SAHIL GUPTA,DELHI vs. CIT(A), DELHI

This appeal of the assessee for the Assessment Year (‘AY’) 2022-23 is directed against the order dated 02.12.2024 of the Ld. Commissioner of Income Tax (Appeals), NFAC, New Delhi (‘CIT(A)’).

Following grounds were raised in this appeal: -

As per guidance note issued by ICAI turnover in case of Derivatives, futures and options shall be calculated i.e The total of favorable and unfavorable differences in case of squared off transactions shall be taken as turnover.

Electronic records of F&O Turnover Statement & Speculative Transaction Statement from my broker Nuwama Wealth and Investments Limited for F.Y 2021-22 are enclosed.

That the learned AO erred on facts and in law in imposing penalty under section 271A of the IT Act and did not examine the documents produced.

In view of the above submissions, I pray to your honor to delete the penalty wrongly levied u/s 271A of the IT Act.”

Before us, the assessee was not represented by anyone. Therefore, we heard the Ld. Sr. DR, who defended the orders of the Authorities below.

We have perused the material available on the record. As per the penalty order, it is evident that the assessee has filed detailed submission before the AO stating that the F & O turnover has to be determined as per the ICAI guidelines as the Income Tax Act does not contain any provision or guidance for the computation of turnover in F & O trading. The Act does not contain any provision or guidance for the computation of turnover in F & O trading. Para 5.14(b) of the Guidance Note on Tax Audit under Section 44AB of the Act (Revised 2022) provides the following guidance on how turnover or gross receipt in Sahil Gupta respect of transactions in derivatives, futures and options is to be determined: The total of favourable and unfavourable differences shall be taken as  turnover. The premium received on the sale of options is also to be included in  turnover. However, where the premium received is included for determining net profit for transactions, the same should not be separately included. In respect of any reverse trades entered, the difference thereon should  also form part of the turnover. Later, it was revised in 2023 [Para 5.10(b) of the Guidance Note on Tax Audit under Section 44AB of the Act]. According to which the turnover or gross receipt in respect of transactions in derivatives, futures and options is to be determined as follows: In the case of squared-off transactions, the total of favourable and  unfavourable differences shall be taken as turnover. Premium received on the sale of options is also to be included in  turnover. However, where the premium received is included for determining net profit for transactions, the same should not be separately included. In respect of any reverse trades entered, the difference thereon should  also form part of the turnover.

We have heard both the parties and have perused the material available on the record. With the help of facts mentioned in orders of the Authorities below, it is evident that there is reasonable cause for not maintaining the books of account as the assessee is guided by the ICAI guidelines. We are of the considered view that this reasonable cause for not maintaining the books of account is justified and the penalty of Rs.25,000/- levied by the AO, in view of provisions of section 274 of the Act, is uncalled for. Hence, the penalty is deleted. The assessee gets consequential relief.