SHRI SANTOSH KUMAR , BHARATPUR V. INCOME TAX OFFICER, WARD-3, BHARATPUR

ITA 1093/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9774 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 06-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Speculative transactions
• Section: 273B; 143(3); 43(5); 271B; 44AB; 13

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1093/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2010-11 SHRI SANTOSH KUMAR S/O- SHRI HARI SHANKER SHARMA LAHAR MANDI, BAYANA, BHARATPUR. CUKE VS. THE ITO, WARD-3, BHARATPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AVGPK 8502 J VIHYKFKHZ@ AP PELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI RAJENDRA AGARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : MISS. CHANCHAL MEENA (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 01/07/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 03/07/2020 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 24.06.2019 OF LD. CIT(A), ALWAR ARISING FROM THE PE NALTY ORDER PASSED U/S 271B OF THE ACT FOR THE ASSESSMENT YEAR 2010-11 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING PENALTY OF RS. 1,00,000/- ITA NO.1093/JP/2019 SHRI SANTOSH KUMAR VS. ITO 2 2. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER WHILE PASSING THE SCRUTINY ASSESSMENT U/S 143(3) R.W.S. 147 OF THE AC T HAS GIVEN THE FINING THAT THE ASSESSEE IS NOT MAINTAINING THE BOO KS OF ACCOUNT AND THE TURNOVER OF THE ASSESSEE IN RESPECT OF DERIVATIVE T RANSACTIONS ON MCX IS MORE THAN RS. 127 CR. THUS, THE AO AFTER FRAMING TH E ASSESSMENT INITIATED PROCEEDING FOR LEVY OF PENALTY U/S 271A A S WELL AS 271B OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO B EFORE THE LD. CIT(A) AGAINST THE LEVY OF PENALTY U/S 271A AS WELL AS 271 B OF THE ACT. THE LD. CIT(A) DELETED THE PENALTY LEVIED U/S 271A OF THE A CT WHILE PASSING EVEN DATED ORDER BUT CONFIRMED THE PENALTY LEVIED U /S 271B OF THE ACT. WE NOTE THAT THE ASSESSING OFFICER HAS PROCEEDED ON BASIS THAT THE TURNOVER OF DERIVATIVE MORE THAN RS. 127 CR. WHEREA S TOTAL DIFFERENCE OF POSITIVE AND NEGATIVE OUTCOME OF SPECULATIVE TRANSA CTIONS IS ONLY RS. 22,55,040/-. THE DETAILS OF THE SPECULATIVE TRANSAC TIONS CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA VE BEEN REPRODUCED BY THE AO AT PAGE 3 AS UNDER:- ITA NO.1093/JP/2019 SHRI SANTOSH KUMAR VS. ITO 3 S YMBOLS SALE PURCHASE DIFF IN QTY PROFIT/LOSS QTY AMOUNT QTY AMOUNT COPPER 410 126596650 410 126510850 0 85800 CRUDEOIL 80 27252700 80 27214100 0 38600 GOLD 31 51116300 31 51421400 0 - 305100 GOLDM 65 10826480 65 10989610 0 - 163130 LEAD 111 57909750 111 57706500 0 203250 NATURAL GAS 1168 336758750 1168 336731375 0 27375 NICKEL 535 116574650 535 117306600 0 - 731950 SOLVER 496 392820660 496 393569940 0 - 749280 SILVERM 1110 147462115 1110 147567695 0 - 105580 ZINC 5 2727250 5 2714750 0 12500 4011 1270045305 4011 1271732820 0 - 1687515 FROM THE ABOVE TABLE IT IS CLEAR THAT IF THE TOTAL SOME OF THE NEGATIVE AND POSITIVE OUTCOME OF THE SPECULATIVE TRANSACTION S IS TAKING INTO CONSIDERATION THE IT WOULD BE RS. 20,55,040/-. THOU GH THE TURNOVER IN CASE OF SPECULATIVE TRANSACTIONS IS NOT DEFINED IN THE INCOME TAX ACT FOR THE PURPOSE OF SECTION 44AA AND 44AB OF THE ACT AND HOWEVER, THE GUIDANCE NOTE ON TAX AUDIT U/S 44AB OF THE IT ACT I SSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA (ICAI) W OULD BE RELEVANT ON THIS POINT. WE FIND THAT THIS TRIBUNAL IN CASE OF S HRI RAJJAK AHMED KHAN VS. ITO IN ITA NO. 1181/JP/2019 VIDE ORDER DATED 13 .01.2020 HAS CONSIDERED AN IDENTICAL ISSUE IN PARA 5 AS UNDER:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL A S THE RELEVANT MATERIAL ON RECORD. THE LIMITED DISPUTE IN THE CAS E IN HAND IS ITA NO.1093/JP/2019 SHRI SANTOSH KUMAR VS. ITO 4 WHETHER THE PROVISIONS OF SECTION 44AB ARE APPLICAB LE IN THE CASE OF THE ASSESSEE WHEN THE ASSESSEE HAS DONE THE SHA RE TRADING IN INTRADAY SEGMENT AND SOME OF THE TRANSACTIONS ARE D ELIVERY BASED TRANSACTIONS TO THE EXTENT OF RS. 53,498/-. THERE IS NO DISPUTE REGARDING THE TURNOVER IN RESPECT OF THE TRANSACTIO NS OF THE SHARES WHICH ARE DELIVERY BASED. HOWEVER, THE DISP UTE IS REGARDING THE TURNOVER IN RESPECT OF THE INTRADAY T RANSACTIONS CARRIED OUT BY THE ASSESSEE. THE AO HAS TAKEN THE TOTAL VALUE OF THE TRANSACTIONS AT RS. 2,43,62,720/- IN THE INTRAD AY NON-DELIVERY BASED TRADING SEGMENT. THERE IS NO QUARREL THAT TH E TRANSACTIONS CARRIED OUT BY THE ASSESSEE IN INTRADAY NON-DELIVER Y BASED SEGMENT ARE SPECULATIVE TRANSACTIONS AS PER SECTION 43(5) OF THE ACT. THIS FACT IS ALSO ACCEPTED BY THE LD. CIT (A) IN HIS FINDING IN PARA 2.3 AS UNDER :- GROUND NO. 01 AND 02 ARE BEING TAKEN UP TOGETHER WHICH ARE INTERRELATED. I HAVE PERUSED THE FACTS OF THE CASE, THE PENALTY ORDER AND THE SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT THE ASSESSING OFFICER IMPOSED PENALTY UND ER SECTION 271B FOR NOT GETTING THE ACCOUNTS AUDITED. THERE IS NO DISPUTE AS TO THE FACT THAT THE TURNOVER OF THE ASSESSEE IS MORE THAN THE LIMIT PRESCRIBED UNDER SECTION 44A B AND THE ASSESSEE HAS NOT GOT HIS ACCOUNTS AUDITED. ASSE SSEE HAS TAKEN PLEA THAT THESE TRANSACTIONS OF STOCK REL ATED TO INTRADAY ACTIVITIES/NON-DELIVERY BASED TRANSACTIONS . THEREFORE, THE SAME DID NOT REQUIRE AUDIT UNDER SEC TION 44AB. ITA NO.1093/JP/2019 SHRI SANTOSH KUMAR VS. ITO 5 ASSESSEE CLAIMED THAT THE TRANSACTIONS ARE NON DELI VERY BASED AND DAILY DIFFERENCE (BY IGNORING THE SIGNS) BE TAKEN AS TURNOVER. THIS PLEA CANNOT BE ACCEPTED AS IT IS APPLICABLE FOR TRANSACTION OF DERIVATIVES WHEREAS ASSESSEE TRA NSACTED IN CASH SECURITIES WHERE NON DELIVERY BASED TRANSAC TIONS ARE CLASSIFIED AS SPECULATIVE TRANSACTIONS AS PER S ECTION 43(5) OF THE I.T. ACT, 1961. ACCORDINGLY ASSESSEE I S LIABLE TO GET HIS ACCOUNTS AUDITED. LOOKING TO THESE FACTS, P ENALTY UNDER SECTION 271B IMPOSED BY THE ASSESSING OFFICER IS CONFIRMED. THESE GROUNDS OF APPEAL ARE DISMISSED. ONCE THESE TRANSACTIONS ARE NON-DELIVERY BASED INTR ADAY TRANSACTIONS AND CLASSIFIED AS SPECULATIVE TRANSACT ION AS PER THE PROVISIONS OF SECTION 43(5) OF THE IT ACT, THEN THE TURNOVER IN RESPECT OF THESE TRANSACTIONS HAS TO BE DETERMINED AS PER THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTS OF INDIA. FOR READY REFERENCE, WE REPRODUCE THE RELEV ANT PART OF THE GUIDANCE NOTE IN PARA 5.14 AS UNDER :- GUIDANCE NOTE ON TAX AUDIT UNDER SECTION 44AB OF THE INCOME-TAX ACT, 1961. 5.14. 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 ITA NO.1093/JP/2019 SHRI SANTOSH KUMAR VS. ITO 6 PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHER WISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMM ODITY 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 CONT RACT IS SETTLED OTHERWISE AND SQUARED UP BY PAYING OUT THE DIFFERENCE WHICH MAY BE POSITIVE OR NEGATIVE. AS SU CH, IN SUCH TRANSACTION THE DIFFERENCE AMOUNT IS TURNO VER. IN THE CASE OF AN ASSESSEE UNDERTAKING SPECULATIVE TRANSACTIONS THERE CAN BE BOTH POSITIVE AND NEGATIV E DIFFERENCES ARISING BY SETTLEMENT OF VARIOUS SUCH CONTRACTS DURING THE YEAR. EACH TRANSACTION RESULT ING INTO WHETHER A POSITIVE OR NEGATIVE DIFFERENCE IS A N INDEPENDENT TRANSACTION. FURTHER, AMOUNT PAID ON ACCOUNT OF NEGATIVE DIFFERENCE PAID IS NOT RELATED TO THE AMOUNT RECEIVED ON ACCOUNT OF POSITIVE DIFFERENCE. IN SUCH TRANSACTIONS THOUGH THE CONTRACT NOTES ARE ISS UED FOR FULL VALUE OF THE PURCHASED OR SOLD ASSET THE E NTRIES IN THE BOOKS OF ACCOUNT ARE MADE ONLY FOR THE DIFFERENCES. ACCORDINGLY, THE AGGREGATE OF BOTH PO SITIVE AND NEGATIVE DIFFERENCES IS TO BE CONSIDERED AS THE TURNOVER OF SUCH TRANSACTIONS FOR DETERMINING THE LIABILITY TO AUDIT VIDE SECTION 44AB. ITA NO.1093/JP/2019 SHRI SANTOSH KUMAR VS. ITO 7 THE TURNOVER HAS NOT BEEN DEFINED IN THE IT ACT AND PARTICULARLY IN RESPECT OF THE SPECULATIVE TRANSACTIONS IN SHARE S AND SECURITIES. THEREFORE, THE GUIDANCE NOTE OF ICAI IS A RELEVANT AND PROPER GUIDANCE FOR DETERMINING THE TURNOVER IN RESPECT OF SUCH SPECULATIVE TRANSACTIONS. AS IT IS CLEAR FROM THE GUIDANCE NOTE ISSUED BY THE ICAI THAT THE TURNOVER IN RESPECT OF NON-DELIVERY BASED SPECULATIVE TRANSACTIONS INCLUDING STOCK AND SHARES HAS TO BE DETERMINED BY TAKING THE AGGREGATE OF BOTH POSIT IVE AND NEGATIVE DIFFERENCES ARISING FROM SUCH TRANSACTIONS AND AS AN OUT- COME OF SETTLEMENT OF SUCH CONTRACTS DURING THE YEA R. WE FIND THAT THE ASSESSEE HAS PRODUCED THE DETAILS OF THE S PECULATIVE TRANSACTIONS AS WELL AS DELIVERY BASED TRANSACTIONS AND ALSO GIVEN THE COMPUTATION OF THE TURNOVER AS UNDER :- INTRADAY POSITIVE OR FAVORABLE DIFFERENCES (SHEET ENCLOSED FOR THIS) 109092.10 INTRADAY NEGATIVE OR UNFAVORABLE DIFFERENCES (SHEET ENCLOSED FOR THIS) 152689.69 SALE OF DELIVERY BASED TRANSACTIONS 53498.9 315280.69 THERE IS NO DISPUTE REGARDING THE DELIVERY BASED TR ANSACTIONS OF SHARES TO THE TUNE OF RS. 53,498.90. WE HAVE VERIF IED THE COMPUTATION OF THE TURNOVER IN RESPECT OF INTRADAY NON-DELIVERY BASED TRANSACTIONS AND THE POSITIVE AND NEGATIVE DI FFERENCES OF THESE SPECULATIVE TRANSACTIONS GIVEN IN THE ABOVE T ABLE. ITA NO.1093/JP/2019 SHRI SANTOSH KUMAR VS. ITO 8 THEREFORE, BY TAKING THE AGGREGATE OF THE POSITIVE AND NEGATIVE DIFFERENCES AS WELL AS THE TURNOVER OF THE DELIVERY BASED TRANSACTIONS, THE TOTAL TURNOVER OF THE ASSESSEE CO MES TO RS. 3,15,280.69. HENCE, WHEN THE TURNOVER OF THE ASSES SEE IS LESS THAN THE THRESHOLD LIMIT PROVIDED UNDER SECTION 44A B, THEN THE ASSESSEE IS NOT REQUIRED TO GET ITS BOOKS OF ACCOUN T AUDITED IN TERMS OF SECTION 44AB OF THE IT ACT AND CONSEQUENTL Y THE PENALTY PROVISION OF SECTION 271B OF THE IT ACT IS NOT ATTR ACTED. EVEN OTHERWISE, WHEN THIS ISSUE OF TURNOVER IS A DEBAT ABLE ISSUE AND THE ASSESSEE HAS CLAIMED THIS TURNOVER AS RS. 3,15, 280.69 IF COMPUTED IN TERMS OF THE GUIDANCE NOTE OF ICAI, THE N THE SAID EXPLANATION OF THE ASSESSEE WOULD BE REGARDED AS RE ASONABLE AND BONAFIDE AS PER THE PROVISIONS OF SECTION 273B OF T HE IT ACT AND CONSEQUENTLY NO PENALTY UNDER SECTION 271B IS LEVIA BLE. ACCORDINGLY, THE PENALTY LEVIED UNDER SECTION 271B IS DELETED. THUS, IN THE ABOVE CASE ON IDENTICAL ISSUE THE TRIB UNAL HAS CONSIDERED THE GUIDANCE NOTE OF ICAI IN RESPECT OF THE TAX AUD IT U/S 44AB OF THE ACT WHEREIN THE TURNOVER OR GROSS RECEIPT IN RESPEC T OF SPECULATIVE TRANSACTIONS HAS BEEN CONSIDERED AS SOME TOTAL OF P OSITIVE AND NEGATIVE OUTCOME OF THE SPECULATIVE TRANSACTIONS. THIS TRIBU NAL IN A SUBSEQUENT DECISION DATED 17.02.2020 IN CASE OF SHRI SANJAY PR AKASH VS. ITO IN ITA NO. 1052 TO 1054/JP/2019 HAS AGAIN CONSIDERED THE S AID THIS ISSUE AND BY FOLLOWING THE EARLIER DECISION ACCEPTED THE CONT ENTION OF THE ITA NO.1093/JP/2019 SHRI SANTOSH KUMAR VS. ITO 9 ASSESSEE THAT TURNOVER IN RESPECT OF THE SPECULATIV E TRANSACTIONS SHALL BE POSITIVE AND NEGATIVE DIFFERENCES OF THE TRANSAC TIONS AND NOT VOLUME OF THE SPECULATIVE TRANSACTIONS. ACCORDINGLY IN VIE W OF THE CONSIST VIEW TAKEN BY THIS TRIBUNAL THE TURNOVER OF THE ASSESSEE WOULD NOT EXCEED THE LIMIT AS PROVIDED U/S 44AB, THE PENALTY LEVIED U/S 271B IS DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/07/2020. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 03/07/2020. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SANTOSH KUMAR, BHARATPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO,WARD-3, BHARATPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1093/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR