2007 (5) TMI 345 - AT - Income Tax

Penalty under section 271B of the Income-tax Act, 1961 - society is registered with an object of not to derive either directly or indirectly any kind of benefit, profit, gain - show-cause notices to the assessee requiring it to explain as to why penalty under section 271B should not be imposed - Indian Hockey Federation is a society registered under the Societies Registration Act, 1860. with an object of not to derive either directly or indirectly any kind of benefit, profit, gain from any activity of business and profession - Hockey Federation is in a bona fide belief that the provision of section 44AB apply to the organisation engaged in the business and profession which object is running the purpose of profit and gain - section 271B is to apply only if activity of the assessee, nature of income to be assessed under Chapter IV, Head D, which categorically prescribed for the nature of income falling only if under the profit and gains from business or profession - Decided that it does not come under the purview of section 44AB - not getting the accounts audited and in not filing the audit report by a specified date, the penal provisions under section 271B are not attracted in this case merely because the assessee has itself been showing its income/loss under the head Income from business inadvertently - Held against the favour of revenue - Appeal dismissed.

Summary

Issues: Appeal against deletion of penalty under section 271B for assessment years 2003-04 and 2004-05.

Analysis:
1. The Revenue appealed against the deletion of penalties imposed under section 271B for both assessment years 2003-04 and 2004-05 by the Commissioner of Income-tax (Appeals).

2. The assessee, a society registered under the Societies Registration Act, explained that it did not fall under the purview of section 44AB as it did not engage in any business or profession for profit. The society's main objective was to promote and develop the game of hockey in the country.

3. The Assessing Officer imposed penalties after the assessee failed to comply with section 44AB requirements, despite the society's explanation that it was not involved in profit-generating activities. The penalties were challenged by the assessee during the appellate proceedings.

4. The Commissioner of Income-tax (Appeals) considered the nature of the society's activities and the fact that it was not engaged in business or profession for profit. The Commissioner observed that the audit reports were filed, and penalties under section 271B were not applicable as the society did not conduct profit-oriented activities.

5. The Appellate Tribunal concurred with the Commissioner's findings, noting that the society's primary goal was promoting hockey and its income source was government grants. The Tribunal upheld the decision to delete the penalties for both assessment years, emphasizing that the society's activities did not attract penalties under section 271B.

6. The Tribunal rejected the Revenue's appeal, affirming that the penalties were rightly deleted for both assessment years 2003-04 and 2004-05, as the society's objectives and income sources did not align with profit-oriented business activities, thus not warranting penalties under section 271B.