Rajan Keshavraoji Parate Vs ITO (ITAT Nagpur)
Summary: The Nagpur “SMC” Bench heard the assessee’s appeals against two penalties for AY 2016-17. The assessee had filed his original return declaring income of Rs. 3,19,530/-. Following information about cash deposits of Rs. 1,01,53,606/- with M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd., he filed a return on 06.02.2024 declaring Rs. 4,72,600/-. The Assessing Officer noted that books of account had not been maintained and no audit under section 44AB had been carried out. Applying the 8% presumptive rate under section 44AD, the officer made an addition of Rs. 3,39,690/-. The assessee did not challenge that addition. Separate penalties of Rs. 67,153/- under section 271(1)(c) and Rs. 25,000/- under section 271A were sustained by the CIT(A).
The assessee argued that a penalty for concealment could not stand where income was estimated, and that computation at the presumptive rate removed the requirement to maintain regular books. The Tribunal distinguished an estimate made after examining books from this case, where no books had been maintained. It held that the assessee knew of the relevant transactions when filing the return in response to the reopening notice but offered less than the income computed at 8%. It therefore confirmed the Rs. 67,153/- penalty under section 271(1)(c). As the Assessing Officer had himself computed income under section 44AD, the Tribunal found no reason to impose a separate penalty for failing to maintain regular books and deleted the section 271A penalty.
The order contains conflicting particulars that require editorial attention: its opening paragraphs associate ITA No. 56/NAG/2026 with section 271A and ITA No. 57/NAG/2026 with section 271(1)(c), while its operative paragraphs attach dismissal and allowance to those appeal numbers in the opposite sequence. Paragraph 7 also describes the section 271A penalty as Rs. 67,153/-, whereas the earlier paragraphs state Rs. 25,000/-. The Full Text below preserves the order’s wording.
FULL TEXT OF THE ORDER OF ITAT NAGPUR
These appeals by the assessee are directed against the separate orders of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi (for short, “CIT(A)”) both dated 14.01.2026 passed u/sec. 250 of the Income Tax Act, 1961 (for short, “Act”) which are arising out of different penalty orders evenly dated 20.09.2024 passed u/sec. 271A and 271(1)(c) of the Act for the Assessment Year (A.Y.) 2016-17.
2. Grievance of the assessee through ITA No.56/NAG/2026 is against the levy of penalty of Rs. 25,000/- u/sec. 271A of the Act for non-maintenance of books of account and, ITA No. 57/NAG/2026 is against levy of penalty u/sec. 271(1)(c) of the Act at Rs. 67,153/- for concealment of particulars of income.
3. I have heard the rival submissions and perused the material placed before me. I observe that assessee is an individual and filed his return of income for A.Y. 2016-17 on 26.11.2016 declaring income of Rs. 3,19,530/-. Thereafter, based on the information about cash deposit of Rs.1,01,53,606/- with M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. during the impugned assessment year, Ld. Assessing Officer (AO) issued notice u/sec. 148A(b) after validly serving notices u/sec. 148A(d) and 148A(a) of the Act. In compliance thereto, assessee filed return of income on 06.02.2024 declaring total income at Rs.4,72,600/-. Thereafter, Ld.AO concluded the assessment proceedings observing that assessee has not maintained books of account and therefore no audit u/sec. 44AB has been carried out, and thus, estimated the income u/sec. 44AD of the Act @8% of the alleged cash deposit, and after giving the benefit of income declared in the return filed in response to the notice u/sec. 148 of the Act, made addition at Rs. 3,39,690/-. Ld. AO also initiated penalty proceedings u/sec. 271(1)(c) of the Act. Assessee did not challenge the quantum addition. Thereafter, Ld.AO carried out penalty proceedings and after duly considering the submissions of the assessee levied penalty @100% of the tax payable at Rs. 67,153/-. Ld. AO also levied penalty u/sec. 271A of the Act for non-maintenance of books of account at Rs. 25,000/-. Assessee failed to get any relief in appeal before the Ld.CIT(A) and both the impugned penalties have been sustained by the Ld.CIT(A). Now assessee is in appeal before this Tribunal.
4. Learned counsel for the assessee vehemently argued referring to the written submissions and other documents placed in paper book running into Annexure-A to Annexure-N claiming that since income has been estimated, penalty levied u/sec. 271(1)(c) of the Act is unjustified and unsustainable. Secondly, he submitted that when the income has been estimated on presumptive basis @8% there was no requirement to maintain regular books of account, therefore penalty u/sec. 271A is not leviable.
5. Ld.DR, on the other side, supported the order of Ld.CIT(A).
6. So far as penalty levied u/sec. 271(1)(c) is concerned, I note that assessee was very much aware about the gross turnover which has been made through his bank account held with M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. Now assessee was issued notice u/sec. 148 of the Act. He was well aware about the information based on which reopening has been carried out. Assessee was also well aware that no books of account have been maintained, therefore, no audit u/sec. 44AB could have been carried out. Under these circumstances, the assessee should have offered income under presumptive taxation u/sec. 44AD of the Act @8% in the return filed in response to the notice issued u/sec. 148 of the Act. However, assessee again opted to offer less income i.e. Rs. 4,72,600/- without having any audit report u/sec. 44AB of the Act. Under these given situations, Ld. AO had no option except to apply section 44AD of the Act. It is not the case where the assessee has maintained the books and has offered the income based on regular transactions and AO estimated the income pointing out certain errors in the books of account. In that situation, it is the estimation of income by the Ld. AO as against the income offered by the assessee, but in the instant case books of account have not been maintained and therefore there is no chance of audit u/sec. 44AB of the Act. The only possible way to complete the assessment by the Ld.Ld. AO is to apply section 44AD of the Act. Therefore, I am of the considered view that assessee has concealed the particulars of income by offering less income computed @8% of business turnover for the year and therefore Ld. AO has rightly levied penalty u/sec. 271(1)(c) of the Act at Rs. 67,153/- and the same is hereby confirmed. Grounds of appeal raised by the assessee are dismissed in ITA No. 56/NAG/2026.
7. As regards the penalty levied u/sec. 271A of the Act at Rs. 25,000/- for non-maintenance of books of account, I find that since Ld. AO himself calculated the income of the assessee u/sec. 44AD of the Act @8% of the business turnover, there was no requirement for the assessee to maintain regular books of account. Therefore, since assessee has already been visited by the penalty u/sec. 271(1)(c) of the Act, I find no reason for levying penalty u/sec. 271A of the Act for non-maintenance of books of account as the income of the assessee has been estimated @8% u/sec. 44AD of the Act, which does not require maintaining regular books of account. Thus, penalty levied u/sec. 271A of the Act at Rs. 67,153/- is deleted. Grounds of appeal raised by the assessee are allowed in ITA No. 57/NAG/2026.
8. In the result, appeal of the assessee in ITA No. 56/NAG/2026 is dismissed and that of ITA No. 57/NAG/2026 is allowed.
Order pronounced on 08th September, 2026 under Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963
