TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 512
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..... 12A of the Income-tax Act, 1961 [the Act] declaring its total income at Nil. The above return was processed u/s. 143(1) and subsequently picked up for scrutiny. The assessment order was passed u/s. 143(3) on 28.12.2021 wherein total income was assessed at Rs. 9,20,360 considering the same as business income and denying the benefit of provisions of section 11 & 12 of the Act. Further penalty proceedings were also initiated u/s. 271(1)(c) of the Act for concealment of income. 4. During the penalty proceedings the assessee made submission. 5. The ld. AO noted that assessee is a society registered under the Karnataka Societies Registration Act, 1960, which is mainly engaged in undertaking civil contract work and projects of the Karnataka Government implemented through various departments. Based on this, the AO was of the view that assessee is carrying on activity of construction work. Accordingly the same was treated as business and trading income. The assessee contested this matter upto the level of ITAT wherein the order of the ld. AO was confirmed by the ITAT in ITA Nos.947 & 948/Bang/2019 dated 16.6.2022. Thus penalty proceedings were initiated. During the penalty proceedings t....
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....g the penalty proceedings the ld. AO did not mention how the assessee has concealed the income. No such finding was given by the ld. AO. 12. In the appellate proceedings also, the ld. CIT(A) has held as under:- "After perusal of the records, it has been found that the order has been passed by CIT(A) for the appellant against the same Assessment order passed by the AD u/s 143(3) of the Act. The present appeal is consequential in nature of the aforementioned order passed by the CIT(A). Therefore, this appeal is being decided on the basis of the order passed by CIT(A). Ld. CIT(A) vide order no. ITA No. 173/MNG/CIT(A)MNG/ 2012-13 for the AY 2010-11 has rejected the quantum appeal of the appellant on merit. Therefore, relying on the order of Ld. CIT(A), penalty order u/s 271 (1)(c) of the Act is confirmed and appellant's appeal against penalty order is dismissed." 13. From the above, it is amply clear that the ld. lower authorities have wrongly held that when the addition is confirmed, penalty is also automatic and required to be confirmed. We find that there is a specific distinction between the assessment proceedings and penalty proceedings. There is no provision in the Inc....
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....filed by the assessee on identical facts and circumstances. 20. We first note down the facts and circumstances for AY 2011-12, consider the arguments of both the parties and thereafter give our decision, which will also be applied to the other 3 appeals. 21. The facts of the case for AY 2011-12 show that assessee has filed return of income on 17.1.2011 which was processed u/s. 143(1) and then taken up for scrutiny u/s. 143(2) resulting into assessment order passed on 16.12.2013 wherein total income of assessee is assessed at Rs. 12,07,284 treating the income of the assessee as business income. This was because the assessee was mainly engaged in undertaking civil contract work of various schemes of the Karnataka Govt. This assessment order was confirmed by the ld. CIT(A) and the ITAT vide appellate order dated 16.6.2022. As the assessee was held to be carrying on business activity and turnover of the assessee from business was determined as per assessment order at Rs. 7.5 crores, the ld. AO issued show cause notice on 16.12.2013. The assessee submitted its reply. The ld. AO stated that the reply of the assessee is not 'considerable', and the penalty is imposed at Rs. 1,50,000 u/s.....
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....red its income and claimed exemption u/s. 11 & 12 of the Act. The ld. AO noted that assessee is not carrying on charitable activity but carrying on business. Accordingly benefit of section 11 & 12 was denied and the income of the assessee was assessed as business income. As the turnover of the assessee for this year is approximately Rs. 7.5 crores, the ld. AO issued a notice for levy of penalty u/s. 271B of the Act. The ld. AO categorically held that in view of the quantum addition confirmed by the Tribunal, the explanation given by the assessee is not "considerable" and therefore he rejected it and levied a penalty u/s. 271B of Rs. 1,50,000. The ld. CIT(A) confirmed the penalty stating that it is consequential as the quantum addition made by the ld. AO is confirmed by ITAT. In a nutshell, the ld. lower authorities have held that penalty u/s. 271B is consequential in nature as the quantum additions treating the income of the assessee as business income is confirmed by the ITAT. 26. We find that a person carrying on business is required to get his accounts audited if it exceeds the specified turnover by a specified date under the provisions of section 44AB of the Act. If the assess....