Held that the assessee had been established by the National Law University, Delhi Act, 2007-the provisions of which indicated that the university was not engaged in any business or for the purpose of profit but existed solely for educational purposes. The penalty order under section 271B of the Act and the assessment order, both specifically mentioned that the assessee was a local authority. Once the Department accepted the assessee to be local authority certainly it could not be considered to be engaged in “business” or to be earning profit, in the ordinary course of its objectives and functions of imparting legal education and legal research in Delhi. Further, the university had claimed exemption of income earned by it from tax under section 10(23C)(iiiab) of the Act. The Assessing Officer had erroneously introduced provisions of section 12A(1)(b) of the Act to conclude that as the assessee had not got its accounts audited in terms of section 12A(1)(b) of the Act, penalty was liable to imposed under section 271B of the Act. In a case of failure of audit for the purpose of section 12A(1)(b) of the Act, there is no penalty provision except that the assessee shall not be entitled to the benefit of exempt income under section 11 or 12. The tax authorities below had fallen in grave error on the facts and law while invoking the penalty provisions.(AY.2018-19)