B, with the result that the penalty was directed to be deleted.

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Issues: Whether the penalty imposed under section 271A for alleged failure to keep and maintain books of account was sustainable when the assessee had maintained books of account and the accounts were audited.

Analysis: The assessee had maintained books of account, though the survey team found them not fully up to date. The accounts were audited under section 44AB and the audited financial statements were available before the authorities. On these facts, mere shortcomings or unreliability in the books could not be equated with a complete failure to keep and maintain books of account so as to attract penalty under section 271A. The decision also recognized the application of reasonable cause and bona fide belief principles in the setting of the statutory scheme governing maintenance of accounts.

Conclusion: The penalty under section 271A was not sustainable and was directed to be deleted.

Ratio Decidendi: Penalty under section 271A cannot be imposed where the assessee has maintained books of account and any defect is only in their correctness or completeness, particularly where reasonable cause is shown under section 273B.

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