Reasonable cause saved the assessee from penalty for failure to obtain a tax audit report under section 44AB.

Penalty under section 271B for failure to obtain and furnish the tax audit report under section 44AB was held unsustainable because the assessee showed reasonable cause under section 273B. The assessee's interest income from bank deposits had consistently been accepted in earlier and subsequent years as income from other sources, and that consistent treatment supported a bona fide belief that section 44AB was not attracted. On those facts, the non-compliance was not deliberate or contumacious, and the penalty was deleted.

---

---

Issues: Whether penalty under section 271B was leviable for failure to obtain and furnish the tax audit report under section 44AB, or whether the assessee had established reasonable cause under section 273B.

Analysis: The assessee's interest income from bank deposits had been consistently accepted in earlier and subsequent years as income from other sources, and the Revenue had accepted that treatment in those years. On the facts of the year under appeal, the assessee did not act deliberately or contumaciously; its non-compliance arose from a bona fide belief that section 44AB was not attracted. Section 273B protects a taxpayer from penalty where reasonable cause is proved, and the consistent past acceptance of the same accounting/tax treatment constituted such reasonable cause.

Conclusion: The penalty under section 271B was not sustainable and was deleted in favour of the assessee.

---