ANITA MEHROTRA,NARENDRA SADAN vs. CIT(A), NFAC

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ITA 137/ALLD/2024Status: DisposedITAT Allahabad28 November 2025AY 2018-2019Bench: SHRI ANADEE NATH MISSHRA (Accountant Member), SHRI SUBHASH MALGURIA (Judicial Member)27 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the appeal of the assessee and deleted the penalty imposed under Section 271B. The Tribunal noted that the AO himself had observed that the assessee had not maintained books of account and had initiated separate penalty proceedings under Section 271A for this non-compliance. The Tribunal reasoned that the infraction of Section 44AB, which necessitates a tax audit, is attracted only when the assessee maintains books of accounts but fails to get them audited. If books of accounts are not maintained, the question of conducting an audit does not arise. Therefore, the penalty under Section 271B is not attracted in such a scenario. The Tribunal respectfully followed the ratio laid down by the jurisdictional Allahabad High Court in CIT vs. Bisauli Tractors (2007) 165 Taxman 1 (Allahabad), which held that Section 271B is not attracted when books of account have not been maintained. The Tribunal also referred to the decision in CIT vs. S. K. Gupta & Co. (2010) 322 ITR 86 (Allahabad) which supported the assessee's view. The Tribunal concluded that the penalty levied under Section 271B was unsustainable in law and directed its deletion.

What were the facts?

The assessee, Anita Mehrotra, is an individual engaged in wholesale tea trading. For Assessment Year 2018-19, her return of income was filed late, after a notice under Section 148. The Assessing Officer (AO) reopened the case due to substantial cash deposits and TDS on interest. The AO estimated business income at Rs. 3,74,394, making an addition of Rs. 1,83,555 to the declared income. During assessment, it was observed that the assessee's turnover exceeded the limit for tax audit under Section 44AB, yet no audit report was furnished. Consequently, the AO initiated penalty proceedings under Section 271B, levying a penalty of Rs. 98,524, calculated at 0.5% of the total turnover of Rs. 1,97,04,950. The assessee appealed to the CIT(A), who dismissed the appeal. The assessee has now filed an appeal before the ITAT.

What were the issues?

1. Whether the penalty under Section 271B of the Income Tax Act, 1961, is leviable when the assessee has not maintained books of account, and consequently, an audit report could not be furnished, in light of Section 44AB of the Act? Assessee's Contention: The assessee argued that the AO incorrectly imposed penalty under Section 271B. The assessee contended that the AO himself noted in the order that books of account were not maintained, and penalty proceedings under Section 271A were initiated separately for this reason. The assessee relied on the principle that if penalty proceedings under Section 271A are initiated for non-maintenance of books of account, then penalty under Section 271B cannot be levied. The assessee cited decisions from the Allahabad High Court in CIT vs. Bisauli Tractors and CIT vs. S. K. Gupta and Co., and other ITAT benches, supporting this view. The assessee also argued that the penalty is not mandatory and reasonable cause can be shown under Section 273B. Revenue's Contention: The Revenue relied on the orders passed by both the lower authorities, i.e., the AO and the CIT(A), who had upheld the levy of penalty under Section 271B.

Which sections of the Income-tax Act were involved?

Section 44AB,Section 271B,Section 148,Section 143(3),Section 147,Section 144B,Section 44AA,Section 271A,Section 273B

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Income Tax Appellate Tribunal, ALLAHABAD BENCH ‘SMC’, ALLAHABAD

Before: SHRI ANADEE NATH MISSHRA & SHRI SUBHASH MALGURIA

For Appellant: Shri Shivam Mehrotra, C.A

has been filed by the assessee for assessment year 2018-19 against impugned appellate order dated 19/07/2024 (DIN & Order No.ITBA/NFAC/S/250/2024- 25/1066831001(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short].

(B) In this case, order under section 271B of the I.T. Act was passed by the Assessing Officer levying penalty amounting to Rs.98,524/-, holding that the assessee had not furnished audit report within the time specified under section 44AB of the Act. The assessee’s appeal against the aforesaid order Assessment Year:2018-19 2 was dismissed by the learned CIT(A) vide impugned appellate order dated 19/07/2024. The relevant portion of the order of learned CIT(A) is reproduced as under:

Assessment Year:2018-19 3 Assessment Year:2018-19 4 Assessment Year:2018-19 5 Assessment Year:2018-19 6 Assessment Year:2018-19 7 (C) The present appeal has been filed by the assessee against the aforesaid impugned appellate order of learned CIT(A). In the course of appellate proceedings, a paper book containing written submissions was filed from the assessee’s side:

Assessment Year:2018-19 8 Assessment Year:2018-19 9 Assessment Year:2018-19 10 Assessment Year:2018-19 11 Assessment Year:2018-19 12 Assessment Year:2018-19 13 (C.1) Alongwith the written submissions; copies of the decisions in the following cases were also filed from the assessee’s side:

(a) ITAT Agra Bench order in the case of Mahadev Cold Storage vs. Jurisdictional Assessing Officer [2021] 190 ITD 273; [2021] 127 taxmann.com 722, & 42/Agr/2021, order dated 14/06/2021 (b) ITAT Bangalore Bench order in the case of Nagesh Consultants vs. DCIT, order dated 07/03/2023 (c) ITAT Delhi Bench order in the case of Arvind Aggarwal vs. Income Tax Officer, [2025] 137 TCL 174, order dated 09/01/2025 (d) Hon'ble Allahabad High Court order in the case of CIT vs. S. K. Gupta and Co. [2010] 322 ITR 86 (All)

(C.2) A paper book containing the following particulars was filed from Revenue’s side:

Assessment Year:2018-19 14 Assessment Year:2018-19 15 Assessment Year:2018-19 16 Assessment Year:2018-19 17 (C.2.1) The oral submissions made at the time of hearing by learned Departmental Representative were also separately presented in writing, which is reproduced below:

Assessment Year:2018-19 18 Assessment Year:2018-19 19 Assessment Year:2018-19 20 Assessment Year:2018-19 21 Assessment Year:2018-19 22 Assessment Year:2018-19 23 (D) At the time of hearing, learned Counsel for the assessee relied on the aforesaid written submissions and decisions referred to in the foregoing paragraph (C) and (C.1) of this order. The learned Departmental Representative placed reliance on the aforesaid paper book, referred to in foregoing paragraph (C.2) of this order. Further, he made oral submissions, which have also been separately presented in writing, as referred to in goregoing paragraph (C.2.1) of this order.

Assessment Year:2018-19 24 (E) We have heard both sides. We have perused materials available on record. The assessee’s claim is that books of account were not maintained by her; therefore penalty under section 271B of the I.T. Act could not have been levied. The claim of Revenue is that the assessee maintained books of account. However, convincing evidence has not been presented by Revenue to prove that the assessee maintained books of account. Although some doubts have been created by Revenue; they fail to establish that the assessee did indeed maintain books of account. The written submissions made from the assessee’s side, as referred to in foregoing paragraph (C) of this order are persuasive. The case of the assessee is also covered in assessee’s favour by decisions of Agra Bench of ITAT in the case of Madadev Cold Storage vs. Jurisdictional Assessing Officer (2021) 190 ITD 273 (Agra/(2021) 127 taxmann.com 722. Moreover, the assessee’s case is also covered in assessee’s favour by decision of Bangalore Bench of ITAT in the case of Nagesh Consultants vs. DCIT (order dated 07/03/2023 in I.T.A. No.32/Bang/2023). Therefore, when order of jurisdictional High Court is in favour of the assessee, we are not persuaded by the Revenue’s contention to take guidance from contrary decisions of non jurisdictional High Court (Karnataka High Court) and non-jurisdictional Bench of ITAT (Ranchi) Bench of ITAT). In any case, decision of Delhi Bench of ITAT in the case of Arvind Aggarwal vs. ITO (DEL-TRIB): (2025) 137 TLC 174 is also in assessee’s favour, relevant portion of which is reproduced below:

Assessment Year:2018-19 25 Assessment Year:2018-19 26 (E.1) The assessee’s case is squarely covered by order of Hon'ble Allahabad High Court, which is the jurisdictional High Court, in CIT vs. Bisauli Tractors (2007) 165 Taxman 1(Allahabad) wherein it was held that section 271B of I.T. Act is not attracted in a case in which books of account have not been maintained.

(E.2) In the case of CIT vs. S. K. Gupta & Co. (All-HC): (2010) 322 ITR 86 also, relevant portion of which is reproduced below; Hon'ble Allahabad High Court has taken a view in favour of assessee:

(E.2.1) In view of the foregoing, and respectfully following the precedents in CIT vs. Bisnauli Tractors (supra); and in CIT vs. S. K. Gupta & Co. (supra); the penalty levied under section 271B of the I.T. Act is hereby deleted.

(E.3) In the result, the assessee’s appeal is allowed.

(Order pronounced in the open court on 28/11/2025)

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