RAMESH MUTTA,HYDERABAD vs. ITO, WARD -10(2), HYDERABAD

ITA 331/HYD/2026Status: DisposedITAT Hyderabad23 September 2026AY 2017-1810 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the matter required further verification. While the AO's own observations in a subsequent assessment order (under Section 147 r.w. Section 144B) suggested the assessee was acting as an agent for vegetable sales at Bowenpally Vegetable Market Yard, receiving commission at 4% on sale proceeds, the absence of irrefutable documentary evidence like a license or market committee receipts to conclusively establish his status as a kachha arhtia necessitated further inquiry. The Tribunal noted that if the assessee could substantiate his claim of being a kachha arhtia and not undertaking any purchase or sale on his own account, then, as per CBDT Circular No. 452, he would not be obligated to get his accounts audited under Section 44AB and consequently, the penalty under Section 271B would not be sustainable. Therefore, the Tribunal set aside the matter to the file of the AO for carrying out necessary verification and re-deciding the issue, affording the assessee a reasonable opportunity of being heard. The penalty was not confirmed or deleted but remanded for fresh adjudication.

What were the facts?

The assessee, Ramesh Mutta, is in appeal against the order of the CIT(Appeals) confirming the penalty of Rs. 1,50,000/- levied by the Assessing Officer (AO) under Section 271B of the Income-tax Act, 1961, for the assessment year 2017-18. The AO initiated penalty proceedings for failure to get accounts audited under Section 44AB, inferring a turnover of Rs. 5,69,58,722/- from bank deposits. The assessee claimed to be a commission agent (kachha arhtia) facilitating vegetable sales, earning only commission income of Rs. 6,24,215/-, which he contended did not attract Section 44AB. The AO rejected this explanation, treating the bank deposits as undisclosed business turnover and imposing the penalty. The CIT(Appeals) upheld the AO's action.

What were the issues?

1. Whether the assessee, engaged in commission agency business, was liable for tax audit under Section 44AB of the Income-tax Act, 1961, for the assessment year 2017-18? Assessee's contention: The assessee argued that as a commission agent (kachha arhtia) facilitating vegetable sales and earning only commission income, his turnover did not exceed the threshold for mandatory audit under Section 44AB. He relied on CBDT Circular No. 452 dated 17.03.1986, which clarified the position of kachha arhtias. Revenue's contention: The revenue, through the AO and CIT(Appeals), contended that the substantial bank deposits of Rs. 5,69,58,722/- represented the assessee's turnover, exceeding the Section 44AB limit, thus making the audit mandatory. The revenue questioned the assessee's claim of being solely a kachha arhtia, requiring proper verification. 2. Whether the penalty levied under Section 271B of the Income-tax Act, 1961, is sustainable in law, given the assessee's claim of not being liable for audit under Section 44AB?

Which sections of the Income-tax Act were involved?

Section 271B,Section 44AB,Section 143(2),Section 142(1),Section 144,Section 69,Section 147,Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SHRI RAVISH SOOD, HON’BLE & SHRI MADHUSUDAN SAWDIA, HON’BLE

PER RAVISH SOOD, JM:

The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals), dated 21.11.2025, which in turn arises from the order passed by the Assessing Officer (for short, ‘AO’) under section 271B of the Income-tax Act, 1961 (for short, ‘the Act’), dated 10.01.2022 for the assessment year 2017-18. The assessee has assailed the impugned order on the following grounds of appeal before us:

ITA 331/HYD/2026 RAMESH MUTTA

“1. The learned Commissioner of Income-tax (Appe

The order continues below.

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