KUNHI RAMAN ,MANGALURU vs. INCOME TAX OFFICER, WARD-1(1), MANGALORE

The brief facts of the case are that the assessee is an individual, who filed his return of income on 31.7.2018 showing total income of Rs.12,42,580. As the return of income was picked up for scrutiny to verify the income from liquor business. Notice u/s. 143(2) dated 28.9.2019 was issued. The assessee was asked to explain that there is Tax Collection at Source [TCS] collected by Karnataka State Beverages Corporation Ltd. [KSBCL] under TAN: BLRK04237C amounting to Rs.2,38,292 and whether corresponding income thereof is offered for taxation. It was stated in the return of income by the assessee that Veenus Cold Bar is having annual turnover of Rs.16,68,546 on which the assessee has disclosed income @ 8% u/s. 44AD of the Act. The TCS amounting to Rs.2,04,684 is on account of purchases of Rs.2,04,65,914 on account of Yashraj Bar & Restaurant which was owned by Sri Manoj Kumar, who is the son of assessee having PAN: ACVPM 1467C, who has filed his return of income by furnishing the audit report u/s. 44AB of the Act where in the purchases are accounted for and corresponding income is shown. It was stated that the licence stands in the name of assessee for which TCS is made and the Yashraj Bar & Restaurant is run and owned by his son. Thus claim of the assessee is that TCS made by KSBCL in the TAN of assessee is in fact purchases of Yashraj Bar & Restaurant which was owned by his son, Sri Manoj Kumar and who has declared turnover of the Bar in his return of income. The ld. AO issued notice u/s. 133(6) to KSBCL asking for the details of purchases made by the assessee. KSBCL stated that there is a sum of Rs.2,04,65,914 in the name of buyer, K. Raman, having address of Yashraj Bar and TCS is of Rs.2,04,684. The ld. AO based on this information estimated 10% of the profit on the turnover and computed the total income of Rs.20,67,056 assessing total income of assessee at Rs.33,09,634 by passing an assessment order u/s. 143(3) r.w.s. 143(3A) & 143(3B) on 8.4.2021.

Thereafter the AO had initiated proceedings u/s. 270A of the Act. The AO based on the addition made in the quantum assessment had proposed to initiate proceedings u/s. 271B of the act for the failure to get the books of accounts audited. The AO had also proposed to initiate penalty proceedings

The assessee had challenged the quantum appeal before the Ld.CIT(A) and further challenged the Ld.CIT(A) order before this Tribunal in ITA No. 1560/Bang/2025 and this Tribunal by order dated 25/09/2025 had accepted the grounds raised by the assessee and allowed the appeal filed by the assessee. By allowing the said quantum appeal, the Tribunal had deleted the additions made by the AO. Before the Tribunal decided the quantum appeal, the assessee had challenged the penalty orders before the Ld.CIT(A) which was dismissed by the Ld.CIT(A) as the penalties are correctly levied.

As against the said orders, the assessee is in appeal before this Tribunal.

At the time of hearing, the Ld.AR submitted that the additions made by the AO in the assessment was deleted by this Tribunal and therefore the penalties are not required to be levied. The Ld.AR further submitted that if the additions were deleted, the requirement of getting the books of accounts audited u/s. 44AB of the Act would not arise and therefore the penalty levied u/s. 271B requires to be deleted. Similarly, the penalty levied u/s. 270A is also not required in view of the order of this Tribunal in the quantum appeal and therefore submitted that there is no under reporting of income which is in consequence of misreporting thereof. The Ld.AR also submitted that the

The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeals.

We have heard the arguments of both sides and perused the materials available on record.

We have also perused the quantum appeal order of this Tribunal in ITA No. 1560/Bang/2025 dated 25/09/2025 in which this Tribunal had deleted the additions made by the AO. In such circumstances, the requirement of getting the books of accounts audited as well as the under reporting of income which is in consequence of misreporting would also does not arise.

In addition to the said fact, the penalty u/s. 270A(9) also not pointed out the limb under which the same has been imposed. In such circumstances, the penalty u/s. 270A(9) also could not be sustained.

We, therefore after going through the order of the Tribunal in the quantum appeal as well as considering the provisions of section 44AB and 271B and 270A(9), are of the view that the penalties need not be levied in the facts and circumstances of the case. We, therefore allow the appeals filed by the assessee.

In the result, both the appeals filed by the assessee are allowed.