SHREE KRISHNA EDUCATIONAL SOCIETY, VISAKHAPATNAM V. INCOME TAX OFFICER, EXEMPTION WARD, VISAKHAPATNAM

ITA 91/VIZ/2023

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The case involves Sree Krishna Educational Society, which appealed against the penalty imposed by the Income Tax Officer (ITO), Exemption Ward, Visakhapatnam, for not filing a tax audit report as required under Section 44AB of the Income Tax Act, 1961. The society, registered under the Societies Registration Act, filed a return declaring NIL income after claiming exemption under Section 10(23C) of the Act. The ITO, during scrutiny, assessed the income and found it exceeded the statutory limit for tax audit, leading to penalty proceedings. The society contended that their income was assessed under 'income from other sources' and thus not subject to the audit requirements of Section 44AB. Both the ITO and the National Faceless Appeal Centre (NFAC) upheld the penalty, which was later contested in the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128587 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-05-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 07-03-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 143(1); 271B; 44AB; 10(23C)

Judgement Text

आयकर अपीलȣयअͬधकरण, ͪवशाखापटणम पीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įी दुåवूǽ आर एल रेɬडी, ÛयाǓयक सदèय एवं Įी एस बालाकृçणन, लेखा सदèय के सम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.91/Viz/2023 (Ǔनधा[रण वष[ / Assessment Year :2018-19) Sree Krishna Educational Society, Visakhapatnam. PAN: AAABS 1467 K Vs. Income Tax Officer, Exemption Ward, Visakhapatnam. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸ कȧ ओर से/ Appellant by : Sri G.V.N. Hari, AR Ĥ×याथȸ कȧ ओर से / Respondent by : Sri Sankar Pandi, Sr. AR सुनवाई कȧ तारȣख / Date of Hearing : 22/05/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 15/06/2023 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [Ld. CIT(A)-NFAC] vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1049738450(1), dated 14/02/2023 2 arising out of the order passed U/s. 271B of the Income Tax Act, 1961 [the Act] for the AY 2018-19. 2. The facts of the case are that the assessee is a society registered under Societies Registration Act to run an educational institution. The assessee filed its return of income for the AY 2018-19 in ITR-7 on 30/10/2018 declaring NIL income after claiming exemption U/s. 10(23C) of the Act. The scrutiny assessment was completed on 7/4/2021 vide order U/s. 143(3) r.w.s 143(3A) & 143(3B) of the Act assessing the total income at Rs. 7,56,350/-. The Ld. AO during the scrutiny proceedings noticed that the assessee had gross receipts of Rs. 2,84,51,500/- which is exceeding the statutory limit for tax audit as per section 44AB of the Act and noticed that the assessee has not filed any report prescribed U/s. 44AB of the Act. Therefore, the Ld. AO initiated penalty proceedings U/s. 271B of the Act and show cause notice dated 7/4/2021 was issued and served on the assessee. Thereafter, one more show cause notice dated 15/07/2021 was also issued and served on the assessee. In response, the assessee submitted that the Ld. AO has assessed the income under ‘income from other sources’ during the scrutiny assessment proceedings and hence it is not required to be 3 audited U/s. 44AB of the Act. After carefully considering the submissions of the assessee, the Ld. AO being not convinced, rejected the assessee’s reply and proceeded to levy penalty of Rs. 1,42,260/- U/s. 271B of the Act. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the NFAC. 3. On appeal, the NFAC confirmed the order of the Ld. AO. Aggrieved by the order of the NFAC, the assessee is in appeal before us and raised the following grounds of appeal: “1. The order of the Ld. CIT( A) is contrary to the facts and al so the l aw appl icabl e to the facts of the cas e. 2. The Ld. CIT(A) is not justified in deciding the appeal exparte. 3. The Ld. CIT(A) is not justified in sustai ning the penal ty of Rs. 1,42,260/- l evied by the Assessing Officer U/s. 271B of the Act. 4. Any other grounds may be urged at the time of hearing.” 4. The only issue arises from the above grounds is sustenance of penalty of Rs. 1,42,260/- levied by the Ld. AO U/s. 271B of the Act. 5. At the outset, the Ld. AR argued that the assessee filed its return of income declaring it as income from other sources. The CPC while processing the return U/s. 143(1) of the Act has also considered the income of the assessee as income from other 4 sources. The Ld. AO during the scrutiny assessment proceedings in his computation sheet has treated the income as income from other sources. The Ld. AR therefore pleaded that since the income of the assessee has been consistently treated as income from other sources, the provisions of section 44AB of the Act which are applicable to the Profit & Gains of Business or Profession cannot be applied in the instant case. He therefore pleaded to delete the penalty levied by the Ld. AO. Per contra, the Ld. DR fully supported the orders of the Ld. Revenue Authorities. 6. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. Admittedly, while filing the return of income, the assessee has disclosed its income as income from other sources as demonstrated in page 6 of the paper book in Sl. No.13(iv) of the ITR-7. Subsequently, we also find that the intimation U/s. 143(1) also considered it as income from other sources. During the scrutiny assessment proceedings, the Ld. AO also in his computation sheet which is available in page 42 of the paper book treated the income of the assessee as income from other sources. Section 44AB(a) of the Act clearly states that Every 5 person,—(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds the prescribed limits”. In the instant case, since the income has been treated as income from other sources and not as income from profit & gains of business or profession, the provisions of section 44AB of the Act, in our considered view, are not applicable. We therefore have no hesitation to delete the penalty of Rs. 1,42,260/- levied by the Ld. AO and direct the Ld. AO accordingly. 7. In the result, appeal of the assessee is allowed. Pronounced in the open Court on the 15 th June, 2023. Sd/- Sd/- (दुåवूǽ आर.एल रेɬडी) (एस बालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखा सदèय/ACCOUNTANT MEMBER Dated :15.06.2023 OKK - SPS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee – Sree Krishna Educational Society, D.No. 3-286, Adarsh Nagar, Old Dairy Farm, Visakhapatnam, Andhra Pradesh 530040. 6 2. राजèव/The Revenue – Income Tax Officer, Exemption Ward, Income Tax Office, Infinity Towers, Sankaramatham Road, Visakhapatnam, Andhra Pradesh – 530016. 3. The Principal Commissioner of Income Tax, 4. आयकर आयुÈत (अपील)/ The Commissioner of Income Tax 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, ͪवशाखापटणम/ DR, ITAT, Visakhapatnam 6. गाड[ फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam