ITAT Cancels Rs. 25,000 Penalty for Non-Maintenance of Books for Local Authority:

ITAT Cancels Rs. 25,000 Penalty for Non-Maintenance of Books for Local Authority The present appeal had been filed by an authority named Yamuna Expressway Industrial Development Authority-YEIDA (appellant), located in Greater Noida, First Floor, Commercial Complex, Gautambudh Nagar, Uttar Pradesh-201308, against the CIT(Appeal), Ghaziabad, in the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘A’: New Delhi before Shri Yogesh Kumar U.S., Judicial Member, and Shri Manish Agarwal, Accountant Member. The appeal is related to the assessment year 2006-07. The appeal had been filed challenging an order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, in Appeal No. CI(A), Ghaziabad/11054/2017-18 dated 20.03.2024 arising out of the order passed under Section 271A of the Income Tax Act, 1961, dated 20.11.2017 for Assessment Year 2006-07.

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Background of Case: YEIDA had received a penalty of Rs. 25,000 under section 271A of the Income Tax Act. The penalty was for not maintaining books of accounts properly as required under section 44AA. The Assessment Officer (AO) had earlier reopened YEIDA’s assessment under section 148, claiming that the Authority had income that should be taxed. The AO calculated the income at Rs. 14,75,758 by disallowing expenses of Rs. 7,95,021 and including a surplus of Rs. 6,80,737 as taxable income. The AO treated YEIDA as a “Local Authority” engaged in business and liable for tax based on a past court judgment regarding Noida Development Authority (NDA). Hence, a penalty of Rs. 25,000 was imposed on YEIDA. The authority dissatisfied with the imposition of the penalty then approached the Commissioner of Income Tax (Appeals) [CIT(A)], but their appeal was quashed. Meaning the penalty stood. Thereafter, the authority further approached the ITAT in New Delhi.

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YEIDA’s Arguments: The Yamuna Expressway Industrial Development Authority (YEIDA) said that it is a local authority and non-profit organisation; hence, it is not engaged in any business or profession. They argued that section 44AA, which requires keeping books of accounts, applies only to businesses and professionals, not to local authorities or non-profit institutions. YEIDA already maintains books of accounts and financial statements, which are enough to show its surplus, assets, and liabilities. These records were also used during the assessment process. As per the Uttar Pradesh Industrial Development Act, 1976, the accounts of YEIDA are audited, so it was wrong to say that books were not maintained. They also mentioned Rule 17AA, which lists books of accounts to be maintained by charitable institutions, was introduced in August 2022, much later than the assessment year 2006-07, so it does not apply to this case. The department argued that YEIDA is making a large profit; therefore, it should be treated as a business authority, and Section 44AA should apply.

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Decision of ITAT New Delhi When ITAT Delhi analysed the arguments of both sides, it concluded:

• Section 44AA does not apply to the appellant authority, i.e., YEIDA, because it is not engaged in business or profession. Therefore, the penalty of Rs. 25,000 under section 271A is unfair and should be deleted.
• In the final decision, ITAT Delhi allowed the appeal filed by YEIDA, meaning now no penalty applies to the authority.