Sh. Nikki Tyagi Vs ITO (ITAT Delhi)
The case of Sh. Nikki Tyagi vs. Income Tax Officer (ITO) addressed a penalty imposed under Section 271B of the Income Tax Act due to a turnover exceeding the threshold requiring an audit. Tyagi, a distributor for Mother Dairy, filed a return under presumptive taxation, declaring income from commission-based transactions without maintaining formal books. The Assessing Officer (AO) determined Tyagi’s total turnover as ₹3.19 crore, which exceeded ₹1 crore, and hence required an audit under Section 44AB. The AO levied a penalty of ₹1.5 lakh for non-audit compliance, a decision upheld by the CIT (Appeals) based on the law that ignorance of audit requirements is not a valid defense. However, upon appeal to the ITAT Delhi, Tyagi argued that the AO incorrectly treated the gross receipts as turnover rather than considering it as commission income derived from sales made on behalf of Mother Dairy. ITAT accepted Tyagi’s stance, noting that the income comprised only commission on sales, not ownership of goods, thus negating the turnover basis for audit. In light of Section 273B, which provides relief from penalties if there is reasonable cause, ITAT concluded that Tyagi’s situation met these grounds and ordered the penalty annulled, upholding the appeal in favor of the assessee.
