GOVINDRAM GOURIDUTTA PODDAR,MUMBAI vs. I.T.O WARD 42(1)(2), MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER:

Commissioner of Income Tax (Appeals) / National Faceless Appeal

Centre [for short “ld.CIT(A)”] dated 29.01.2026 for the assessment

year 2023-24. The assessee has raised following grounds of appeal.

“1. On the facts and in the circumstances of the case, and in law, the Learned CIT(A) has erred in confirming the penalty of Rs. 1,50,000/- levied under section 271B of the Income Tax Act, 1961. 2. "The Appellant keeps his right reserve to add/modify/delete any ground of appeal during the appellant proceeding.” 2. Rival submissions of both the parties have been heard and records

are perused. The Learned Authorised Representative (‘Ld. AR’)

of the assessee submits that the Assessing Officer (‘AO’) levied penalty under Section 271B of Rs. 1,50,000/-, by taking view that the

assessee has not filed audit report despite having turnover of Rs.

Rs.74,97,165/-. The Ld. AR of the assessee submits that, the AO

committed error in considering the turnover of the assessee at Rs.

2,17,69,46,883/-. The assessee is engaged in trading of Futures and

Options and AO determined turnover from all transaction and levied

penalty. The Mumbai Tribunal in the case of Sanjay Maraotra Modak

Vs. DCIT [2023] 147 taxmann.com 221 (Mumbai - Trib.) held that in

case of trading in Futures & Options, the Institute of Chartered

Accountants of India (ICAI) has prescribed that turnover in such

transactions should be treated by considering the facts namely; (i)

the total of favourable and unfavourable differences, (ii) premium

received on sale of options and (iii) difference in respect of any

reverse trades entered into each transaction. It was further held that

each transaction comprising “buy” and “sell” is to be considered as an

independent transaction and turnover in respect of each such

transaction must be computed separately. The total turnover during a

financial year would be the turnover of all such independent

transaction for the financial year. If entire transaction of the assessee

is considered, the assessee has suffered loss of Rs. 21,60,306/-.

(‘Ld. Sr. DR’) for the revenue has supported the orders of the lower

authorities.

have gone through the orders of the lower authorities carefully. We

find that, the AO levied penalty of Rs. 1,50,000/- vide order dated

25.08.2025 by holding that the assessee was having turnover of Rs.

2,17,69,46,883/-. The AO levied minimum penalty prescribed under

section 271B. The action of the AO was confirmed by ld. CIT(A). We

find that the Coordinate Bench of the Mumbai Tribunal in the case of

Sanjay Maraotra Modak Vs. DCIT (Supra) held that, where the

assessee was trading in future and options transaction and AO

determined turn over from said transaction and levied penalty on the

ground that assessee’s turnover was beyond limit prescribed under

section 44AB as he failed to submit audit report. It was held that as

per ICAI “ guidance note on Tax Audit” assessee’s case did not fall

under section 44AB thus impugned penalty deserved to be deleted.

We find that ratio of decision in Sanjay Maraotra Modak Vs. DCIT

(Supra) is squarely applicable on the facts of the present case. We

further find that before lower authorities, the assessee in response to

show casue notice submitted that turnover from his business income

is only of Rs. 74,97,164/- as such turnover is calculated on future and

option business considering the favourable and unfavourable

differences (profit and loss) from all contract settled during the year

and is not liable for audit under section 44AB. Thus, considering the

decision of the Coordinate Bench of the tribunal wherein one of us is author and respectfully filling the same. Hence, we direct the AO to

delete the penalty under Section 271B.

Order pronounced in open court on 13.07.2026.

Sd/- Sd/- Sd/- Sd/- OM PRAKASH KANT PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 13/07/2026 Aditi Pandare, PS Aditi Pandare, PS Aditi Pandare, PS Aditi Pandare, PS

Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT Mumbai (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai