TaxTMI 
TaxTMI 
2026 (8) TMI 1175
X X X X Extracts X X X X
X X X X Extracts X X X X
....Assessing Officer u/s. 271B of the Income-tax Act, 1961. 2. In the facts and circumstances of the case and in law, the National Faceless Appeal Centre/ Ld Commissioner Income Tax (Appeals) has erred in holding that the Appellant was liable to get his accounts audited under Section 44AB of the Income-tax Act, 1961. 3. In the facts and circumstances of the case and in law, the National Faceless Appeal Centre/ Ld. Commissioner Income Tax (Appeals)has erred in not appreciating that GST cannot be included in the definition of 'turnover' for the purposes of Section 271B r.w.s. 44AB of the Income-tax Act, 1961. 4. In the facts and circumstances of the case and in law, the National Faceless Appeal Centre/ Ld. Commissioner Income Tax (Appeals) has erred in not appreciating that the Appellant was under a bonafide belief that GST cannot be included in the definition of 'turnover' for the purposes of Section 271B r.w.s. 44AB of the Income-tax Act. 1961 as per the guidance note of the ICAI. 5. The appellant craves leaves to add to, to alter or to amend the grounds of appeal." 3. The appellant has filed the above appeal on 10.02.2026 against....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ual running a proprietary concern called D.M. Sales Corporation and is in the business of manufacturing and selling packaging materials. The appellant filed his return of income u/s. 139(1) of the Income Tax Act, 1961 on 29.07.2022 declaring a total income of Rs. 3,72,790/-. The case was selected for scrutiny through the CASS system and assessment u/s. 143(3) r.w.s. 144B of the Act was completed on 28.02.2024 wherein the Ld. AO did not propose any variation to the total income of the appellant. However, during the course of assessment proceedings the Ld. AO noticed that as per the appellant's GSTR-1 for the relevant year, the total invoice value was Rs. 11,59,43,746/- inclusive of GST. Since the amount was above Rs 10 crore, the Ld. AO held that the appellant was liable to get his books of accounts audited u/s. 44AB of the Act. He initiated penalty proceedings u/s. 274 r.w.s 271B of the Act for assessee's failure to get the accounts of his business audited, and issued show cause notice to the assessee on 20/05/2024 requiring him to explain why the penalty should not be imposed. The assessee furnished reply to the show cause notice on 04/06/2024. The Ld. AO, however, was not s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... services are rendered by an enterprise. Para 5.9 of the Guidance Note specifically states that if GST or any other tax is included in the sale price, no adjustment in respect thereof should be made for considering the quantum of turnover. Hence, it is the case of the appellant that the GST collected and paid was not to be included in the definition of total sales, turnover or gross receipts for the purposes of audit u/s. 44AB of the Act. 5.2 The appellant's Ld. AR also submitted that the language of section 145A(ii) of the Act makes it clear that GST is not to be included for the determination of income under the section. Section 145 A (ii) states that - "For the purpose of determining the income chargeable under the head Profits and gains of business or profession - (ii) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation." But GST, according to the Ld. AR, cannot be considered as a tax actually paid/in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fault committed in not getting the audit report was without any malafide intention or any wanton act on the part of the assessee. Accordingly, the Hon'ble Court directed the Ld. AO to delete the penalty. • Sachin Marotrao Rangari v. ACIT [2022] 197 ITD 358 (Rajkot Trib) - Distinguishing the word 'may' occurring in section 271B of the Act from the word 'shall', the Hon'ble Tribunal has observed that levy of penalty under the said section is discretionary and not automatic. In the facts of that case, it was seen that the explanations offered by the assessee had been ignored by the Ld. Assessing Officer as well as Ld. CIT(A) on the ground that the Guidance Note issued by the ICAI is not binding on the Income tax authorities. The Hon'ble Tribunal deleted the penalty levied u/s. 271B of the Act. 6. The Ld. Departmental Representative (in short, Ld. DR) placed reliance on the Ld. AO's order u/s. 271B, relevant excerpt from which is reproduced hereunder:- "However, on perusal of the profit and loss account, it was noticed that the assessee had made sales at Rs. 9,82,74,982/-net of taxes and other charges. The assessee had shown GST Payable at Rs. 6,15,475/- in Bal....