According to provisions of section 44AB of the Income Tax Act, specific categories of the assessee are required to get their accounts audited. Accordingly, such specified categories of the assessee are also required to furnish the tax audit report. In case of any default, the assessee would be penalized under section 271B of the Income Tax Act.
The present article tries to cover the provisions of section 271B of the Income Tax Act; list of the assessee who is required to get their accounts audited; the amount of penalty payable under section 271B and relevant Frequently Asked Questions (FAQ).
Applicability of provisions of section 271B of the Income Tax Act
The penalty provisions under section 271B apply under any of the following circumstances –
1. The assessee fails to get his accounts audited, as required under section 44AB, in respect of any previous year/ years; or
2. The assessee fails to furnish a tax audit report as required under section 44AB of the Income Tax Act.
However, it is essential to make a note that, the penalty under section 271B is payable by the assessee only on the direction of the Assessing Officer.
Further, it is noteworthy to mention here that section 273B of the Income Tax Act states that penalty under section 271B shall not be levied if the assessee / person provides the reasonable cause for failure of getting the accounts audited or failure in the furnishing of the tax audit report.
List of an assessee who is required to get their account audited –
As seen above, the penalty under section 271B is leviable on the assessee who fails to get their accounts audited. Hence, it is important to go through the list of the assessee who is required to get their accounts audited. The list is summarized hereunder –
| Sr. No. | Category of person | Threshold limit exceeding which tax audit is mandatory |
| 1 | The person carrying on business | Total sales / turnover / gross receipts exceed INR 1 Crore in any previous year. |
| 2 | The person carrying on profession | Gross receipts exceed INR 50 Lakhs in any previous year. |
| 3 | The person carrying on business covered under section 44AE or section 44BB or section 44BBB | Income claimed by the person is lower than the deemed profit under respective sections in any previous year. |
| 4 | The person carrying on profession covered under section 44ADA | Income claimed by the person is lower than the deemed profit and income exceeds the specified threshold exemption limit in any previous year. |
| 5 | The person carrying on business to whom provisions of section 44AD (4) are applicable | Income exceeds the specified threshold exemption limit in any previous year. |
Amount of penalty payable under section 271B of the Income Tax Act –
The penalty payable under section 271B would be lower of the following –
- 0.5% of the total sales / total turnover or gross receipt in case of business (0.5% of the gross receipts in case of the profession); or
- INR 1.50 Lakhs.
Frequently Asked Questions (FAQ) on Provisions of Section 271B
Q.1 What is Section 271b of the Income Tax Act?
Ans: Section 271b of the Income Tax Act is a penalty provision, which penalizes the assessee who fails to get the accounts audited or who fails to furnish the tax audit report within the prescribed time limit.
Q.2 What is the penalty for late filing of tax audit report?
Ans: In case of late filing of the tax audit report, lower of the following amount is payable as a penalty –
- 0.5% of the total sales / total turnover or gross receipt; or
- INR 1,50,000
Q.3 How to avoid penalty u/s 271b?
Ans: In order to avoid the penalty u/s 271b, the specified categories of person are required to get their accounts audited and are also required to furnish the Tax Audit Report within the prescribed time limit.
