MAMTA MEHTA, MUMBAI V. INCOME TAX OFFICER WARD 31(2)(3), MUMBAI

ITA 1237/MUM/2022

AI Insights

The case involves appeals by Mamta Sundeep Mehta against penalties levied under section 271B of the Income Tax Act for not auditing her books of accounts as required under section 44AB, due to her belief that losses on derivatives trading were not subject to such audit. The Income Tax Officer (ITO) had initiated penalty proceedings after reassessing her income and finding undisclosed long-term capital gains. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to the appeal before the Tribunal. The Tribunal, considering the assessee's explanations and judicial precedents, ruled in her favor, emphasizing that the penalty is not automatic and requires a discretionary approach.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 299526 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 05-12-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 19-05-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; Reasonable cause; Futures and options
• Section: 148; 143(3); 143(1); 274; 271B; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 1237/Mum/2022 (A.Y: 2011-12) ITA No. 1861/Mum/2021 (A.Y: 2016-17) Mamta Sundeep Mehta B-3, Bldg No. 3, Saibaba Enclave, Behind City Centre, Goregaon (W), Mumbai-400062 Vs. ITO – 31(2)(3) Kautilya Bhavan, C-41 To C-43, G Block, BKC Bandra (E) Mumbai-400051 सं./ज आइआर सं./PAN/GIR No. : AFXPM6021P Appellant .. Respondent Assessee by : Mr. Bhupendra Shah.AR Revenue by : Mr. Tejinder Pal Singh Anand.DR Date of Hearing 06.12.2022 Date of Pronouncement 29.12.2022 आद श / O R D E R PER PAVAN KUMAR GADALE JM: These are appeals filed by the assessee against the separate orders passed by the National Faceless Appeal Centre (NFAC) – Delhi / CIT(A) u/s 271B and 250 of the Act. Since the issues in these appeals are common and identical, hence are clubbed, heard and consolidated order is passed. ITA No. 1237/Mum/2022 & 1861/Mum/2021 Mamta Sundeep Mehta, Mumbai. - 2 - For the sake of convenience, we shall take up the ITA No.1237/Mum/2022 for the A.Y.2011-12 as a lead case and the facts narrated. The assessee has raised the following grounds of appeal: 1.In the facts and circumstances of the case and in law, the learned A.O. erred in levying penalty u/s 271B amounting to Rs. 65,795/- for not carrying out audit u/s 44AB of the books of accounts by disregarding the fact that the Appellant was under bonafide belief that loss on derivatives is not subject to Tax Audit u/s 44AB and it was unintentional. 2. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax(A), NFAC, Delhi erred in confirming the above penalty by overlooking submissions made. [B] Relief Prayed: The appellant therefore prays as follows, 1. To delete the penalty amounting to Rs. 65,795/- levied u/s 271B. [C] General: - The appellant reserve rights to add alter or delete any portion of this appeal before its conclusion. This appeal is filed in time and the same may be allowed in full. A Detailed paper book along with case laws will be submitted at the time of hearing. ITA No. 1237/Mum/2022 & 1861/Mum/2021 Mamta Sundeep Mehta, Mumbai. - 3 - 2. The brief facts of the case are that the assessee is an individual and is engaged in the business and derives income from business, capital gains and income from other sources. The assessee has filed the return of income for the A.Y 2011-12 on 12.12.2011 disclosing a total income of Rs. 2,35,452/- and the return of income was processed u/s 143(1) of the Act. Subsequently, the Asssessing Officer (A.O.) has received information from DGIT(Inv), Mumbai that the assessee has obtained accommodation entries of long term capital gains of shares in the F.Y 2010-11, therefore the AO has reason to believe that the income has escaped assessment and issued notice u/s 148 of the Act. In compliance to notice, the assessee has filed the details in the hearing proceedings. The AO on perusal of the facts found that the assessee has earned long term capital gains of Rs.1,11,39,648/- and has claimed exemption u/s 10(38) of the Act. The AO has dealt exhaustively on the facts in respect of the transactions and the assessee has filed the explanations to show cause notice on 20.12.2012 referred at Para 7.2 of the assessment order, whereas ITA No. 1237/Mum/2022 & 1861/Mum/2021 Mamta Sundeep Mehta, Mumbai. - 4 - the A.O. was satisfied with the explanations and has disallowed the claim of exemption u/s 10(38) of the Act and assessed the total income of Rs. 1,51,03,830/- and passed the order u/s 143(3) r.w.s 147 of the Act. 3. Subsequently the AO has initiated penalty proceedings u/s 271B of the Act as the assessee has failed to get the books of accounts audited as the turnover exceeds prescribed limit under the provisions of Sec. 44AB of the Act. The A.O. has issued notice u/s 274 r.w.s 271B of the Act dated 10.12.2018 and the assessee has filed the detailed explanations on 30.01.2019 mentioning that the penalty should not be levied as the assessee has suffered loss on derivatives trading under the head income from business and the assessee was under the bonafide belief that loss on derivatives is not subject to taxed audit u/s 44AB of the Act and therefore no tax audit was carried out and penalty is always a discretionary and not an obligatory or mandatory. The Ld. AR relied on the judicial decisions and supporting the facts that the imposing the ITA No. 1237/Mum/2022 & 1861/Mum/2021 Mamta Sundeep Mehta, Mumbai. - 5 - penalty is not obligation and cannot be automatic. The A.O. was not satisfied with the explanations and levied a penalty Rs.65,795/- and passed the order U/sec271B of the Act dated 28-06-2019. 4. Aggrieved by the penalty order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the penalty proceedings but has confirmed the levy of penalty and dismissed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal. 5. At the time of hearing, the Ld. AR submitted that the CIT(A) erred in confirming the levy of penalty as the assessee was under the bonafide belief that the loss on derivatives is not subject to tax audit u/s 44AB of the Act and it is unintentional. The Ld.AR has emphasized on the facts that the assessee is under the bonafide belief and therefore no penalty can be levied. Further the Ld.AR mentioned that it is not a wanton act and the reasonable cause is explained and supported the submissions with the judicial decisions ITA No. 1237/Mum/2022 & 1861/Mum/2021 Mamta Sundeep Mehta, Mumbai. - 6 - and factual paper book and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the CIT(A). 6. We heard the rival submissions and perused the material on record. The sole matrix of the disputed issue that the CIT(A) has erred in confirming the Levy of penalty U/sec271B of the Act. The Ld.AR contentions are that the penalty should not be levied as the assessee has suffered loss on derivatives trading under the head income from business and the assessee was under the bonafide belief that loss on derivatives is not subject to tax audit u/s 44AB of the Act and therefore no tax audit was carried out and penalty is always a discretionary and not an obligatory or mandatory and relied on the judicial decisions. The Ld.AR submitted that the asssessee has started the business of dealing in shares & securities in the F.Y.2010-11 and being the first year of business in futures and options and incurred loss of Rs.21,14,173/- and the assessee was under the bonofide belief that due to loss in trading there is no need to get the books of accounts audited under ITA No. 1237/Mum/2022 & 1861/Mum/2021 Mamta Sundeep Mehta, Mumbai. - 7 - sec44AB of the Act and further the assessee has not claimed the loss in the income tax return filed. We considering the facts, circumstances and the ratio of the judicial decisions enumerated in the course of hearing find that the asssessee was under bonofide belief that the transaction volume was not to be included for the purpose of determining the obligation of Tax Audit under section 44AB of the Act and same constitute a reasonable cause for not getting the books of accounts audited U/sec44AB of the Act and the default committed in not getting the Audit report is without any malafide intentions on the part of the asssessee. Accordingly,we set aside the order of the CIT(A) and direct the Assessing officer to delete the penalty and allow the grounds of appeal in favour of the assesse. ITA.No.1861/Mum/2021, A.Y 2016-17 7. As the facts and circumstances in this appeal are identical to ITA No. 1237/Mum/2022, for A.Y 2011-12 (except variance in figures) and the decision rendered in above paragraphs would apply mutatis mutandis ITA No. 1237/Mum/2022 & 1861/Mum/2021 Mamta Sundeep Mehta, Mumbai. - 8 - for this case also. Accordingly, the grounds of appeal of the assessee are allowed. 8. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open court on 29.12.2022. Sd/- Sd/- (PRASHANT MAHARISHI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 29.12.2022 KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. सं ं आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, हमद द / DR, ITAT, Mumbai 6. % -. / 0 / Guard file. ान ु सार/ BY ORDER, स " & //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai