Case Law Details
Brief of the Case
Karnataka High Court held In the case of M/s Koramangala Club vs. ITO that it is clear that the assessee was under the bonafide belief that the provisions of Section 44AB were not applicable to a Club, while supplying beverages, liquor etc., to its members as it was not engaged in any business, but only a mutuality. As per section 271B, no penalty shall be leviable to a person or on assessee for any failure to obtain audit report; if it is proved that there was reasonable cause for such failure. The explanation of bonafide belief offered by the appellant would constitute a reasonable cause to absolve the appellant from the imposition of penalty. Hence, no penalty is sustainable.
Facts of the Case
The assessee had failed to obtain the audit report under Section 44AB for which proceedings under Section 271B were initiated by the assessing officer while concluding the assessments for the relevant assessment years. The assessee offered an explanation that the appellant club was the mutual concern and was supplying the liquor and beverages only to its members and there was no business carried on by the appellant and accordingly, it was under the bonafide belief that the provisions of Section 44AB of the Act were not applicable to it. Consequently, the appellant did not obtain the audit report at the time of filing of the return of income. The assessing Officer rejected the explanation offered by the appellant and levied the penalty.
Held by CIT (A)
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