SANGHI TEXTILES PRIVATE LIMITED,HYDERABAD V. INCOME TAX OFFICER, WARD-3(1), HYDERABAD

ITA 758/HYD/2024

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Sanghi Textiles Private Limited filed an appeal against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which had dismissed their earlier appeal against a penalty levied under section 271B of the Income Tax Act, 1961. The penalty was imposed for failing to furnish an audit report as required under section 44AB within the stipulated due date. The assessee argued that their failure was due to a bona fide belief that the outcome of pending quantum proceedings would affect the penalty proceedings, leading them to not submit detailed explanations during the penalty proceedings. The Departmental Representative opposed the remand, citing a precedent where a similar plea was dismissed. However, the Tribunal found the circumstances of the current case distinct and remitted the matter back to the Ld. AO for a detailed examination of the assessee's explanations.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 790466 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2013-2014
• Appeal Filed On: 09-08-2024
• Other Referred Cases: S. Ramkumar Reddy vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Additional evidence; Question of law; Principle of natural justice
• Section: 147; 148; 144

Judgement Text

" ITA No 758 of 2024 Sanghi Textiles Private Limited Page 1 of 7 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ DB-B ‘ Bench, Hyderabad ŵी रिवश सूद,Ɋाियक सद˟ एवं ŵी मधुसूदन साविड़या लेखा सद˟ समƗ | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.758/Hyd/2024 (िनधाŊरण वषŊ/Assessment Year: 2013-14) M/s Sanghi Textiles Private Limited Hyderabad PAN:AADCS0837P Vs. Income Tax Officer Ward 3(1) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri P Murali Mohan Rao, CA राज̾ व Ȫारा/Revenue by:: Dr. Sachin Kumar, Sr. DR सुनवाई की तारीख/Date of hearing: 25/11/2025 घोषणा की तारीख/Pronouncement: 05/12/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by Sanghi Textiles Private Limited (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated 29.06.2024 for the A.Y. 2013-14. Printed from counselvise.com ITA No 758 of 2024 Sanghi Textiles Private Limited Page 2 of 7 2. The assessee has raised the following grounds of appeal: Printed from counselvise.com ITA No 758 of 2024 Sanghi Textiles Private Limited Page 3 of 7 3. The brief facts of the case are that the assessment of the assessee for the A.Y 2013-14 was completed by the Learned Assessing Officer (“Ld. AO”) under section 147 read with sections 144 and 144B of the Income Tax Act, 1961 (“the Act”), determining the total income of the assessee at Rs.2,79,41,346/-. During the course of assessment proceedings, the Ld. AO observed that the assessee had not furnished the audit report as required under section 44AB of the Act within the stipulated due date. Accordingly, penalty proceedings under section 271B of the Act were initiated by the Ld. AO during the course of assessment proceedings. Subsequently, a show cause notice under section 271B read with section 274 of the Act dated 30.03.2020 was issued by the Ld. AO. After considering the submissions filed by the assessee, the Ld. AO completed the penalty proceedings under section 271B of the Act on 21.09.2022 and levied a penalty of Rs.1,50,000/-. 4. Aggrieved with the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee. 5. Aggrieved with the order of the Ld. CIT (A), the assessee is now in further appeal before us. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the only issue arising out of the grounds of appeal of the assessee is the levy of penalty of Rs.1,50,000/- under section 271B of the Act. Inviting our attention to para no. 6 of the penalty order, the Ld. Printed from counselvise.com ITA No 758 of 2024 Sanghi Textiles Private Limited Page 4 of 7 AR submitted that during the penalty proceedings, the assessee had stated before the Ld. AO that since the quantum proceedings were pending before the appellate forum, the penalty proceedings should be kept in abeyance till disposal of the quantum appeal. It was submitted that the assessee was under a bona fide belief that the outcome of the quantum proceedings would have a bearing on the penalty proceedings and, therefore, did not file detailed submissions explaining the reasons for failure to furnish the audit within the stipulated time period. The Ld. AR submitted that due to this bona fide belief, the assessee could not place the factual explanation on merits before the Ld. AO. Therefore, he prayed that one more opportunity may be granted by remitting the matter back to the file of the Ld. AO so that the assessee may place proper facts and submissions on record. 6. Per contra, the Leaned Departmental Representative (“Ld. DR”) strongly opposed the request for remand. Relying on the judgment of the Hon’ble Telangana High Court in the case of S. Ramkumar Reddy vs ACIT (147 taxmann.com 401) dated 02.11.2022, the Ld. DR submitted that a mere plea of bona fide belief cannot be a ground to restore the matter to the file of the Ld. AO. Accordingly, it was argued that the order of the Ld. CIT(A) deserved to be confirmed. 7. We have considered the submissions of both sides and perused the material available on record. We have also gone through para nos. 7 to 10 of the judgment of the Hon’ble Printed from counselvise.com ITA No 758 of 2024 Sanghi Textiles Private Limited Page 5 of 7 Telangana High Court in the case of S. Ramkumar Reddy vs ACIT (Supra) relied upon by the Ld. DR, which is to the following effect: “7. Tribunal in the order dated 8-4-2005 held as follows: \"6. We have heard rival contentions. On a careful consideration of the facts and circumstances of the case, we find that a notice under sec. 148 was issued and it was only in response to that notice that the assessee had filed his return of income. The entertainment tax return of the assessee shows that his turnover is Rs. 3,37,70,270. The assessee paid entertainment tax. Subsequent to the notice given by the AO for levy of penalty under sec. 271B, the assessee claimed that he was under a genuine belief that his turnover had not crossed Rs. 40 lakhs and he need not get his accounts audited. While saying so, he filed additional evidence stating that due to seizure of books by the Sales tax authorities, the audit of accounts under sec. 44AB got delayed. This is a contradictory stand. As the assessee bona fide believed that his accounts need not be audited, he would not have taken a plea that the audit got delayed due to seizure of books by the Sales tax authorities. Having paid entertainment lax on a turnover of Rs. 3,37,70,270, the assessee cannot claim that he believed that his turnover was much below that amount. The return itself was not filed voluntarily, but in response to a notice under sec. 148. The argument of the learned counsel for the assessee that the penalty was levied much prior to completion of assessment also, does not come to the rescue of the assessee as nothing in law prevents the AO from levying penalty under sec. 271B prior to completion of assessment proceedings. 7. The petition for admission of additional evidence cannot be entertained at this stage as before the CIT (A) no plea was taken that due to seizure of books by Sales tax authorities the audit got delayed. Even otherwise, no copy of letter from the Sales tax authorities is filed before us. The two letters dated 28-8-1996 and 25-3-1997 are of the assessee written to the Commercial Tax Officer, and are self-serving. 8. In view of the fact that the assessee himself filed entertainment tax return and paid tax on a turnover of Rs. 3,37,70,270, we are inclined to upheld the order of the CIT (A) and confirm levy of penalty of Rs. 1,00,000. 9. In the result, the appeal of the assessee is dismissed.\" 8. Thus, Tribunal noticed that subsequent to notice issued by the assessing officer for levy of penalty under section 271B of the Act, appellant had claimed that he was under a genuine belief that his turnover had not crossed Rs. 40 lakhs and therefore he need not get his accounts audited. It may be Printed from counselvise.com ITA No 758 of 2024 Sanghi Textiles Private Limited Page 6 of 7 mentioned that the entertainment tax return of the appellant showed his turnover at Rs. 3,37,70,270.00. Tribunal further noted the contradictory stand of the appellant when he contended that due to seizure of books by the sales tax authorities, audit of accounts under section 44AB of the Act got delayed. Additionally Tribunal held that appellant did not file the income tax return voluntarily but it was in response to a notice under section 148 of the Act. 9. In view of above, Tribunal confirmed the levy of penalty. 10. We do not find any error or infirmity in the view taken by the Tribunal. No question of law arises out of the aforesaid order of the Tribunal dated 8-4-2005, not to speak of any substantial question of law.” 8. On perusal of the above, we find that the facts of the above case stand on an entirely different footing and are not applicable to the present appeal. In that case, the assessee did not get his accounts audited on a bona fide belief that he was not required to do so. In the present case, the bona fide belief of the assessee was only with respect to the relevance of quantum proceedings to the penalty proceedings, as a consequence of which the assessee failed to place on record the reasons for delay in furnishing the audit report within the stipulated time period. Therefore, the ratio of the judgment relied upon by the Ld. DR cannot be applied to the present factual matrix. Considering the above factual circumstances and in the interest of natural justice, we deem it appropriate to remit the matter back to the file of the Ld. AO with a direction to grant one final opportunity to the assessee to furnish necessary explanations and evidence regarding the reasons for not furnishing the audit report within the prescribed time. The assessee is directed not to seek unnecessary adjournments and to properly prosecute the penalty Printed from counselvise.com ITA No 758 of 2024 Sanghi Textiles Private Limited Page 7 of 7 proceedings. The Ld. AO shall decide the matter strictly in accordance with law after verifying the submissions and evidence to be filed by the assessee. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 5th December, 2025. Sd/- Sd/- (RAVISH SOOD) JUDICIAL MEMBER (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER Hyderabad, dated 5th December, 2025 Vinodan/sps Copy to: S.No Addresses 1 M/s. Sanghi Textiles (P) Ltd, C/o P Murali & Co. CAs, 6-3- 655/2/3 Somajiguda, Hyderabad 500082 2 Income Tax Officer Ward 3(1) Hyderabad 3 Pr. CIT - Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order Printed from counselvise.com "