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Facts
The assessee, Jalpaiguri Zilla Regulated Market Committee, failed to file its income tax return for AY 2017-18. Despite notices, there was no response, leading the Assessing Officer (AO) to estimate the turnover and profit, and consequently impose a penalty of ₹1,20,330/- u/s 271B for non-filing of the audit report.
Held
The Tribunal noted that the assessee's income might be exempt under Section 10(26AAB), but Section 44AB mandates an audit based on turnover exceeding a threshold, irrespective of income exemption. Since the assessee did not provide a reasonable cause for not obtaining the audit, the matter was remanded to the CIT(A).
Key Issues
Whether a penalty under Section 271B for failure to obtain an audit report is leviable when the assessee claims its income is exempt, and whether a reasonable cause was presented for not obtaining the audit.
Sections Cited
250, 142(1), 144, 44AB, 271B, 10(26AAB)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH AT KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the Assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2017-18 dated 19.09.2025. 1.1 The Registry has not pointed out any delay in filing the appeal. However, the assessee has filed an application for condonation of delay, if any, in filing the appeal before the Tribunal. The order of the Ld. CIT(A) was passed on 19.09.2025 and the appeal has been filed on 21.11.2025. The reasons for the delay are stated to be the administrative and communication constraints during retrieval of records from earlier NFAC proceedings and was neither intentional nor deliberate. The assessee has prayed in the interest of justice for condonation of delay, if any, in submitting the appeal. On going through the petition seeking ITA No.: 2796/KOL/2025 Assessment Year: 2017-18 Jalpaiguri Zilla Regulated Market Committee. condonation of delay, we are satisfied that the assessee had sufficient cause for the delay, the delay, if any, is condoned and the appeal is admitted for adjudication.
The Assessee is in appeal before the Tribunal raising the following grounds of appeal: “Ground 1: The penalty order u/s 271B is bad in law as mandatory conditions for levy of penalty were not satisfied and adequate opportunity of hearing was not provided. Ground 2: The assessee is an Agricultural Produce Market Committee whose income is exempt u/s 10(26AAB). Penalty for failure to obtain audit is unjustified in the facts of the case. Ground 3: The estimated turnover adopted in the ex-parte assessment u/s 144 cannot form the valid basis for levy of penalty u/s 271B. Ground 4: The Ld. CIT(A) dismissed the appeal for non-prosecution without adjudicating the issues on merits, violating principles of natural justice. Ground 5: The appellant craves leave to add, alter or withdraw any ground at the time of hearing.”
Brief facts of the case are that the assessee, M/s. Jalpaiguri Zilla Regulated Market Committee (AOP) did not file its return of income for AY 2017-18. However, as per the information available with the Department, the assessee deposited cash in the bank account during the FY 2016-17. Notice u/s 142(1) of the Act was issued asking the assessee to furnish its return of income for the AY 2017-18, but there was no response from the assessee in this regard. Therefore, a show- cause notice was issued to the assessee which also resulted in non- compliance. The Assessing Officer (hereinafter referred to as Ld. 'AO') therefore, treated the total credits amounting to ₹2,40,65,509/- in its bank account as the total turnover of the assessee. The net profit of the assessee was estimated @8% of the total receipts which comes to ₹19,25,400/- (8% of ₹2,40,65,509/-) for AY 2017-18. The assessment ITA No.: 2796/KOL/2025 Assessment Year: 2017-18 Jalpaiguri Zilla Regulated Market Committee. was completed u/s 144 of the Act, bringing ₹19,25,400/- to tax. Since the total turnover in this case was estimated at ₹2,40,65,509/- and sufficient & reasonable opportunities were provided to the assessee but the assessee failed to get its accounts audited as required u/s 44AB of the Act, therefore, penalty proceeding u/s 271B of the Act was initiated for non-filing of the Audit report. Accordingly, the Ld. AO levied penalty of ₹1,20,330/- u/s 271B of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who, vide order dated 19.09.2025, dismissed the appeal of the assessee on ground of non-prosecution.
Aggrieved with the order of the Ld. CIT(A), the Assessee has filed the appeal before the Tribunal.
Rival contentions were heard and the submissions made have been examined. The assessee claims that no audit u/s 44AB of the Act was carried out. As per section 44AB(a) of the Act, every person carrying on business shall, if his total sales, turn-over or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. The assessee claims that its income was exempt being Agricultural Produce Market Committee constituted under the state law which is entitled to full tax exemption under section 10(26AAB) of the Act and such Agricultural Produce Market Committee or Regulated Market Committee is generally not required to undergo tax audit under section 44AB or to file income tax returns for this exempt income, provided it is ITA No.: 2796/KOL/2025 Assessment Year: 2017-18 Jalpaiguri Zilla Regulated Market Committee. used for statutory purposes. The statutory audit as specified under the relevant Act was claimed to have been carried out. However, as per the 3rd proviso to section 44AB, in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnishes by that date the report of the audit as required under such other law and a further report by an accountant in the form prescribed under this section. However, the required audit under section 44 AB was not carried out, as was categorically informed by the Ld. AR. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.
Thus, the assessee was required to get the audit report u/s 44AB of the Act also in addition to the statutory audit carried out in this case which has not been done. The assessee contends that its income was exempt, therefore, it was not liable for audit u/s 271B of the Act. However, a perusal of section 44AB as well as 271B of the Act shows that the requirement of audit and the penal consequence are dehors the finding of the assessment proceedings relating to computation of income and the audit under section 44AB of the Act is required on the basis of the turnover exceeding the threshold limit. Hence, despite the income being exempt, since the turnover had exceeded the specified amount for the purpose of getting the statutory audit done, the required audit report u/s 44AB of the Act on Form-3CD was required to be filed. The Ld. AR further submitted that the assessee had a reasonable cause for not getting the audit carried out. However, no such reasonable cause was mentioned before us, except for mentioning the fact that the income was exempt. Therefore, in the interest of justice and fair play, it was ITA No.: 2796/KOL/2025 Assessment Year: 2017-18 Jalpaiguri Zilla Regulated Market Committee. considered by the Bench that the matter may be remanded to the Ld. CIT(A) for giving another opportunity to the assessee and present its case that it had a reasonable cause for not getting the audit done, who shall decide the issue as per law. Hence, the grounds of appeal raised by the assessee 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 10th February, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 10.02.2026 Bidhan (Sr. P.S.) ITA No.: 2796/KOL/2025 Assessment Year: 2017-18 Jalpaiguri Zilla Regulated Market Committee. Copy of the order forwarded to:
Jalpaiguri Zilla Regulated Market Committee, Jalpaiguri Sadar, Jalpaiguri, West Bengal, 735101. 2. ITO, Ward-1(2), Jalpaiguri.
CIT(A)-NFAC, Delhi.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order