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Facts
The assessee, a Section 8 company registered under Section 12AA of the Income Tax Act, was assessed under Section 143(3). The Assessing Officer levied a penalty of Rs. 1,50,000/- under Section 271B for failure to get its books of account audited as stipulated under Section 44AB. The CIT(A) upheld this penalty, leading to the current appeal before the Tribunal.
Held
The Tribunal held that as the assessee was a Section 8 company registered under Section 12AA and was not carrying on any business, the provisions of Section 44AB were not applicable to its case. Consequently, the levy of penalty under Section 271B for non-compliance with Section 44AB was unwarranted and contrary to the Act. The AO was directed to delete the penalty.
Key Issues
Whether penalty under Section 271B for non-compliance with Section 44AB of the Income Tax Act can be levied on a Section 8 company registered under Section 12AA that is not carrying on any business.
Sections Cited
12AA, 143(3), 44AB, 271B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI PRAKASH CHAND YADAV, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 04.03.2024 for Assessment Year (AY) 2016-17.
Brief facts of the case are that the assessee is a company duly incorporated under the provisions of section 8 of the Companies Act, 2013. It is duly granted registration under the provisions of section 12AA of the Income Tax Act, 1961 (the Act) . The assessee Vegetable & Fruit Promotion Council Keralam (VFPCK company was formed by the Government of Kerala for the relief of poor, small and marginal farmers. Assessment for AY 2016-17 was completed u/s. 143(3) of the Act vide order dated 29.12.2026 at an income of Rs. 2,53,20,45/-. During the course of assessment proceedings, the AO found that the assessee had not got the books of account audited as stipulated u/s. 44AB of the Act and failed to file the prescribed audit report on or before the specified date. Therefore, he initiated penalty proceedings u/s. 271B of the Act. In response to the show cause notice no explanation was filed by the assessee. In the circumstance the AO had proceeded with levy of penalty u/s. 271B of the Act vide order dated 15.03.2022 levying penalty of Rs.1,50,000/- u/s. 271B of the Act.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the levy of penalty for non prosecution without adverting to the statements of facts of the case.
Being aggrieved, the assessee is in appeal before the Tribunal in the present appeal.
The learned counsel for the assessee submits that the provisions of section 44AB of the Act have no application to the assessee, inasmuch as, the assessee was not carrying on any business. Therefore, he prayed that the penalty order be quashed.
On the other hand, the learned Sr. DR, supporting the orders of the lower authorities, submits that no interference is called for.
Vegetable & Fruit Promotion Council Keralam (VFPCK 7. We have heard the rival contentions of both the parties and perused the material available on record. The solitary issue in the present appeal relates to whether the levy of penalty u/s. 271B of the Act is justified in the facts of the present case. Admittedly, the assessee is a company registered u/s. 8 of the Companies Act, 2013 enjoying registration under the provisions of section 12AA of the Act. Therefore, it cannot be said that the assessee company is carrying on any business and the turnover exceeded above Rs. 1 crore. Therefore, the provisions of section 44AB of the Act have no application to the facts of the present case. The lower authorities, without properly appreciating the facts of the case as well as spirit of provisions of section 44AB of the Act, had merely levied penalty which is contrary to the plain provisions of section 44AB of the Act. Therefore, we direct the AO to delete the penalty of Rs. 1,50,000/- levied u/s. 271B of the Act.
In the result, the appeal filed by the assessee stands allowed.