SHASHI BHUSHAN KHANDELWAL,INDORE vs. DEPUTY COMMISSIONER OF INCOME TAX -1(1), INDORE, INDORE

ITA 937/IND/2025Status: HeardITAT Indore08 May 2026AY 2016-175 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the characterization of the income as business or investment is a debatable issue. The assessee's bona fide belief that it was an investment constituted a reasonable cause for non-compliance with the audit requirement.

What were the facts?

The assessee sold shops and declared the income as capital gains. The AO re-characterized this as business income and imposed a penalty under Section 271B for not obtaining a tax audit report. The penalty was confirmed by the CIT(A).

What were the issues?

Whether a penalty under Section 271B is leviable when the assessee had a reasonable cause for not obtaining a tax audit report due to a debatable classification of income?

Which sections of the Income-tax Act were involved?

Section 271B,Section 44AB,Section 273B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI

For Appellant: Shri Venus Rawka, AR
For Respondent: Shri Ashish Porwal, Sr. DR
Hearing: 30.04.2026Pronounced: 08.05.2026

Per B.M. Biyani, A.M.:

Feeling aggrieved by the order of first appeal dated 11.08.2025 passed by learned Commissioner of Income-tax (Appeals)-3, Bhopal [“Ld. CIT(A)”], which in turn arises out of the penalty-order dated 28.05.2019 passed by learned DCIT/ACIT-1(1), Indore [“Ld. AO”] u/s 271B of Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2016-17, the assessee has filed this appeal on following ground:

Shashi Bhushan Khandelwal ITA No. 937/Ind/2025 – AY 2016-17

“That the learned CIT(A) erred both in law and the fact of the case and confirmed the penalty u/s 271B of the Income Tax Act, 1961 of Rs. 150000/- without considering full facts & reasoning. The pena

The order continues below.

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