Banwari Sitaram Pasari, Dhule V. Asst. Comm. of Income-tax, Pune

ITA 1489/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9782 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2011
• Court: TRIBUNAL
• Department Lawyers: S K SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1489/PN/2011 (ASSESSMENT YEAR: 2006-07) BANWARI SITARAM PASARI HUF OPP. PANZARAPOL, DHULE 424 001 PAN AADHP 5284 Q .. APPELLANT VS. ASSTT. CIT CIR. 3(1) DHULE RESPONDENT APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SHRI S.K. SINGH DATE OF HEARING: 15-11-2012 DATE OF PRONOUNCEMENT: 22-11-2012 ORDER PER G.S. PANNU, A.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II NASIK D ATED 23-9-2011 WHICH, IN TURN, HAS ARISEN FROM ORDER DATED 29-6-20 09 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 271B OF THE INCOME -TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT Y EAR 2006-07. 2. THE SOLITARY ISSUE RELATES TO PENALTY OF RS. 93, 332/- IMPOSED BY THE ASSESSING OFFICER U/S 271B OF THE ACT ON FAI LURE OF THE ASSESSEE TO GET HIS ACCOUNTS AUDITED BY A CHARTERED ACCOUNTANT IN TERMS OF SECTION 44AB OF THE ACT WITHIN THE SPECIFI ED DATE. 3. IN BRIEF, THE FACTS ARE THAT THE ASSESSEE IS AN HUF WHICH IS ENGAGED IN ONLINE TRADING IN COMMODITIES. DURING T HE YEAR UNDER CONSIDERATION, THE TOTAL SAUDA IN THE COMMODITIES B OOKED WITH COMMODITY EXCHANGE WAS SHOWN AT RS. 1,86,66,488/- O N WHICH GROSS PROFIT OF RS. 16,44,343/- WAS DECLARED. AS PER THE ASSESSING OFFICER, SINCE THE TURNOVER IN COMMODITIES BY WAY OF SAUDA B OOKING EXCEEDED RS. 40.00 LAKHS, ASSESSEE WAS LIABLE TO GE T ITS ACCOUNTS 2 ITA NO. 1489/PN/2011 BANWARI SITARAM PASARI A.Y. 2006-07 AUDITED IN TERMS OF SECTION 44AB OF THE ACT AND FUR NISH REPORT BY THE SPECIFIED DATE. THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES HAS BEEN THAT IT WAS UNDER A BONAFIDE I MPRESSION THAT THE LIMIT OF RS. 40,.00 LAKHS OF TURNOVER IS TO BE APPL IED TO THE NET INCOME FROM THE SPECULATION ACTIVITY OF DEALINGS IN COMMODITY EXCHANGE AND NOT GROSS AMOUNT OF SAUDA BOOKED. THE ASSESSEE EXPLAINED THAT IN ITS ACTIVITY OF SPECULATION TRADI NG IN COMMODITIES, NO DELIVERY OF PHYSICAL GOODS WAS GIVEN OR TAKEN. IT WAS THEREFORE, POINTED OUT THAT THERE WAS NO REQUIREMENT TO GET TH E ACCOUNTS AUDITED U/S 44AB OF THE ACT AS THE INCOME FROM SPEC ULATION ACTIVITY WAS BELOW RS. 40.00 LAKHS. IT IS ALSO NOTICED THAT ON BEING CONFRONTED, THE ASSESSEE GOT HIS ACCOUNTS AUDITED A ND SUBMITTED THE AUDIT REPORT ON 12-11-2008 DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. HOWEVER, IN THE PROCEEDINGS INITIATED U/S 271B OF THE ACT, THE ASSESSING OFFICER HELD THE ASSESSEE GUILTY FOR NOT GETTING THE ACCOUNTS AUDITED AND FURNISHED THE REPORT WITHI N THE PRESCRIBED PERIOD AND LEVIED PENALTY OF RS. 93,332/- EQUIVALE NT TO % OF THE TOTAL TURNOVER OF THE COMMODITY EXCHANGE SHOWN BY T HE ASSESSEE AT RS. 1,86,66,488/-. THE CIT(A) HAS ALSO UPHELD THE PENALTY AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT FAILURE TO GET THE ACCOUNTS AUDITED IN TERMS O F SECTION 44AB OF THE ACT WAS PRIMARILY ON THE BONAFIDE IMPRESSION EN TERTAINED BY THE ASSESSEE THAT TRADING IN COMMODITIES BEING SPECULAT ION ACTIVITY, THE TOTAL AMOUNT OF SAUDA BOOKED WITH THE COMMODITY EXC HANGE WOULD NOT CONSTITUTE TURNOVER FOR THE PURPOSE OF SECTION 44AB OF THE ACT. THE LEARNED COUNSEL SUBMITTED THAT IN TERMS OF THE SAID BONAFIDE IMPRESSION, THE NET INCOME ACCRUING TO THE ASSESSEE IN THE SPECULATIVE TRADING IN COMMODITIES WAS BELOW RS. 40 .00 LAKHS AND THEREFORE, THE ASSESSEE DID NOT GET HIS ACCOUNTS AU DITED. IN SUPPORT 3 ITA NO. 1489/PN/2011 BANWARI SITARAM PASARI A.Y. 2006-07 OF THE AFORESAID PROPOSITION, RELIANCE WAS PLACED O N THE DECISION OF BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF GROWMOR E EXPORTS LTD. & ORS. VS. ACIT (2001) 78 ITD 95 (MUM). APART THER EFROM, IT IS ALSO POINTED OUT THAT WHEN THE ASSESSEE WAS CONFRONTED W ITH THE SITUATION BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROC EEDINGS, THE ASSESSEE READILY GOT ITS ACCOUNTS AUDITED AND FURNI SHED A REPORT DURING THE ASSESSMENT PROCEEDINGS ITSELF, WHICH SHO WS BONAFIDES OF THE ASSESSEE. IN THIS MANNER, IT IS SOUGHT TO BE M ADE OUT THAT PENALTY U/S 271B BE DELETED. 5. ON THE OTHER HAND, THE LEARNED DR APPEARING FOR THE REVENUE POINTED OUT THAT THE ASSESSEE WAS GETTING HELP OF T AX PRACTITIONER FOR FURNISHING RETURN OF INCOME AND OTHER TAX OBLIGATI ONS AND THEREFORE, IT COULD NOT BE SAID THAT THE ASSESSEE WAS UNAWARE OF THE PROVISIONS OF THE ACT SO AS TO APPLY THE CORRECT LIMITS FOR GE TTING THE ACCOUNTS AUDITED U/S 44B OF THE ACT. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE CRUX OF THE CONTROVERSY REVOLVES AROUND AS TO WHETHER TH E ASSESSEE WAS INDEED LIABLE TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT ON THE GROUND THAT ITS TURNOVER FROM THE COMMODITIES BY BO OKING OF SAUDA WITH COMMODITY EXCHANGE STOOD AT RS. 1,86,66,488/-? IN THIS CONNECTION, IT IS NOTED THAT THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF ON-LINE TRADING OF COMMODITIES AND IN THIS SPECU LATION ACTIVITY, THERE IS NO PHYSICAL DELIVERY OF COMMODITIES GIVEN OR TAKEN. WHETHER THERE WAS ANY ELEMENT OF TURNOVER IN SUCH ACTIVIT Y IS THE BONE OF CONTENTION BETWEEN THE ASSESSEE AND THE REVENUE. I N SOMEWHAT SIMILAR SITUATION, OUR CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GROWMORE EXPORTS LTD. & ORS (SUPRA) HAS DEA LT WITH REQUIREMENT TO GET THE ACCOUNTS AUDITED U/S 44AB OF THE ACT. IN THE CASE BEFORE THE MUMBAI BENCH, THE ASSESSEE WAS ENGA GED IN THE 4 ITA NO. 1489/PN/2011 BANWARI SITARAM PASARI A.Y. 2006-07 SPECULATION TRANSACTION OF SALE AND PURCHASE OF UNI TS WITHOUT TAKING DELIVERY AND THE ACCOUNT WAS SETTLED BY CREDITING T HE DIFFERENCE. THE TRIBUNAL AFTER CONSIDERING SECTION 18 OF THE SALE O F GOODS ACT 1930 OBSERVED THAT NO PROPERTY IN THE SAID UNITS PASSED ON TO THE ASSESSEE INASMUCH AS THE ASSESSEE NEVER ACQUIRED TH E PROPERTY IN THE UNITS AS THE UNITS CONTRACTED TO BE BOUGHT WERE FUTURE UNASCERTAINED GOODS. SIMILARLY, IT COULD NOT PASS O N THE PROPERTY TO THE PARTY TO WHOM THE UNITS WERE CONTRACTED AND THE REFORE, THERE WAS NO SALE OR TURNOVER EFFECTED BY THE ASSESSEE IN THE LEGAL SENSE FOR THE PURPOSES OF GETTING THE ACCOUNTS AUDITED U/S 44 AB OF THE ACT. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THIS R EGARD ARE AS UNDER: 10. HOWEVER, WE MAY LEGALLY ALSO EXAMINE THE ISSUE. FOR THAT WE MAY TURN TO THE MEANING OF THE TERM 'GO ODS'. THE SAID TERM IS NOT DEFINED IN THE ACT. BUT SALE O F GOODS ACT SPECIFICALLY INCLUDES STOCKS AND SHARES I N THE MEANING OF THE TERM 'GOODS'. THEREFORE, OTHER PROVI SIONS OF SALE OF GOODS ACT AUTOMATICALLY WOULD APPLY. AS PER SECTION 6(3) OF THE SAID ACT, WHERE BY A CONTRACT O F SALE THE SELLER PURPORTS TO EFFECT A PRESENT SALE OF FUT URE GOODS, THE CONTRACT OPERATES AS AN AGREEMENT TO SEL L THE GOODS. IN THE INSTANT CASE, THE CONTRACT THROUGH WH ICH ASSESSEE SOUGHT TO BUY THE UNITS WAS CERTAINLY A CONTRACT TO BUY FUTURE GOODS. AT THIS JUNCTURE WE M AY CLARIFY THAT THE ASSESSEE NEVER TOOK DELIVERY OF TH E UNITS AS OBSERVED BY THE CIT(A). THE CONTRACT NOTE CLEARL Y SPECIFIES THE DATE OF DELIVERY AS 30-9-1989. EVEN OTHERWISE THERE IS NO EVIDENCE TO SHOW THAT ASSESSE E IN FACT OBTAINED DELIVERY THEREOF. THUS THE UNITS CONT RACTED TO BE BOUGHT WERE FUTURE GOODS AND WERE UNASCERTAIN ED. AS PER SECTION 18 OF THE SALE OF GOODS ACT, NO PROP ERTY IN THE GOODS IS TRANSFERRED TO THE BUYER UNLESS AND UNTIL THE GOODS ARE ASCERTAINED. THEREFORE, WHEN THE ASSESSEE HAD CONTRACTED TO BUY THE UNITS, NO PROPER TY IN THE SAID UNITS HAD PASSED TO THE ASSESSEE. AS A RES ULT, IT CANNOT BE SAID THAT ACTUAL PURCHASE AS CONTEMPLATED UNDER THE SALE OF GOODS ACT WAS EVER EFFECTED. AND IF THE ASSESSEE NEVER ACQUIRED PROPERTY IN THE UNITS, IT COULD NOT PASS ON THE PROPERTY TO THE PARTY TO WHOM THE UNITS WERE CONTRACTED TO BE SOLD BY THE ASSESSEE. I N THE ULTIMATE RESULT, THEREFORE, THERE WAS NO SALE BY TH E ASSESSEE AND WHEN THERE WAS NO SALE, THERE WAS NO QUESTION OF RECEIVING ANY SALE PROCEEDS BY THE ASSESSEE, WHICH IN COMMERCIAL SENSE WOULD BE DESCRIBED AS EITHER SALES OR TURNOVER. THUS, EVEN I N LEGAL SENSE THERE WAS NO TURNOVER EFFECTED BY THE ASSESSE E. 11. THE MUMBAI BENCH OF THE TRIBUNAL, IN THE CASE O F BABULAL ENTERPRISES [IT APPEAL NO. 6031 (MUM.) OF 1 996 DATED 12-2-1997] HAS ON SIMILAR FACTS HELD THAT THE AMOUNT OF TRANSACTIONS AS NOTED IN THE CONTRACT NOT ES CANNOT BE TAKEN AS TURNOVER OF THE ASSESSEE. THE 5 ITA NO. 1489/PN/2011 BANWARI SITARAM PASARI A.Y. 2006-07 TRIBUNAL ALSO RELIED ON THE DECISION OF THE TRIBUNA L IN THE CASE OF ROYAL CUSHION VINYL PRODUCTS LTD. (SUPRA) A ND OBSERVED THAT THOUGH THE SAID DECISION WAS RENDERED IN THE CONTEXT OF SECTION 80HHC, THE PRINCIPLE LAID DO WN IN THAT CASE WOULD EQUALLY APPLY TO THE FACTS OBTAININ G TO THE CASE IN HAND. 12. IN THE PRESENT CASE, THE TRANSACTION OF BUYING AND SELLING THE UNITS WAS A SPECULATIVE TRANSACTION. NO DELIVERY HAS TAKEN PLACE. THE ACCOUNT HAS BEEN SETT LED ONLY BY CREDITING THE DIFFERENCE WHICH IS DULY REFL ECTED IN THE PROFIT AND LOSS ACCOUNT. NO OTHER ACTIVITY HAS BEEN CARRIED OUT BY THE ASSESSEE. IN VIEW OF THE FOREGOI NG DISCUSSION AND ALSO RESPECTFULLY FOLLOWING THE DECI SIONS OF THE TRIBUNAL CITED SUPRA, WE HOLD THAT NO TURNOV ER WAS EFFECTED AT ALL BY THE ASSESSEE AND HENCE WAS NOT L IABLE TO GET THE ACCOUNTS AUDITED UNDER SECTION 44AB OF T HE ACT AND HENCE THE PENALTY CONFIRMED BY THE CIT(A) I S DELETED. 7. IN THE PRESENT CASE ALSO, THE TRANSACTION OF BUY ING AND SELLING OF COMMODITIES IS A SPECULATIVE ACTIVITY WHERE NO P HYSICAL DELIVERY IS TAKEN OR GIVEN AND IN THIS VIEW OF THE MATTER, FOLL OWING THE PARITY OF REASONING GIVEN IN THE CASE OF GROWMORE EXPORTS LTD . & ORS (SUPRA), HEREIN ALSO WE ARE INCLINED TO HOLD THAT THERE WAS NO TURNOVER CONSTITUTED IN THE AMOUNT OF RS. 1,86,66,488/- FOR THE PURPOSES OF CONSIDERING THE LIABILITY OF ASSESSEE TO GET THE AC COUNTS AUDITED U/S 44AB OF THE ACT AND HENCE, THERE WAS NO REQUIREMENT TO GET THE ACCOUNTS AUDITED U/S 44AB OF THE ACT. THUS, THE PEN ALTY U/S 271B IMPOSED BY THE ASSESSING OFFICER IS HEREBY DIRECTED TO BE DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER 2012. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 22 ND NOVEMBER 2012 ANKAM COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT (A)-II NASIK 4. THE CIT- II NASIK 5. THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T. A.T., PUNE. BY ORDER 6 ITA NO. 1489/PN/2011 BANWARI SITARAM PASARI A.Y. 2006-07 //TRUE COPY// SR. P.S. I.T.A.T., PUNE