NARENDRA A SHETH,MUMBAI vs. ITO 12(1)(2), MUMBAI

This appeal was fixed on 20.04.2017; none appeared on behalf of assessee despite repeated calls and pass over. We have noticed that assessee has not appeared throughout the proceeding. The authority letter of S/Shri P.N. Saha, A.H. Saha and Dalpat Saha is on record. The notice of hearing of appeal for 20.04.2017 was also duly served on the assessee by RPAD. The AD Card bearing acknowledgment of receipt is also available on record. We left no option except to hear the ld. DR for the Revenue and to proceed on the basis of material available on record. The Ld. DR for the Revenue supported the order of authorities below and would argue that in reply to the show-cause notice, the assessee has not given any plausible and convincing explanation. The assessee has taken lame excuse. The lower authorities considered the reply filed by assessee and after affording full opportunity, the penalty was levied. The ld. DR for the Revenue prayed for dismissal of appeal.

We have considered the contention of ld. DR for the Revenue and further gone through the orders of authorities below. In reply to the show-cause notice for levy of penalty u/s 271B, the assessee has taken the plea that he is a Sr. Citizen, his accounts are looked after by Accountant, who is not qualified person, he was under bonafide belief that accounts are not required to be issued u/s 44AB of the Act. It was further contended that Guidance ‘Note of Tax Audit u/s 44AB’ issued by ICAI that if the turnover of Future & Option defined as aggregate of favorable and unfavorable transaction exceed Rs. 40,00,000/- than the assessee is liable to get his account audited. The contention of assessee was not accepted by AO holding that the Guidance ‘Note of ICAI’ on Future & Option activities have no Shri Narendra A Sheth override effect to the provisions of Income-tax Act. The ld. CIT(A) while considering the contention of the assessee observed that section 44AB became operative from ay 1985-86. The contention of the assessee is that the person who was maintaining the accounts was not a qualified person, do not carry any conviction. The ld. CIT(A) further concluded that the reply furnished by assessee is not sufficient and justified for his omission for not auditing his account. The reply is neither plausible nor convincing. The ld. CIT(A) further concluded that the assessee being a Sr. Citizen and engaged in the business of derivative, Future & Option with a tremendous courage and dynamism and on the other hand, he is taking such excuse which is not acceptable. We have seen that the order of ld. CIT (A) is reasoned one and does not suffer from any infirmity or illegality, which requires our interference. We have seen that in reply to the show-cause notice for initiation of penalty, the assessee has replied that he is a Sr. Citizen; his accounts are looked after by Accountant. The accountant of the assessee is not qualified person. The assessee was under bonafide belief that accounts are not required to be issued u/s 44AB of the Act. The assessee specifically pleaded in the reply that the Guidance note, ‘Note of Tax Audit u/s 44AB’ issued by ICAI that, if the turnover of Future & Option defined as aggregate of favorable and unfavorable transaction exceed Rs. 40,00,000/- than the assessee is liable to get his account audited. As per our view the assessee has sufficiently explained the circumstances, as per the provisions of section 273B of the Income-tax Act. Considering the reply of the assessee the penalty levied by assessing officer under section 271B for Rs.40,694/- is deleted. - Shri Narendra A Sheth

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 26th day of May 2017.