SAINATH BUILDERS AND DEVELOPERS,MUMBAI vs. THE INCOME TAX OFFICER, WARD 41(2)(5), MUMBAI, KAUTILYA BHAVAN, BANDRA KURLA COMPLEX

आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal emanating from the appellate order dated 04.12.2025 is preferred by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to the Penalty order passed u/s. 271B of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 28.10.2023 for the Assessment Year [A.Y.] 2015-16.

ITA No. 1153/Mum/2026; Sainath Builders and Developers “Being aggrieved by the Order of The Commissioner of Income Tax (Appeals) National Faceless Appeals, Delhi, hereinafter to be referred as "The CIT Appeals (NFACY", this appeal petition is submitted on the following grounds, which it is prayed may be considered without prejudice to one another. I) "The Assessing Authority" misled himself resulting in non-application of mind while passing penalty order u/s-271B as can be seen from para 3.4 and para 3.5 of the penalty order passed u/s-271B. II) "The Assessing Authority" erred in considering the submissions, documents, explanations on merits, furnished during the course of penalty proceedings. III) "The CIT Appeals (NFAC)" failed to provide appellant fair and reasonable opportunity to furnish cause of delay in filing the first appeal, resulting in violation of principles of natural justice. IV) "The CIT Appeals (NFAC)" dismissed first appeal arbitrarily ignoring the facts explained, documents enclosed, ITAT order passed in appellant's own case on similar facts, deletion of penalty u/s-271F in filing return of income as well as completely ignored to look into merits of the present case of appellant. V) "The CIT Appeals (NFAC)" only focused on delay in filing the appeal and passed order in mechanical manner.” 3. The instant appeal pertains to imposition of penalty u/s 271B of the Act. According to the order, the AO noted that the assessee during the relevant financial year, had made financial transactions to the tune of Rs.14,87,80,100/- which exceeded the limit for getting the account audited u/s 44AB of the Act. Therefore, the assessee should have got its books audited and submitted within the due date but failed to get its accounts audited as stipulated u/s 44AB of the Act. Notice u/s 148 was issued in this case in response to which, it filed return of income declaring total income of Rs. 38,30,700/-. On perusal of the ROI, it was revealed that the assessee had shown total Gross sales of business to the tune of Rs. 12,23,63,334/-. As per provisions of Section 271B of the Act, if a person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year 2

ITA No. 1153/Mum/2026; Sainath Builders and Developers or furnish a report of such audit as required under section 44AB, the Assessing Officer may direct that such person shall pay, by way of penalty a sum equal to one half percent of the total sales, turnover or gross receipts as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of one hundred fifty thousand rupees, whichever is less.

3.1 During penalty proceedings, the assessee vide its reply submitted as under:

“With reference to your notice u/s. 271B of the Income Tax Act, 1961, we hereby state and submit the following: - 1. As regards to the Explanation/Written submission regarding, why penalty should not be imposed under aforesaid section. It should contain supporting documents in light of submission. - Clarification is as follows: - We, M/s. SAINATH BUILDERS AND DEVELOPERS have entered into a Development Agreement with the Mulund Navaghar Road Manali Cooperative Society Ltd., aimed at the development of a parcel of land owned by the aforementioned society. This comprehensive agreement encompassed a range of considerations, including the pivotal construction of 8 flats designated for society members. Additionally, it entailed addressing various financial aspects, such as rent agreements, compensatory measures for the prior developer, and more. The firm took on the responsibility of coordinating suppliers and contractors to initiate the construction work, which was promptly commenced as per the terms of the agreement. The outcome of the efforts materialized in the construction of a total of 42 units, comprising a combination of 41 flats and a single shop space. An internal dispute emerged among the partners concerning the acquisition of Flat No. 1502. The intensity of this dispute heightened to the extent that one of the partners initiated legal action against another partner. This unfortunate turn of events had an adverse impact on the project, ultimately leading to a suspension of all ongoing construction work. Furthermore, due to this legal impasse, the bank account associated with the partnership firm has been frozen, severely affecting the financial operations. The adverse repercussions of this situation extended to the ability to meet the designated deadline for filing the income tax returns. The disruption caused by the dispute and subsequent freeze of financial activities impeded the ability to compile accurate financial information and fulfil the tax obligations within the stipulated time frame. Regrettably, due to the freeze of financial activities, we find ourselves unable to submit the Audit Report beyond the established due date as well. I am enclosing herewith a copy of High Court’s Arbitration Appointment Order for your reference vide Annexure-A. 2. Copy of submission/reply made through any mode other than eproceeding, if any: - No submissions have been made through any mode other than e-proceedings. 3. Documentary proof regarding filing of appeal, if any: - We have not preferred any

ITA No. 1153/Mum/2026; Sainath Builders and Developers appeal. …….. Considering the above, we hereby request you to kindly drop the penalty proceedings and oblige. I hope the above information will suffice your requirements, in case youneed any more documents / information, I shall be glad to produce the same on hearing from you.” 3.2 The AO noted from the copy of High Court’s Arbitration Appointment Order dated 25.06.2015 that the assessment order had been passed on 23.05.2015 and only after the passing of assessment order the assessee went for High Court’s Arbitration dated 25.06.2015 i.e almost a month later. Moreover, the assessee had not filed any appeal against the order dated 23.05.2015. During the course of assessment proceedings, the assessee had been making compliances. This showed that no hindrances were faced by it which would have prevented him from getting the accounts audited and file it within due date. Therefore, he considered it a fit case to levy penalty u/s 271B of the Act.Accordingly,penalty of Rs.1,50,000/- was imposed.

ITA No. 1153/Mum/2026; Sainath Builders and Developers assessee. It was requested that the delay in filing the appeal may kindly be condoned in the interest of justice and the matter be decided on merits. However, the plea of the assessee was rejected on the ground that the appeal was filed beyond prescribed time of 30 days in terms of section 249(2) of the Act stating that the reasons stated were not “sufficient cause” for condonation u/s 5 of the Limitation Act, 1963.

4.Before us, it is submitted by the ld.AR that the ld.CIT(A) did not call for any explanation from the assessee in respect of the delay, thus violating the principles of natural justice. It is submitted that the delay was mainly attributable to the Tax consultant who did not inform about the proceedings in time. Due to such communication gap, appeal could not be filed in time.It is also stated that the delay is also attributable to various factors which have also been stated before the AO in response to the show cause notice issued for imposition of penalty. The assessee was facing several operation and legal issues which prevented it from filing the appeal in time. However, there was no malafide intention as the assessee wanted to contest the penalty in right earnest. The CIT (A) by dismissing the appeal in limine deprived the assessee for making necessary submissions in the matter.

ITA No. 1153/Mum/2026; Sainath Builders and Developers connection, reliance could be placed on the landmark decision of hon’ble Supreme Court which inter alia held in Collector, Land Acquisition v Mst. Katiji And Others- 167 ITR 471 (SC) that “ordinarily, a litigant does not stand to benefit by lodging an appeal late……..Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated….Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period…. A litigant does not stand to benefit by resorting to delay. In fact, he runs serious risk.” We therefore, condone the delay.

6.1 As the ld. AR has requested before us that the assessee shall be given one more opportunity and this request which was not objected by the ld.DR, in such a scenario, we are of the opinion that the scales of justice demand that

ITA No. 1153/Mum/2026; Sainath Builders and Developers the matter should be verified and revisited at the level of ld. CIT(A) and accordingly, we are of the considered view that the matter should be remanded back to the file of ld. CIT(A) for de novo adjudication by him while applying the principles of natural justice after affording sufficient opportunity of being heard to the assessee.

Order pronounced in the open court on 02/06/2026.

Sd/- Sd/- SAKTIJIT DEY PRABHASH SHANKAR ( (उपाध्यक्ष/ VICE PRESIDENT) (लेखाकार सदस्य/ACCOUNTANT MEMBER)

Place: म ुंबई/Mumbai ददनाुंक /Date 02.06.2026 Soumili Das / PS

आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt. Registrar) ITAT