2019 (5) TMI 23 - AT - Income Tax

Penalty u/s 271B - receipt from profession or receipt from business - assessee is a private limited company which is engaged in running of a nursing home - activity of company is business or profession - as per AO assessee activity was the professional activity - HELD THAT - We find that assessee itself did not possess any professional degree and rather it was engaged in commercial activities. There is difference between business and profession. For carrying on a profession, possession of some professional qualification is must. From the qualification we mean that there must be some special training of particular skill which involve high level education. The company in itself cannot be said to be having any professional qualification or education. It was running only with a motive to earn profit through engagement of specialized doctors and with the help of plant machinery. Therefore, the assessee company cannot be said to be engaged in professional activities and rather it is held to be engaged in business activities. Therefore, the provisions of section 44AB(b) will apply for determining the amount of limit required for audit of accounts. The turnover limit for the year under consideration was ₹ 60 lacs and the turnover of the assessee was ₹ 54,45,940/- therefore, the assessee was not liable to get its accounts audited and therefore, the penalty imposed and sustained by learned CIT(A) u/s 271B is not justified - Decided in favour of assessee.

Summary

Issues: Appeal against penalty imposed under section 271B of the Income Tax Act for non-audit of accounts due to exceeding turnover limit.

Analysis:
1. Issue: The appeal was filed against the penalty imposed under section 271B of the Income Tax Act for not auditing the accounts due to exceeding the turnover limit.

Judgment: The appeal was initially dismissed for non-prosecution but was later recalled for hearing on merits. The only ground taken by the assessee was the upholding of the penalty by the CIT(A) under section 271B of the Act.

2. Issue: Interpretation of whether the assessee was engaged in professional activities or business activities.

Judgment: The assessee, a private limited company providing medical facilities through professional doctors, declared receipts of &8377; 54,45,940/-. The authorities held it to be professional activity subject to audit under section 44AB(a). However, it was argued that the company did not possess any professional qualifications and was engaged in commercial activities for profit, not professional activities requiring specialized skills.

3. Issue: Applicability of section 44AB(b) for determining audit requirement based on turnover limit.

Judgment: The Tribunal differentiated between business and profession, emphasizing the need for professional qualifications for professional activities. As the company lacked such qualifications and was engaged in business activities, section 44AB(b) applied. The turnover limit for audit was &8377; 60 lacs, while the turnover was &8377; 54,45,940/, making the audit unnecessary. Consequently, the penalty under section 271B was deemed unjustified and deleted.

4. Outcome: The appeal of the assessee was allowed, and the penalty imposed under section 271B was deleted. The Tribunal pronounced the order in the open court on 26/04/2019.