SAHAB SINGH,KURUKSHETRA, HARYANA vs. INCOME TAX OFFICER, WARD 1, KURUKSHETRA., INCOME TAX OFFICER, WARD ONE, KURUKSHETRA, HARYANA.

The Assessing Officer levied the impugned penalty observing that the gross receipts of the assessee from the sale of packed milk and milk products were more than the limit prescribed under Section 44AB of the Income Tax Act and the assessee was supposed to get his accounts audited and was required to furnish the Audit Report as per provisions of Section 44AB of the Income Tax Act. Since the assessee had neither filed any return of income nor got his accounts audited, therefore the AO levied the impugned penalty under Section 271B of the Income Tax Act, which has been further confirmed by the CIT(A).

I have heard the rival contentions and gone through the record. At the outset, the ld. Counsel for the assessee has invited my attention to the order of the CIT(A) dated 17.02.2025 passed in the appeal against quantum additions made by the AO vide assessment order dated 28.12.2019 passed under Section 144 of the Income Tax Act.

The assessee in its appeal before the CIT(A) had pleaded that the amount deposited in its bank account was not out of the turnover of the assessee, rather the said amount deposited did not belong to the assessee but to ‘Mother A.Y. 2017-18 3 Dairy’ and that the assessee was the custodian of that money. That the assessee had worked just as a collection agency on behalf of ‘Mother Dairy’ and earned commission income therefrom. The ld.CIT(A) considering the above submissions of the assessee, has set aside the assessment

Since the matter relating to the quantum additions made by the AO has already been set aside for fresh adjudication by the CIT(A) considering the plea of the assessee that the amount deposited in its bank account was not out of the sale proceeds/turnover of the assessee and rather the said amount belonged to the ‘Mother Dairy’ and that the assessee was just a Collection Agency on behalf of the Mother Dairy, therefore, the impugned penalty levied under Section 271B of the Income Tax Act is also liable to be set aside as the same has been levied on the same footing by treating the amount deposited in the bank account as turnover of the assessee. The impugned order of the CIT(A) is, therefore, set aside and the matter is also restored to the file of the AO with the direction to decide the same after the A.Y. 2017-18 4 fresh assessment passed by the AO, as directed by the CIT(A) vide his order dated 17.02.2025.

The appeal of the assessee is treated as allowed for statistical purposes.