NARESH GOPALDAS BHOJWANI,AHMEDABAD vs. ITO, WARD-5(2)(3), AHMEDABAD

The assessee has taken the following Grounds of Appeal:

At the outset, we observe that the appeal is time-barred by 21 days. The assessee has also filed an affidavit requesting for condonation of delay in filing the appeal. The reason cited by the assessee was that the order passed by the Ld. CIT(Appeals) sought to be appealed against, was handed over to the accountant of the assessee so that the same may be handed to the CA of the assessee for purpose of filing of appeal before ITAT. Meanwhile, the assessee during the intervening period got preoccupied with the illness of his mother. Subsequently, the assessee came to know that his accountant had misplaced the appeal papers and accordingly, the appeal could not be filed in time. The counsel for the assessee submitted that it is for the foregoing reasons, owing to the mistake of the accountant of the assessee, that the appeal could not be filed within time. Considering the explanation offered by the assessee by way of affidavit and also considering that there is only a minor delay of 21 days in filing of appeal, we are hereby condoning the delay in filing of appeal by the assessee in the interest of justice. The Ld. DR has also not objected to our condoning the delay in filing the appeal.

Coming to the merits of the case, the brief facts of the case are that the assessee filed return of income declaring total income of � 4,96,890/- on 08- 04-2013. Order under section 144 of the Act was passed on 28-03-2015 determining income at � 60,25,470/-. During the course of assessment proceedings, the Ld. Assessing Officer observed the assessee had carried out transactions through commodity exchange to the tune of Rs. 477 crores. From the data obtained from the MCX Exchange, the Assessing Officer observed that the assessee had incurred a net loss in the above transaction. However, the assessee had not disclosed details of the above business transaction in the return of income and also concealed the information from the Department. As the transactions were huge, the assessee was asked to furnish audit report in Form 3CD for the impugned assessment year. The Ld. Assessing Officer further initiated penalty proceedings u/s 271B of the Act on the ground that the assessee’s turnover had exceeded the prescribed limit u/s 44AB of the Act and he had failed to carry out audit u/s 44AB of the Act. The Ld. Assessing Officer thereafter levied penalty of Rs. 1,50,000/- u/s 271B of the Act for the reason that the turnover of the assessee from business of commodity exchange was Rs. 477 crores and the assessee failed to get his books audited as provided in section 44AB of the Act. The Ld. CIT(Appeals) dismissed the assessee’s appeal (which was passed ex-parte on account on non-appearance on behalf of the assessee). Thereafter, the ITAT vide order dated 05-04-2018 in ITA number 3472 and 3488/ Ahd/ 2016 restored the matter to the file of Ld. CIT(Appeals) to hear the matter on merits afresh after giving reasonable opportunity of hearing to the assessee. In remand proceedings before Ld. CIT(Appeals), despite several notices,

The assessee is in appeal before us against the aforesaid order of Ld. CIT(Appeals). The Ld. Counsel for the assessee submitted that the assessee is earning income from Salary, House Property and Income from Other Sources and hence he is not required to maintain books of accounts. The assessee was under the bona-fide belief that he had entered into a capital gains transaction from which he had incurred a loss and he was not required to declare such loss in the return of income. Since the assessee is not required to maintain any books of accounts, there is evidently no requirement of audit u/s 44AB of the Act as well. The Ld. Counsel for the assessee drew our attention to page 74 of Paper-Book in the case of Bisauli Tractors 299 ITR 219 (All), in which it was held that if a person has not maintained any books of accounts, the question of audit doe not arise. Hence, no penalty can be imposed u/s 271B of the Act.

In response, the Ld. DR submitted that it is evidently not clear whether the assessee has earned capital gains or engaged in a business transaction. It is further not clear whether the assessee has entered into a speculative or non-speculative transaction on the commodity exchange. Accordingly, the issue may be restored to the file of the Ld. Assessing Officer to ascertain the nature of transaction and to decide whether there was necessity to maintain books of account in the instant facts.

We have heard the rival contentions and perused the material on record. While the assessee is arguing that it has entered into a capital gains transaction, the Ld. DR is of the view that the true nature of the transaction needs to be decided for purpose of determining whether penalty may be imposed u/s 271B of the Act. Further, Ld. D.R. argued that it also needs to be ascertained whether the assessee has been engaged in the speculative or non-speculative transaction. In the case of Om Stock & Commodities (P.) Ltd.[2014] 48 taxmann.com 186 (Mumbai - Trib.), the ITAT held that value of sale transactions of commodity through MCX without delivery cannot be considered as turnover for purpose of section 44AB and, therefore, failure on part of assessee to get its accounts audited in such a case, would not lead to levy of penalty under section 271B of the Act. The Pune Tribunal in the case of Banwari Sitaram Pasari HUF [2013] 29 taxmann.com 137 (Pune - Trib.) held that where assessee was engaged in online buying and selling of commodities through a commodity exchange, as a speculative activity, wherein no physical delivery was taken or given, total transactions booked with such commodity exchange could not be considered as 'turnover' for purposes of considering liability of assessee to get accounts

In the result, appeal of the assessee is allowed for statistical purposes.