Non doctor running a hospital is not a professional for tax audit turnover limit purpose – ITAT

Non doctor running a hospital is not a professional for tax audit turnover limit purpose, but it is a business activity – ITAT deletes penalty u/s 271B

ABCAUS Case Law Citation:
ABCAUS 2914 (2019) (05) ITAT

The appeal was filed by the assessee against the order of CIT(A) whereby he had upheld the penalty imposed by the Assessing Officer u/s 271B of Income Tax Act, 1961 (the Act).

The appellant assessee was a private limited company which was engaged in running of a nursing home. The Assessing Officer (AO) imposed the penalty u/s 271B of the Act by holding that the total receipts declared by the assessee exceeded the minimum amount which required the accounts to be audited u/s 44AB(a) of the Act.

The assessee submitted that itself it was not engaged in professional activities and rather it was running a business in the form of a private limited company therefore, the provisions of section 44AB(b) of the Act were applicable and the turnover limit for that year under consideration for business was Rs. 60 lacs as against the turnover criteria applicable to professionals.

It was submitted that the authorities below had wrongly assumed that the assessee was engaged in professional activities whereas the company itself did not possess any professional qualification and therefore, the penalty should not have been levied.

The Tribunal observed that the assessee was a private limited company which was engaged in providing medical facilities through engagement of professional doctors. The receipts of the assessee was below Rs. 60 lacs.

The Tribunal noted that the assessee itself did not possess any professional degree and rather it was engaged in commercial activities.

The Tribunal clarified that there is difference between business and profession. For carrying on a profession, possession of some professional qualification is must. Qualification denotes that there must be some special training of particular skill which involves high level education.

The Tribunal opined that the company in itself could not be said to be having any professional qualification or education. It was running only with a motive to earn profit through engagement of specialized doctors and with the help of plant & machinery.

Therefore, the assessee company could not be said to be engaged in professional activities and rather it was held to be engaged in business activities.

The Tribunal pointed out that the turnover limit for tax audit for the year under consideration was Rs. 60 lacs and the turnover of the assessee was much below it, hence the provisions of section 44AB(b) would not apply for determining the amount of limit required for audit of accounts.

Accordingly, the Tribunal deleted the penalty holding that the assessee was not liable to get its accounts audited and therefore, the penalty imposed and sustained by CIT(A) u/s 271B was not justified.

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