M/S.SHALOM CHARITABLE MINISTRIES OF INDIA,PALAKKAD vs. THE ACIT, PALAKKAD

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ITA 643/COCH/2019Status: DisposedITAT Cochin05 March 2020AY 2009-104 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the micro finance activities were confirmed as business and the receipts exceeded the threshold, the assessee was liable to furnish an audit report. As no explanation was provided for the failure, the penalty under Section 271B was rightly confirmed.

What were the facts?

The assessee, a trust claiming exemption under Section 11, was denied this exemption as its micro finance activities were held to be business. Consequently, the assessee failed to furnish an audit report under Section 44AB, leading to a penalty under Section 271B.

What were the issues?

Whether the penalty imposed under Section 271B for failure to furnish an audit report under Section 44AB is justified when the assessee's activities were deemed business and not charitable.

Which sections of the Income-tax Act were involved?

Section 11,Section 44AB,Section 271B,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Before: Shri Chandra Poojari, AM & Shri George George K, JM

Hearing: 05.03.2020Pronounced: 05.03.2020

Heard together (2 matters)

ITA No.643/Coch/2019
SA No.97/Coch/2019

Read from the judgment's own cause title. This page is filed under one of them.

This appeal at the instance of the assessee is directed against the order of the CIT(A), dated 09.08.2019. The relevant assessment year is 2009-2010. The assessee has also filed stay application seeking to stay the recovery of outstanding tax arrears.

2.

The solitary issue that was argued, is whether the CIT(A) is justified in confirming the penalty imposed u/s 271B of the I.T.Act amounting to Rs.1,00,000.

4.

The brief facts of the case are as follows : The assessee is a trust claiming exemption u/s 11 of the I.T.Act. For the assessment year 2009-2010, the claim of exemption u/s 11 of the I.T.Act was denied by the Assessing

2 SA No.97/Coch/2019 M/s.Shalom Charitable Ministries of India. Officer in the assessment concluded u/s 143(3) of the I.T.Act. The reasoning of the Assessing Officer to deny the benefit of exemption was that the assessee was engaged in micro financial activities and charging exorbitant interest from the beneficiaries and there is no charitable activities involved in the micro finance activity of the assessee. Hence, the income sought to be exempted u/s 11 of the I.T.Act was brought to tax as business income by the Assessing Officer. The view taken by the A.O. was affirmed by the CIT(A) as well as the ITAT (ITAT’s order dated 25.04.2014 in 2017). The receipts from micro finance was Rs.3,75,42,635 during the year and since the assessee had failed to furnish audit report u/s 44AB of the I.T.Act, the Assessing Officer imposed penalty u/s 271B of the I.T.Act.

5.

Aggrieved by the order of the Assessing Officer imposing penalty u/s 271B of the I.T.Act, the assessee preferred an appeal to the first appellate authority. The view taken by the Assessing Officer was affirmed by the CIT(A). The relevant finding of the CIT(A) reads as follow:-

“Since the activity from micro finance has been held as business, the appellant was liable to furnish Audit Report u/s 44AB of the I.T.Act as the receipts from micro finance activity is Rs.3,75,42,635/- during the year. The appellant has not furnished any explanation regarding its failure to get its account audited u/s 44AB of the I.T.Act. In the facts and circumstances of the case, I confirm the penalty imposed by the Assessing Officer.”

3 SA No.97/Coch/2019 M/s.Shalom Charitable Ministries of India. 6. Aggrieved by the order of the CIT(A), the assessee has filed this appeal before the Tribunal. The learned AR reiterated the submissions made before the Income Tax Authorities. The learned Departmental Representative, on the other hand, strongly supported the Assessing Officer’s order imposing penalty u/s 271B of the I.T.Act and the CIT(A)’s order confirming the penalty.

7.

We have heard the rival submissions and perused the material on record. The assessee was engaged in micro finance activities during the relevant assessment year. The receipts from micro finance activity was Rs.3,75,42,635. The Tribunal for the relevant assessment year in (order dated 25.04.2018) had held that the micro finance activity of the assessee is not a charitable activity and confirmed the view taken by the Assessing Officer. Since the activity of micro finance has been held to be business and the receipt from the said activity had exceeded the prescribed limit mentioned in the said section, the assessee was liable to get its accounts audited u/s 44AB of the I.T.Act. The assessee admittedly has not filed the audit report nor has it offered any explanation before the Assessing Officer, why penalty u/s 271B of the I.T.Act cannot be imposed in this case. Therefore, we are of the view that the penalty imposed u/s 271B of the I.T.Act, by the Assessing Officer has been rightly confirmed by the CIT(A). It is ordered accordingly.

4 SA No.97/Coch/2019 M/s.Shalom Charitable Ministries of India. 8. Since we have disposed of the appeal filed by the assessee, the Stay Application filed by the assessee becomes infructuous and the same is dismissed as such.

9.

In the result, the appeal as well as stay application filed by the assessee are dismissed.

Order pronounced on this 05th day of March, 2020.

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