LAKSHMI SADHO COMMERCIAL PRIVATE LIMITED,KOLKATA vs. ITO, WARD 10(2), , KOLKATA

This appeal by the assessee arises against the order dated 22.01.2025 of the National Faceless Appeal Centre (hereinafter referred to as the ‘CIT(A)’) passed under section 250 of the Income- tax Act, 1961 (the ‘Act’).

Brief fact of the case are that during the course of assessment proceedings, it was noticed that the assessee had shown a property valued at ₹1,35,95,500, whereas the fair market value was determined at ₹1,47,77,500 for the purpose of stamp duty. In the return of income, the assessee had declared the nature of business as trading under code 204. Based on this declaration, the Assessing Officer held that the assessee was required to get its accounts audited as per section 44AB of the Act. The Assessing Officer issued notice under section 274 r.w.s.

Aggrieved by the order of penalty order assessee went in appeal before ld. CIT (A) where the appeal of the assessee was dismissed by sustaining the penalty order.

Dissatisfied with the order of the Ld. CIT(A), assessee is before this Tribunal, the assessee contended that the penalty imposed is bad in law because the receipts against the property were not during the course of business and therefore section 44AB of the Act could not be invoked. Even assuming the receipts were business receipts, the assessee was under a bona fide belief that such receipts were capital in nature. Besides that where constitutes reasonable cause within the meaning of section 273B of the Act, no penalty could be levied.

On the other hand, the learned DR supported the orders of the lower authorities.

We have heard the rival submissions and perused the material on record. The penalty under section 271B of the Act has been levied solely for alleged violation of section 44AB of the Act. At the outset, we note that the Assessing Officer has not rejected the books of account, nor has he brought any adverse material to show that the assessee was engaged in business activity with Lakshmi Sadho Commercial Pvt. Ltd. respect to the impugned property transaction. In such circumstances, section 44AB of the Act cannot be mechanically applied. Further, section 273B of the Act provides that no penalty shall be imposed if the assessee proves that there was a reasonable cause for the default. In the present case, whether the receipts constitute business income or capital receipts is itself debatable. The assessee’s bona fide belief that the receipts were not business receipts constitutes a reasonable cause within the meaning of section 273B of the Act. Therefore, in our considered view, the penalty levied under section 271B of the Act is not justified. Accordingly, we set aside the penalty imposed under section 271B of the Act and grant relief to the assessee.

In the result, the appeal of the assessee is allowed.