2021 (12) TMI 504 - AT - Income Tax

Penalty levied u/s 271B - not getting the books of account audited u/s 44AB - HELD THAT - As stated that an indemnity bond was filed by the society with the Punjabi University, Patiala for getting affiliation of course in the college run by the society. Also on perusal of the income and expenditure account of Guru Nanak Dev Khalsa Girls College as dated 01.12.2021 we find that the gross receipts mainly includes the fees received from college students for various educational courses imparted by the college. Prima facie the particulars of income and expenditure account looks to be from the activity not in the nature of any business or commerce and purely looks of an educational institutions. This fact asserts the submission made by the Ld. Counsel for the assessee that the society was under a bonafide belief that since it is an education institute, its income was exempt u/s 10(23C)(iiad) of the Act and as it was not carrying out any business activity, it was not required to get its books of account audited u/s 44AB. We are of the view that the finding of this Tribunal in the case of Sant Baba Rangi Ram Charitable Trust, Hoshiarpur 2012 (8) TMI 1121 - ITAT AMRITSAR. is squarely applicable on the isuses raised in the instant appeal so much so that the assessee society is also running an educational institution and was under the bonafide belief that since it is not carrying out any business or commercial activity, provisions of section 44AB of the Act are not attracted. In the instant case penalty u/s 271B of the Act was not leviable and we accordingly delete the penalty levied u/s 271B of the Act. Accordingly all the effective grounds raised in the instant appeal are allowed.

Summary

Issues:
Levy of penalty u/s 271B for not getting books of account audited under section 44AB of the IT Act, 1961.

Detailed Analysis:

1. Background and Facts:
The appeal was filed by the assessee against the order of Ld. CIT(A)-1, Amritsar for Assessment Year 2011-12. The delay in filing the appeal was condoned by the ITAT due to a reasonable cause stated in the affidavit.

2. Grounds of Appeal:
The assessee challenged the penalty imposed under section 271B by the AO and confirmed by the CIT(A). The grounds of appeal raised by the assessee mainly focused on the incorrect application of the penalty provisions.

3. Assessment and Penalty Imposition:
The AO initiated penalty proceedings under section 271B as the assessee did not get its books of account audited under section 44AB. The penalty of ?42,000 was imposed for alleged gross business receipts.

4. Arguments and Submissions:
The assessee contended that it is an educational institution exempt under section 10(23C)(iiiad) and therefore not required to get its books audited under section 44AB. The society believed its activities were purely educational and not commercial.

5. Tribunal's Analysis:
The ITAT examined the facts and noted that the gross receipts were mainly from educational activities, supporting the assessee's claim of exemption under section 10(23C)(iiiad). The Tribunal referred to a similar case where penalty was cancelled due to exemption under section 11 of the Act.

6. Legal Precedent and Decision:
Citing the case of Sant Baba Rangi Ram Charitable Trust, Hoshiarpur, the Tribunal held that since the assessee's income was wholly exempt under section 11, the provisions of section 44AB were not applicable. The Tribunal found no justification for levying the penalty under section 271B.

7. Conclusion:
Based on the above analysis and legal precedent, the ITAT allowed the appeal of the assessee, deleting the penalty of ?42,000 imposed under section 271B. The Tribunal found that the assessee, being an educational institution, was not liable for the penalty as it was under a bonafide belief that the audit provisions did not apply to its non-commercial activities.

8. Final Decision:
The ITAT pronounced the order in favor of the assessee, allowing all the effective grounds raised in the appeal and deleting the penalty. The decision was based on the assessee's exemption status under section 10(23C)(iiiad) and the non-applicability of audit provisions due to its educational nature.

This detailed analysis highlights the key aspects of the judgment, including the grounds of appeal, factual background, legal arguments, tribunal's analysis, legal precedent, and the final decision in favor of the assessee.