, आयकर अपीलीय अधिकरण हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘SM’ Bench, Hyderabad , श्री विजय पाल राि उपाध् यक्ष एिं , श्री मिुसूदन सािडिया लेखा सदस्य के समक्ष ।

BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.547/Hyd/2025 (निर्धारण वर्ा/Assessment Year:2013-14)

Shri Naresh Kumar, Income Tax Officer, Hyderabad. Vs. Ward-8(1), Hyderabad.

PAN:APSPK4691Q (Appellant) (Respondent)

निर्धाररती द्वधरध/Assessee by: Shri P. Murali Mohan Rao, C.A.

रधजस् व द्वधरध/Revenue by: Shri Karthik Manickam, SR-DR सुिवधई की तधरीख/Date of hearing: 12/08/2025 घोर्णध की तधरीख/Pronouncement: 20/08/2025 /ORDER आदेश PER MADHUSUDAN SAWDIA, A.M. :

This appeal is filed by Shri Naresh Kumar (“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 17.01.2025 for the A.Y. 2013-14.

2. At the outset, it is seen that, there is a delay of 10 days in filing of this appeal for which the assessee has filed a condonation petition along with affidavit explaining the reasons for such delay. After considering the contents of the condonation petition and after hearing the Learned Department Representative (“Ld. DR”), the delay of 10 days in filing of this appeal is condoned and the appeal is admitted for adjudication.

3. The assessee has raised the following grounds of appeal :

4. The brief facts of the case are that, the assessee is an individual who had not filed any return of income under section 139(1) of the Income Tax Act, 1961 (“the Act”). Based on AIR information, the Learned Assessing Officer (“Ld. AO”) noticed that the assessee had deposited cash to the tune of Rs.1,00,10,000/- in his bank account during the assessment year 2013–14. Accordingly, the case of the assessee was reopened under section 147 of the Act and notice under section 148 of the Act was issued to the assessee on 21.06.2016. After considering the submissions of the assessee, the Ld. AO rejected the books of account under section 145 of the Act and computed the net profit at the rate of 3% on the total turnover of Rs.2,53,63,877/- , arriving at net profit of Rs.7,60,916/-. After allowing deduction under section 80C of the Act of Rs.35,355/-, the total income was determined at Rs.7,25,561/- by order dated 27.12.2017 under section 143(3) read with section 147 of the Act.

5. Subsequently, the Ld. AO also initiated penalty proceedings under section 271B of the Act for failure on the part of the assessee to get accounts audited within the stipulated time. After issuing notice under section 274 read with section 271B of the Act and considering the assessee’s reply, the Ld. AO levied a penalty of Rs.1,26,819/- on the assessee under section 271B of the Act, vide his order dated 26.06.2018.

6. Aggrieved with the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A), who dismissed the appeal and confirmed the penalty. The observations of the Ld. CIT(A) are found at para nos. 4.3.1 and 4.3.2 of his order which is to the following effect :

7. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. The Ld. AR submitted that the penalty under section 271B of the Act is unsustainable for two reasons i.e. (i) Once the books of account are rejected under section 145 of the Act and income is estimated, the very basis for audit ceases, and therefore penalty under section 271B of the Act cannot be levied and (ii) Without prejudice, the assessee could not obtain the audit report within the specified due date due to illness of the assessee, however, the tax audit report in Form Nos. 3CB and 3CD was subsequently filed during the assessment proceedings before the Ld. AO. In support of these contentions, reliance was placed on (i) Naveen Kumar Kaparthy Vs. ITO (ITA Nos. 1659 & 1660/Hyd/2017, order dated 23.10.2019 – ITAT Hyderabad) and (ii) Jigneshbhai Rasikbhai Savalia Vs. ITO [2023] 14