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Facts
The assessee filed an appeal against the penalty imposed under Section 271B for not filing a tax audit report under Section 44AB. The assessee was engaged in derivative and stock market trading, and the Assessing Officer treated the total sale proceeds of Rs. 6.5 crore as turnover.
Held
The Tribunal noted that as per the Guidance Note issued by ICAI, turnover for speculation business should only consider the positive or negative difference for independent transactions. Under this interpretation, the assessee's turnover was Rs. 12.58 lakhs, which is below the threshold for Section 44AB. The issue was covered by a coordinate bench decision.
Key Issues
Whether the penalty under Section 271B is leviable when the assessee's turnover, calculated as per ICAI guidance for speculation business, falls below the threshold limit prescribed for Section 44AB.
Sections Cited
271B, 44AB, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER (Assessment Year : 2015-16) Sunny Walia Vs. ITO Plot No.141, Pratap Nagar, Ward – 49(4) New Delhi – 110 064 New Delhi PAN No. AAVPW 2884 P (APPELLANT) (RESPONDENT) Assessee by -None- Revenue by Shri Anuj Garg, Sr. D.R. Date of hearing: 15.01.2024 Date of Pronouncement: 15.01.2024 ORDER PER PRADIP KUMAR KEDIA, AM :
The captioned appeal has been filed by the assessee against the first appellate order of the Ld. Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre (NFAC), Delhi (‘CIT(A)’ in short) dated 30.06.2022 arising from the assessment order dated 28.12.2017 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning Assessment Year 2015-16.
The captioned appeal has been filed by the assessee against the imposition of penalty of Rs.1,50,000/- under section 271B of the Act alleging that assessee has not filed tax audit report in terms of provisions of section 44AB of the Act despite the total value of transactions made in derivative segment of Rs.46,55,36,733/- which exceeds the limit prescribed for audit of the books of account under section 44AB of the Act.
When the matter was called for hearing none appeared for the assessee, matter was accordingly proceed ex parte.
As per the case records, the assessee is inter alia engaged in derivative segment of stock market and is also engaged in trading transaction in stock market. As per records, the assessee contends that the Revenue authority have wrongly adopted sale value as turnover for the purposes of section 44AB of the Act whereas as per para 5 of the Guidance Note of Tax Audit under section 44AB of the Act issued by ICAI, turnover in respect of speculation business is to be reckoned as only which may be positive or negative difference for independent transactions. As per the difference of positive and negative, the turnover works out to Rs.12.58 lakhs only whereas the Assessing Officer has wrongly considered turnover to be total sale proceed of transaction done at a whopping figure of 6.5 crore and consequently, imposed penalty under misconception of facts.
We find that the issue is squarely covered in favour of the assessee by the decision of Co-ordinate Bench in Parag Jain vs. ITO order dated 23.05.2023.
In accord with the guidance note issued by ICAI, the turnover of the assessee for the purposes of section 44AB stands lower than the threshold limit prescribed for audit purposes. Consequently, the reasonable cause exists for non-compliance of provision of section 44AB of the Act. The penalty imposed under section 271B is consequently reversed and cancelled.
In the result, appeal of assessee is allowed ex parte. Order was pronounced in the open court on 15.01.2024