LOBSANG DHARGYAL,NAHARLAGUN vs. ASSESSING OFFICER, GUWAHATI

1 Since the name of the person is not mentioned nor even the name of the applicant is mentioned and the signature on the adjournment application and Form No. 35 apparently do not match, therefore, the adjournment sought was rejected and the appeal was heard with the assistance of the Ld. DR.

The assessee is in appeal before the Tribunal raising the following grounds of appeal:

Brief facts of the case are that the assessment order u/s 147 r.w.s. 144B of the Act was made on 14.03.2024 assessing the total income at ‘NIL’ without making any addition. However, the penalty proceedings u/s 274 r.w.s. 271B of the Act were initiated as the assessee’s turnover was found to be exceeding the limits prescribed u/s 44AB of the Act and the books of account were required to be audited. No return of income was filed. However, in response to the show cause notice issued, the assessee responded before the Assessing Officer (hereinafter referred to as Ld. 'AO') that the assessee is a member of a Schedule Tribe as defined in clause (25) of Article 366 of the constitution and residing in area specified in Part-I or Part-II of the table appended to Paragraph 20 of the Sixth Schedule to the Constitution. It was submitted before the Ld. Ambalal Mody vs. S.A.L. Narayan Row, Commissioner of Income- tax [1966] 61 ITR 428 (SC)[04-05-1966] and Commissioner of Income-tax vs. Alembic Chemical Works Co. Ltd. [1981] 6 Taxman 177 (Gujarat)/[1982] 133 ITR 578 (Gujarat)[30-10-1980] and it was stated that the object of audit u/s 44AB of the Act is only to assist the Ld. AO in computing the total income of an assessee in accordance with different provisions of the Act. The assessee claimed to be an agriculturist who does not have any income under the head ‘profit and gains of business or profession’ and therefore, submitted that the assessee was not required to get the accounts audited for the purpose of section 44AB of the Act even though the total sale of agricultural products may exceed the limit of ₹60 Lakh (₹1 Crore for the relevant assessment year). Reliance was also placed upon the decision of Addl. CIT vs. India Magnum Fund (002) ITD 265 (MUM- Trib) in support of the claim that the assessee outside the purview of income tax law as well as those whose income is otherwise exempt under the Act are not required to get their accounts audited. The Ld. AO noted that the assessee is a firm and had not filed the return of income for AY 2015- 16 as per the provisions of section u/s 139(1) of the Act. The assessee had also submitted that the assessee was engaged in the sales of readymade garments and had filed the return of income u/s 148 of the ITA No(s). 107/GTY/2026 Assessment Year(s) 2015-16 Act for AY 2015-16 by reporting sales of ₹1,21,31,657/- and admitted profit of ₹8,68,715/- and claimed that the entire profit as exempt u/s 10(26) of the Act. It was also submitted that due to unavoidable circumstances, the return for the AY 2015-16 was not filed. The assessee had also submitted the copy of the audit report in Form No. 3CB dated 27.04.2022. The assessee stated that all the deposits in the bank accounts represents the turnover of his business. The assessee submitted that he had not filed any sales tax/VAT/GST returns. Accordingly, a sum of ₹60,658/- being 0.5% of the total sales/turnover of ₹1,21,31,657/- was imposed as the penalty. Aggrieved with the penalty order, the assessee filed an appeal before the Ld. CIT(A) who issued notices for hearing and considered the penalty order, the summary of addition made by the Ld. AO, the reply filed by the assessee and after carefully examining the submission, he was of the view that the appellant has claimed exemption u/s 10(26) of the Act; however, as the assessee had carried on business of sale of readymade garments and the turnover was ₹1,21,31,657/- which exceeded the threshold prescribed u/s 44AB of the Act for AY 2015-16, therefore, statutory audit was mandatory. The assessee had voluntarily disclosed the business turnover and profit in the return filed u/s 148 of the Act and the appeal was dismissed.

Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.

None appeared on behalf of the assessee and the case was heard with the assistance of the Ld. DR.

The Ld. DR vehemently argued that the audit relates to the turnover of the business and there is no issue of exemption in section ITA No(s). 107/GTY/2026 Assessment Year(s) 2015-16 44AB of the Act if the profit is exempt u/s 10(26) of the Act as long as the turnover exceeds the prescribed limit. However, his attention was drawn to the provisions of section 44AB of the Act as per which the due date of filing the audit report is one month before the due date of filing of the return u/s 139(1) of the Act. The assessee’s income is claimed to be exempt and it was also held in the course of the assessment u/s 147 of the Act made by the Ld. AO therefore, the assessee had not filed any return of income. However, since the due date was 30.09.2015, the penalty ought to have been initiated within a reasonable time even though there is no time limit for initiation of the penalty proceeding. But the show cause notice for penalty was issued after completion of the reassessment u/s 147 r.w.s. 144B of the Act on 14.03.2024, which is after nearly 8 years. This aspect has not been examined by the Ld. CIT(A). Further, before the Ld. AO the assessee claimed to be an agriculturist who does not have any income under the head ‘profit and gains from business or profession’. However, in para 3.2, the Ld. AO has treated the assessee as a firm which had not filed the return of income as per the provisions of section 139(1) of the Act and has mentioned that the assessee stated that the assessee was engaged in the sales of readymade garments. This fact contradicts the submission of the assessee that he did not have any income under the head ‘profits and gains from business or profession’ and is an agriculturist. Since the facts mentioned are contradictory, the order of the Ld. CIT(A) is hereby set aside and the appeal is restored before him to re-examine the provisions of section 44AB of the Act, the limitation for issuing the show cause notice for penalty u/s 271B of the Act and also the fact whether the assessee had any business or not or was only an agriculturist as the Ld. AO has treated the assessee as a firm whereas the assessee has ITA No(s). 107/GTY/2026 Assessment Year(s) 2015-16 stated to be an individual and the PAN also denotes the status as of an individual. The Ld. CIT(A) shall grant an opportunity of being heard to the assessee and thereafter, decide the appeal. The comments of the Ld. AO shall also be called for verification of the facts. Hence, the grounds of appeal are partly allowed for statistical purposes.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 6th May, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 06.05.2026 Bidhan (Sr. P.S.)

CIT(A)-NFAC, Delhi.

CIT-

CIT(DR), Guwahati Benches, Guwahati.

Guard File. //// By order