ARVIND KUMAR,KANPUR NAGAR vs. ITO WARD 1(2) (1) , KANPUR NAGAR

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘B’ BENCH, LUCKNOW BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.285/LKW/2025 A.Y. 2019-20 Arvind Kumar, vs. Income Tax Officer, C/o Shri Shailendra Sachan Ward-1(2)(1), Kanpur (Advocate) R/o 113/223 Swaroop Nagar, Kanpur PAN: EKYPK0062C (Appellant) (Respondent) Assessee by: None Revenue by: Sh. R.R.N. Shukla, Addl CIT DR Date of hearing: 05.02.2026 Date of pronouncement: 30.04.2026 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC dated 14.02.2025, wherein the ld. CIT(A) has upheld the penalty of Rs. 1,50,000/- levied upon the assessee under section 271B of the Income Tax Act. The grounds of appeal are as under:- “1. That the ld. CIT(A), NFAC has erred in law and on facts by sustaining the penalty of Rs. 150000/- imposed by the ld. AO u/s 271B of the I.T. Act, 1961. 2. That the penalty Order of the ld. CIT(A) u/s 271B of the I.T. Act, 1961 is illegal, wholly unjustified, unsustainable in law and deserves to be deleted. 3. That any other relief or reliefs as may deem fit in the case and circumstances be granted. 4. That the appellant craves leave to add, amend or withdraw any grounds of appeal on or before hearing of appeal.” 2. The facts of the case are that during the course of assessment proceedings, the ld. AO observed that the assessee had a turnover of Rs.

ITA No.285/LKW/2025 A.Y. 2019-20 Arvind Kumar 12,57,53,439/- and still had not filed a tax audit report under section 44AB within the stipulated time prescribed under the Income Tax Act. Therefore, penalty proceedings were initiated under section 271B. The ld. Assessing Officer issued penalty notices against the assessee, but the assessee submitted in response that he had filed an appeal against the quantum addition and therefore requested to keep the penalty proceedings in abeyance till the disposal of the appeal. The ld. AO considered the reply of the assessee but did not find the same to be tenable as the appeal against the quantum addition had no bearing on the outcome of the penalty. Since, the assessee had a turnover of Rs. 12,57,53,439/- and had failed to get his accounts audited and file an audit report on time within the provisions of section 44AB therefore, the ld. AO concluded that the assessee had violated the provisions of section 44AB of the Act and made himself liable for penalty under section 271B of the Act. Since the assessee had not submitted any justification of the same in response to the show cause notice, the ld. AO concluded that he had nothing substantial to say in the matter and therefore, he proceeded to levy the penalty of Rs. 1,50,000/- upon the assessee. 3. Aggrieved with the levy of the penalty, the assessee went in appeal before the ld. CIT(A). The ld. CIT(A) noted that during the course of appellate proceedings, the assessee had filed written submissions but he did not discuss what those written submissions were, though he added that they had been taken into consideration while disposing off the appeal. The ld. CIT(A) held that the provisions of section 44AB were quite clear that the assessee was supposed to get his accounts audited by an Accountant before the specified date and furnished by that date a report of such audit in the prescribed form duly verified and signed by such Accountant. Failure to comply with the said provisions rendered an assessee liable to be penalized

ITA No.285/LKW/2025 A.Y. 2019-20 Arvind Kumar under section 271B. In the present case, the assessee had not filed its report of audit in the prescribed form and therefore, it was a clear cut case of default on the part of the assessee. He noted that the assessee had a turnover of Rs. 12,57,53,439/- and therefore the failure to get his account audited and furnish the audit report constituted a default, specifically within the meaning of section 44AB of the I.T. Act r.w.r. 6G of the I.T. Rules, 1962. Since the legal position was clear, the ld. CIT(A) held that there is no infirmity in the actions of the Assessing Officer and he accordingly confirmed the same. 4. Aggrieved with the said confirmation of the order, the assessee is in appeal before us. On the appointed date of hearing, nobody appeared on behalf of the assessee. However, a petition was received from Sh. Shailendra Sachan, AR on behalf of the assessee wherein it was submitted that the hearing of the assessee’s quantum appeal against the order passed under section 147 r.w.s. 144/144B of the Act for the A.Y. 2019-20 had been heard on 14.10.2025 by the ld. CIT(A), and the order of the ld. CIT(A) was still awaited. It was, therefore, prayed that the hearing in the assessee’s case may kindly be kept in abeyance till the order of the said appeal was pronounced or received. Alongwith the said letter was attached a copy of the e- proceedings response acknowledgment that was filed by the assessee with the ld. CIT(A) and it is seen that from the same, the assessee had asked the ld. CIT(A) to kindly provide a copy of the SBI bank statement for the relevant period, pointing out that since the account had already been closed and the bank authorities had expressed their inability to furnish the statement stating that the same had already been submitted to the Income Tax Department, therefore a copy of the same may kindly be made available to the assessee to enable proper verification and submission of a complete response. It had been pointed out in the same that a similar request had been made to the ld.

ITA No.285/LKW/2025 A.Y. 2019-20 Arvind Kumar AO but the same had not been provided and the order that had been passed was unjust. We have also perused a copy of the assessment order passed in the instant case and it is seen that the assessee was mostly non-compliant during the course of assessment proceedings, which led the Assessing Officer to conclude that its books of accounts were neither complete nor correct and therefore, the ld. AO made an addition of Rs. 90,47,315/- by estimating the income of the assessee at 8% on total receipts that were computed on the basis of credits in the bank account. The ld. AO also noted that the assessee was running a business in the name and style of Abhinav Trading Co. and that the assessee in response to the notice under section 148 had shown the turnover of his business at Rs. 1,26,61,980/- and calculated income of 8% of the same, but since the credits in the bank account amounted to Rs. 12,57,53,439/-, the ld. AO had taken this as the actual turnover and computed the profits on this basis. 5. Sh. R.R.N. Shukla, Sr. DR appearing on behalf of the Revenue submitted that the credits in the bank account were far in excess of the declared turnover and the assessee would therefore, have to explain how he had not got his accounts audited and file the audit report on account of having such a large turnover. Accordingly, he prayed that the penalty under section 271B may be confirmed. 6. In examining whether penalty under section 271B is leviable or not in this particular case, one cannot lose sight of the fact that as per the return filed by the assessee, he has declared a turnover of Rs. 1,26,61,980/- and offered tax @ 8% of the same. The provisions of section 44AD for the assessment year allowed the assessee to take shelter within it, provided the assessee is not covered by the exceptions. Thus, as per the return of income filed by the assessee, unless it could be shown that the assessee was not

ITA No.285/LKW/2025 A.Y. 2019-20 Arvind Kumar eligible to take shelter under section 44AD, it could not be held to be in violation of section 44AB and have penalty levied upon it. That being said, it is noticed that the ld. AO has observed that the credits in the two-bank accounts maintained by the assessee far exceeded the amount of turnover declared by him in his return of income and for this reason has assumed that the turnover was actually much more. To our mind, this is an assumption which needs to be established after further enquiry. 7. We, therefore, deem it appropriate that the matter should be restored back to the file of the ld. AO so that the nature of the deposits in the said bank account can be enquired into and only thereafter, if it is found that the turnover of the assessee is in excess of Rs. 2 Crore limit, which is a pre- requisite for taking him out of the ambit of section 44AD, may he be visited with a penalty under section 271B. Accordingly, we restore the matter to the file of the AO and direct the assessee to furnish the necessary information before the AO so as to enable the AO to come to a final decision in this regard. 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 30.04.2026. Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30/04/2026 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR , ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S.