Stargate Enterprises Pvt. Ltd. Vs DCIT (ITAT Chennai)
The Income Tax Appellate Tribunal (ITAT), Chennai allowed the assessee’s appeal and deleted the penalty of ₹1,50,000 levied under Section 271B of the Income Tax Act, 1961, holding that the assessee had established a reasonable cause under Section 273B for not obtaining a tax audit report under Section 44AB.
The assessee, a company, filed its return for Assessment Year (AY) 2018-19 declaring a total income of ₹12,00,22,760. The return was initially processed under Section 143(1), and the income was determined at ₹15,35,25,960. Subsequently, the case was selected for scrutiny to verify the non-furnishing of the tax audit report. During the assessment proceedings, the assessee explained that it had not earned any business income and, therefore, believed that the provisions of Section 44AB were not applicable. However, while completing the assessment under Section 143(3), the Assessing Officer (AO) held that interest income of ₹11,84,66,453, which had been declared under the head “Income from Other Sources,” was assessable as “Business Income.” Based on this finding, the AO concluded that the assessee was required to obtain a tax audit report and imposed a penalty of ₹1,50,000 under Section 271B for failure to furnish the audit report.
