The Classic Partners LLP
Section 271B — Audit Penalty
Penalty notice for not getting your accounts audited under Section 44AB? Section 271B penalties can be dropped if reasonable cause is shown. We draft your defence and represent you.
Defend 271B PenaltyWhat is the Penalty Under Section 271B?
Section 271B of the Income Tax Act levies a penalty when a taxpayer who is required to get accounts audited under Section 44AB fails to do so, or fails to furnish the tax audit report by the due date. The penalty is 0.5% of total sales, turnover, or gross receipts — capped at Rs. 1,50,000.
Importantly, the penalty is not automatic. Section 273B protects taxpayers who can show reasonable cause for the failure — and courts have accepted causes like illness, system failures, resignation of the auditor, seizure of records, and genuine belief that audit wasn't applicable. A well-drafted reply to the show-cause notice is often enough to get the penalty dropped. If it is still levied, the order can be challenged before the Commissioner of Income Tax (Appeals).
When Does Tax Audit Apply (Section 44AB)?
- Business with turnover above Rs. 1 crore (Rs. 10 crore where cash receipts and payments are within 5%).
- Profession with gross receipts above Rs. 50 lakh (Rs. 75 lakh where cash receipts are within 5%).
- Presumptive taxpayers under 44AD/44ADA declaring profits below the prescribed rate while exceeding the basic exemption limit.
- Taxpayers opting out of presumptive taxation within the lock-in period under Section 44AD(4).
What We Handle
Applicability Review
Verifying whether tax audit was actually required in your case.
Show-Cause Reply
Reasonable-cause defence drafted with supporting evidence.
Case-Law Support
Precedents where 271B penalties were deleted on similar facts.
Audit Completion
Getting the pending 44AB audit done and the report filed.
Penalty Appeal
Challenging levied penalties before CIT (Appeals).
Tribunal Escalation
Further appeal at ITAT where relief is denied.
Why Choose The Classic Partners
- Qualified Chartered Accountants who conduct tax audits and defend audit penalties.
- Reasonable-cause expertise — defences built on accepted judicial precedents.
- Compliance fix included — we complete the pending audit, not just the reply.
- Transparent fees and a single point of contact for your case.
Frequently Asked Questions
How much is the penalty under Section 271B?
0.5% of total sales, turnover, or gross receipts of the business or profession, subject to a maximum of Rs. 1,50,000.
Can the 271B penalty be waived?
Yes. Under Section 273B, no penalty is leviable if you prove reasonable cause — such as serious illness, auditor's resignation, destruction or seizure of records, or a bona fide belief that audit was not applicable.
Is the penalty levied if the audit report is filed late but before assessment?
Courts have in many cases taken a lenient view where the audit report was obtained and filed before the assessment was completed, treating the delay as a technical breach with reasonable cause. Each case depends on its facts.
Does 271B apply if I didn't maintain books of account at all?
Judicial precedents hold that where no books were maintained, the penalty applicable is under Section 271A for non-maintenance, not 271B for non-audit — since accounts that don't exist cannot be audited. This is a strong technical defence.
Can I appeal against a 271B penalty order?
Yes. The penalty order can be appealed before the CIT (Appeals) within 30 days, and further before the ITAT. Many 271B penalties are deleted at the appellate stage on reasonable-cause grounds.
Facing a tax audit penalty?
Get a reasonable-cause defence drafted before the penalty is levied.
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