No Penalty shall be Levied on Grounds of Non-Auditing of Accounts if Bonafidely Claims Exemption u/s 11 of Income Tax Act: ITAT [Read Order]

The Delhi Bench of  Income Tax Appellate Tribunal (ITAT) held that no penalty should  be levied on the  grounds of non-auditing of accounts if bonafidely claims exemption under Section 11 of Income Tax Act, 1961.

The assessee,Bhartiya Shiksha Prachar Samiti, Tonk assessment was completed on 13-12- 2019 by not allowing exemption under Section 10(23C)(iiiad)/ Section 11 of the Income Tax Act. 

Against this order, the assessee filed an appeal   before CIT(A) which was still pending. However, the AO initiated penalty proceedings under Section  44AB of the  Income Tax Act  and in the absence of reply filed by the assessee, penalty under Section  271B of the  Income Tax Act  was imposed at Rs.1.50 lakhs.

Aggrieved by the penalty order, the assessee filed an appeal before the CIT(A) who while dismissing the appeal of the assessee held that the assessee is carrying on business of running education institution and it is required to get its accounts audited under Section  44AB of the Income Tax Act.

Thereafter the assessee filed a second appeal before the tribunal.

Before the bench P.C. Parwal, the counsel for the assessee submitted that assessee was under bona fide belief that income of the assessee is exempt and Chapter III of the Act and Section 44AB of the Income Tax Act falls in Chapter IV which relates to computation of business income and thus the assessee is not required to get its accounts audited under section 44AB of the Income Tax Act. Hence, the penalty was confirmed by the CIT(A) as bad in law.

Monisha Choudhary, Counsel for the revenue, supported the decision of the lower authorities.

The tribunal reviewing the facts and decision of the CIT(A) observed that there was no computation of profit and gains of business or profession as a part of the total income. It was also noted that when the assessee under bona fide belief claimed the exemption under Section 11 of the Income Tax Act  and had not got his accounts audited from the accountant as per provisions contained under Section  44AB of Income Tax Act , penalty under section  271B of Income Tax Act  could not be levied.

After considering the facts, the single -member bench comprising Sandeep Gosain, (Judicial Member) deleted the penalty imposed under Section 271B of Income Tax Act.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates