Income treated as income from other source not to be considered for applicability of section 44AB

Krishna Educational Society Vs ITO (ITAT Visakhapatnam)

ITAT Visakhapatnam held that penalty u/s 271B of the Income Tax Act not imposable as provision of section 44AB of the Income Tax Act doesn’t apply to income that is treated as income from other sources.

Facts- 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.

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, AO initiated penalty proceedings U/s. 271B of the Act.

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 audited U/s. 44AB of the Act. AO rejected the assessee’s reply and proceeded to levy penalty of Rs. 1,42,260/- U/s. 271B of the Act.

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