CHINTAN YOGESH PANCHMATIYA,MUMBAI vs. COMMISSIONER OF INCOME TAX APPEALS, MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM I.T.A. No.3290/Mum/2026 (Assessment Year: 2019-20) Chintan Yogesh Panchmatiya Commissioner of Income Tax Appeals A/702, Akshita Avenue, Holy Piramal Chamber, Circle 23(1), Cross Road, IC Colony, Mumbai – 400012. Vs. Mandapeshwar, S.O., Mumbai- 400103. PAN: ATEPP3259R

Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

Assessee by : Shri Harshal Jain, CA Revenue by : Shri Ajay Soneji (Sr. AR.) Date of Hearing : 16.06.2026 Date of Pronouncement : 18.06.2026

ITA NO. 3290/Mum/2026 Chintan Yogesh Panchmatiya

O R D E R Per Arun Khodpia, AM: This appeal is filed by the assessee, against the order of Commissioner of

Income Tax Appeals/ National Faceless Appeal Centre (NFAC), Delhi [“the Ld. CIT(A)]

dated 15.01.2026 for the assessment year 2019-20. The appeal before the Ld. CIT(A)

was preferred on account of penalty order u/s. 271(B), dated 09.09.2024.

for Rs. 1,50,000/- on account of violation of provisions of section 44AB, as the books

of account of the assessee were not audited.

scrutiny by invoking provisions of section 147. Accordingly, the order u/s. 144AD

was passed on 21st March, 2023 and the proceedings of reopening assessment were

initiated by issue of notice u/s. 148 of the Act. The reopening assessment u/s. 147

was completed on 8th March, 2024, making therein an addition of Rs. 77,625/- as

the assessee has not submitted any evidence for expense against brokerage income

claimed during the year under consideration. In the assessment order, it is also

observed by the Ld. AO the assessee has undertaken the transactions of purchases

in derivatives for Rs. 65,22,52,997/- and sold the same for Rs. 65,19,68,756/-

ITA NO. 3290/Mum/2026 Chintan Yogesh Panchmatiya resulting a loss of Rs. 2,84,241/-. Similarly, the assessee has booked a loss from sale

of shares amounting to Rs. 7,05,977/-. However, the assessee has transacted in to

shares trading for Rs. 2,72,78,896/-. Therefore, the assessee who had not

maintained and got the books of accounts audited, is liable for penalty proceedings

u/s. 271A as well as section 271B of the Act. Subsequently, the penalty proceedings

u/s. 271B were initiated against the assessee and penalty order u/s. 271B was

passed on 09.09.2024. The assessee was levied with a penalty of Rs. 1,58,000/- with

the observations that the total turnover of assessee in derivatives and shares was

more than Rs. 1,00,00,000/-, the assessee was thus required to get his books of

accounts audited under the provisions of section 44AB of the Act, but the assessee

since has failed to do so. The penalty u/s. 271B of the Act is imposed.

preferred an appeal before the Ld. CIT(A), but with no success, the appeal of

assessee has been dismissed by the Ld. CIT(A) with the following observations:

“4.3 In this respect, the AO noted that the appellant purchased derivatives for Rs.65,22,52,997/- and sold the same for Rs. 65,19,68,756/-. Further, the appellant also sold shares of Rs.2,72,78,896/- during the year under consideration. Further, the explanation of the appellant is not found satisfactory. The appellant has not submitted proper reasonable cause for non-audit of the books of accounts. Considering the facts, I am of the considered view that the appellant has not complied with the terms of section 44AB of the IT Act despite of exceeding the turnover of the appellant than 3

ITA NO. 3290/Mum/2026 Chintan Yogesh Panchmatiya the specified limit for getting the books of account audited. The appellant has grossly violated the

provisions u/s 44AB of the IT Act. Therefore, the penalty imposed by the AO is justified in terms of

section 271B of the IT Act. Accordingly, the appellant has no merit in his grounds of appeal and

therefore penalty u/s 271B is hereby confirmed and thus the grounds of appeal are dismissed.”

submitted that the assessee transacted into F & O transactions and according to the

statement of F & O transaction issued by ‘IIFL securities’ the turnover of the

assessee is only Rs. 98,62,127.14/- which is worked out in accordance with the

guidelines for audit u/s. 44AB issued by The Institute of Chartered Accountants of

India (ICAI), wherein there is a specific method to work out the turnover of the

assessee for the purpose of audit u/s 44AB. The Ld. AR drew our attention to such

guidelines by the ICAI. The relevant part from is has been extracted as under:

“5.10 The turnover or gross receipts in respect of transactions in shares, securities and derivatives

may be determined in the following manner.

(a) Speculative transaction: A speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately

settled otherwise than by the actual delivery or transfer of the commodity or scrips. Thus, in a

speculative transaction, the contract for sale or purchase which is entered into is not completed by

giving or receiving delivery so as to result in the sale as per value of contract note. The contract is settled otherwise and squared up by paying out the difference which may be positive or negative.

As such, in such a transaction, the difference amount is 'turnover. In the case of an assessee

ITA NO. 3290/Mum/2026 Chintan Yogesh Panchmatiya undertaking speculative transactions, there can be both positive and negative differences arising

from settlement of various such contracts during the year. Each transaction resulting into whether

a positive or negative difference is an independent transaction. Further, amount paid on account

of negative difference is not related to the amount received on account of positive difference. In

such transactions, though the contract notes are issued for full value of the purchased or sold asset,

the entries in the books of account are made only for the differences. Accordingly, the aggregate

of both positive and negative differences is to be considered as the turnover of such transactions

for determining the liability to audit vide section 44AB.

(b) Derivatives, futures and options: Such transactions are completed without actual delivery of

shares or securities or commodities etc. These are squared up by receipts/payments of differences.

The contract notes are issued for the full value of the underlined shares or securities or commodities

etc. purchased or sold but entries in the books of account are made only for the differences. The

transactions may be squared up any time on or before the striking date. The buyer of the option

pays the premia. The turnover in such types of transactions is to be determined as follows (This is

only and only for the purpose of computing 'turnover' for tax audit):

(i) The total of favourable and unfavourable differences in case of squared off transactions

shall be taken as turnover.

(ii) Premium received on sale of options is also to be included in turnover. However, where

the premium received is included for determining net profit for transactions, then such net profit should not be separately included.”

furnished before the Ld. AO as well as Ld. CIT(A) are not taken into consideration by

ITA NO. 3290/Mum/2026 Chintan Yogesh Panchmatiya both the authorities, the assessee would not liable to get its accounts audited under

the provision of Section 44AB of the Act, if the turnover is worked out accordingly.

Regarding transaction in shares for Rs. 2,72,78,896/-, it is submitted by the assessee

that such transactions are in the nature of investment and, therefore, those do not

fall within the business transactions of the assessee, therefore, the audit u/s. 44AB

shall not apply on such transactions. Accordingly, it was the prayer that the assessee

is not liable to audit u/s. 44AB of the Act. Therefore, the penalty imposed on the

assessee is liable to be deleted.

authorities have rightly imposed the penalty as the turnover of the assessee was

more than Rs. 1,00,00,000/- in the year under consideration and, therefore, the

penalty imposed deserves to be upheld.

find that the transactions in derivatives, the turnover liable for audit for the purpose

of 44AB on such transaction has to be worked out in accordance with the guidelines

of ICAI which are extracted (supra) and also if the assessee’s turnover in shares is in

the nature of investment, the same cannot be added in the turnover of the assessee

for the purpose of audit u/s. 44AB. In view of such circumstances, since there were

ITA NO. 3290/Mum/2026 Chintan Yogesh Panchmatiya no findings or deliberation on the aforesaid aspects by the authorities below, we

restore this matter back to the file of Ld. AO for fresh verification of the facts and

to adjudicate the issue afresh after considering the submissions of the assessee.

of being heard in the set aside assessment proceedings. The assessee is directed to

provide necessary information and furnish requisite evidence in support of his

contentions. The Ld. AO thereafter is directed to pass a speaking order in terms of

our directions in the present order.

Order pronounced in the open court on 18-06-2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated : 18-06-2026. Soumili Das, PS

ITA NO. 3290/Mum/2026 Chintan Yogesh Panchmatiya Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai