The officer treated my cash deposits as turnover, said I crossed the s.44AB limit and levied s.271B. The quantum was settled under Vivad se Vishwas. Does the penalty still stand?
No. Where the assessee's declared turnover was below the s.44AB threshold and the officer crossed the threshold only by adding cash deposits to it, and the quantum dispute ended under the Vivad se Vishwas Scheme 2020 without any final judicial finding on the correctness of the turnover, the benefit of the doubt goes to the assessee and the s.271B penalty is reversed.
Decided by the ITAT (Shri Kul Bharat, Judicial Member and Shri Pradip Kumar Kedia, Accountant Member) on 2022-06-10, reported as I.T.A. No. 4543/DEL/2019 (ITAT Delhi Bench 'F'); AY 2011-12. It bears on section 271B, section 44AB, section 44AD, section 273B of the Income Tax Act 1961, in Penalty and Presumptive Taxation & Audit matters.
s.271B is computed on turnover, so the penalty has no base until turnover is settled. This is the case that says so where the turnover was never judicially settled at all. It is worth most in the very common pattern where a small assessee files under s.44AD, the officer treats bank credits or advances as receipts, the turnover on paper jumps past the audit limit and a s.271B penalty is bolted on to the addition. It also answers a question practitioners keep asking about the Vivad se Vishwas Scheme: settling the quantum does not concede the turnover for penalty purposes — here it cut the other way, because settlement meant there was no finding against the assessee to build the penalty on. Read the threshold with care: the Tribunal applied Rs 60 lakh, the s.44AB limit for AY 2011-12. The limit is now Rs 1 crore, and Rs 10 crore where cash receipts and cash payments are each within 5 per cent. The reasoning transfers; the figure does not.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For AY 2011-12 the assessee declared a total turnover of Rs 58,42,500 and filed his return under s.44AD, offering 8 per cent of that turnover on the presumptive basis. The s.44AB threshold applicable at the time was Rs 60 lakh, so on the declared figures no audit was due. In assessment the Assessing Officer took the view that cash deposits of Rs 1,54,92,400, which the assessee had shown as advances and carried as a liability, formed part of his turnover; on that footing the assessee crossed the s.44AB threshold and had failed to get his accounts audited. A penalty of Rs 77,462 was imposed under s.271B, and the CIT(A)-XXXIII, New Delhi confirmed it by order dated 22 March 2019. The quantum addition of Rs 1,54,92,400 was afterwards settled under the Vivad se Vishwas Scheme 2020, so no appellate authority ever ruled on whether those deposits were turnover. Before the Tribunal the assessee argued that he was a small businessman filing under s.44AD, that s.44AB never applied to him, and that the penalty rested on an assumption about the deposits that had never been tested.
The appeal was allowed and the s.271B penalty deleted. The Assessing Officer had displaced the turnover declared by the assessee by including cash deposits reflected by him as a liability; the quantum litigation had ended under the Vivad se Vishwas Scheme 2020 and there was accordingly no final judicial finding available on the correctness of the turnover declared, so the benefit of the doubt had to go to the assessee and the penalty could not be sustained (para 5). The order of the CIT(A) was set aside and the action of the Assessing Officer reversed.
The Tribunal started from the declared position: turnover of Rs 58,42,500, below the Rs 60 lakh threshold then applicable, and a return filed under the presumptive scheme of s.44AD declaring 8 per cent of that turnover, so that s.44AB was not attracted on the assessee's own case (para 5). The threshold was crossed only because the Assessing Officer displaced that declared turnover by adding cash deposits which the assessee had carried as a liability, not as receipts (para 5). The Tribunal then attached decisive weight to the procedural history: because the quantum dispute had been closed under the Vivad se Vishwas Scheme 2020, no adjudicating authority had ever found the declared turnover to be wrong, and in the absence of a final judicial finding on the correctness of the turnover the benefit of the doubt belonged to the assessee (para 5). It observed that the income had been assessed and the tax collected without protracted litigation, and that in those peculiar circumstances the stale cause represented by the s.271B penalty should be shunned (para 5).
Thus, when seen with the fact that the quantum litigation has come to an end under 'Vivad se Vishwas Scheme, 2020' (VSV) and there is no final judicial finding available regarding the correctness of turnover declared by the assessee, the benefit of doubt must go to the assessee.
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Handle my notice → Ask a CA on WhatsAppNo. Where the assessee's declared turnover was below the s.44AB threshold and the officer crossed the threshold only by adding cash deposits to it, and the quantum dispute ended under the Vivad se Vishwas Scheme 2020 without any final judicial finding on the correctness of the turnover, the benefit of the doubt goes to the assessee and the s.271B penalty is reversed. This was decided by the ITAT (Shri Kul Bharat, Judicial Member and Shri Pradip Kumar Kedia, Accountant Member) and bears on section 271B, section 44AB, section 44AD, section 273B of the Income Tax Act 1961. It is reported as I.T.A. No. 4543/DEL/2019 (ITAT Delhi Bench 'F'); AY 2011-12. s.271B is computed on turnover, so the penalty has no base until turnover is settled. This is the case that says so where the turnover was never judicially settled at all. It is worth most in the very common pattern where a small assessee files under s.44AD, the officer treats bank credits or advances as receipts, the turnover on paper jumps past the audit limit and a s.271B penalty is bolted on to the addition. It also answers a question practitioners keep asking about the Vivad se Vishwas Scheme: settling the quantum does not concede the turnover for penalty purposes — here it cut the other way, because settlement meant there was no finding against the assessee to build the penalty on. Read the threshold with care: the Tribunal applied Rs 60 lakh, the s.44AB limit for AY 2011-12. The limit is now Rs 1 crore, and Rs 10 crore where cash receipts and cash payments are each within 5 per cent. The reasoning transfers; the figure does not. If it applies to you, the first step is this: Separate the two turnovers in the penalty reply: the turnover declared and the turnover the officer constructed, and identify exactly which receipts he added to get across the threshold.
For AY 2011-12 the assessee declared a total turnover of Rs 58,42,500 and filed his return under s.44AD, offering 8 per cent of that turnover on the presumptive basis. The s.44AB threshold applicable at the time was Rs 60 lakh, so on the declared figures no audit was due. In assessment the Assessing Officer took the view that cash deposits of Rs 1,54,92,400, which the assessee had shown as advances and carried as a liability, formed part of his turnover; on that footing the assessee crossed the s.44AB threshold and had failed to get his accounts audited. A penalty of Rs 77,462 was imposed under s.271B, and the CIT(A)-XXXIII, New Delhi confirmed it by order dated 22 March 2019. The quantum addition of Rs 1,54,92,400 was afterwards settled under the Vivad se Vishwas Scheme 2020, so no appellate authority ever ruled on whether those deposits were turnover. Before the Tribunal the assessee argued that he was a small businessman filing under s.44AD, that s.44AB never applied to him, and that the penalty rested on an assumption about the deposits that had never been tested. The matter was decided on 2022-06-10 by the ITAT (Shri Kul Bharat, Judicial Member and Shri Pradip Kumar Kedia, Accountant Member). On those facts the ITAT held as follows. The appeal was allowed and the s.271B penalty deleted. The Assessing Officer had displaced the turnover declared by the assessee by including cash deposits reflected by him as a liability; the quantum litigation had ended under the Vivad se Vishwas Scheme 2020 and there was accordingly no final judicial finding available on the correctness of the turnover declared, so the benefit of the doubt had to go to the assessee and the penalty could not be sustained (para 5). The order of the CIT(A) was set aside and the action of the Assessing Officer reversed.
The Tribunal started from the declared position: turnover of Rs 58,42,500, below the Rs 60 lakh threshold then applicable, and a return filed under the presumptive scheme of s.44AD declaring 8 per cent of that turnover, so that s.44AB was not attracted on the assessee's own case (para 5). The threshold was crossed only because the Assessing Officer displaced that declared turnover by adding cash deposits which the assessee had carried as a liability, not as receipts (para 5). The Tribunal then attached decisive weight to the procedural history: because the quantum dispute had been closed under the Vivad se Vishwas Scheme 2020, no adjudicating authority had ever found the declared turnover to be wrong, and in the absence of a final judicial finding on the correctness of the turnover the benefit of the doubt belonged to the assessee (para 5). It observed that the income had been assessed and the tax collected without protracted litigation, and that in those peculiar circumstances the stale cause represented by the s.271B penalty should be shunned (para 5). In the words reproduced by the source cited on this page: "Thus, when seen with the fact that the quantum litigation has come to an end under 'Vivad se Vishwas Scheme, 2020' (VSV) and there is no final judicial finding available regarding the correctness of turnover declared by the assessee, the benefit of doubt must go to the assessee."
It was decided by the ITAT on 2022-06-10 and is reported as I.T.A. No. 4543/DEL/2019 (ITAT Delhi Bench 'F'); AY 2011-12. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271B, section 44AB, section 44AD, section 273B, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the s.271B penalty deleted. The Assessing Officer had displaced the turnover declared by the assessee by including cash deposits reflected by him as a liability; the quantum litigation had ended under the Vivad se Vishwas Scheme 2020 and there was accordingly no final judicial finding available on the correctness of the turnover declared, so the benefit of the doubt had to go to the assessee and the penalty could not be sustained (para 5). The order of the CIT(A) was set aside and the action of the Assessing Officer reversed. It arises in Penalty and Presumptive Taxation & Audit matters, on section 271B, section 44AB, section 44AD, section 273B of the Income Tax Act 1961, and was decided by Shri Kul Bharat, Judicial Member and Shri Pradip Kumar Kedia, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the added receipts are advances, loans, deposits or transfers rather than sales, say so and show it from the ledger — an amount carried as a liability is not turnover. If the quantum was settled under Vivad se Vishwas or otherwise disposed of without a finding, take the point that there is no adjudicated turnover on which the penalty can be computed. Where the quantum appeal is still live, ask for the s.271B penalty appeal to be kept pending behind it rather than argued on assumed figures. Check the threshold for the actual assessment year before anything else — Rs 40 lakh, Rs 60 lakh, Rs 1 crore and Rs 10 crore have each been the limit at different times, and a penalty computed on the wrong year's limit fails at the threshold.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns nothing, and a search on the appeal number (I.T.A. No. 4543/DEL/2019) returns only the order itself. No later Bench has cited it and no Delhi High Court appeal was traced. The proposition that a penalty under section 271B cannot stand where the turnover on which the audit obligation depends is itself in dispute is supported here by this order alone. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The Tribunal's route is looser than its result. It says at para 5 that "reasonable cause exists", which is the s.273B language, but the substance of the paragraph is that the turnover on which the penalty was computed had never been judicially determined, which is a base-of-the-penalty point rather than a reasonable-cause point. A practitioner should be ready to argue it both ways, because a bench that reads it purely as a s.273B finding on peculiar facts will confine it. The order also records the assessee's declared turnover as Rs 58,42,500 against a threshold of Rs 60 lakh — a margin of about Rs 1.5 lakh — so the case is not authority for anything where the declared turnover is itself above the limit. The signature block is dated "DATED: /06/2022" with the day left blank; the date of pronouncement is stated as 10 June 2022. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the s.271B penalty deleted. The Assessing Officer had displaced the turnover declared by the assessee by including cash deposits reflected by him as a liability; the quantum litigation had ended under the Vivad se Vishwas Scheme 2020 and there was accordingly no final judicial finding available on the correctness of the turnover declared, so the benefit of the doubt had to go to the assessee and the penalty could not be sustained (para 5). The order of the CIT(A) was set aside and the action of the Assessing Officer reversed.
TaxSphere, “Yuvraj Singh v ITO”, https://taxnotice.vittsphere.com/caselaw/case/yuvraj-singh-v-ito-271b-where-the-turnover-itself-is-disputed/ (validity last checked 2026-09-07)
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My client's turnover was Rs 1.22 crore, above the s.44AB audit limit. He declared eight per cent under s.44AD and got no audit. The officer has levied s.271B. Is he liable?
My client's turnover is Rs 6 crore and almost everything moves through the bank. Is he outside tax audit, and what counts as 'cash' for the 5 per cent test?
My client filed under s.44AD for two years and then declared below eight per cent in the third. What happens to him for the next five years, and does he now have to get audited?
Our audit report was late because the statutory auditor was late. Can the officer still levy the s.271B penalty?
