VARADAGOVIND PARTHASARTHY IYER (THROUGH LEGAL HEIR ARVIND IYER), MUMBAI V. ITO WARD 41(2)(5), MUMBAI

ITA 1716/MUM/2023

AI Insights

The case revolves around the penalty imposed on the assessee, Varadagovind Parthasarthy Iyer, for not getting his accounts audited as required under Section 44AB of the Income Tax Act, due to having a turnover exceeding Rs. 1 Crore from transactions in futures and options. The Assessing Officer (AO) treated the assessee's declared short-term capital loss from these transactions as a business loss and noted the absence of an audit report. The assessee contended that he considered himself an investor, not a trader, and thus did not maintain books of accounts or audit them. The Tribunal, referencing several High Court decisions, concluded that since the assessee did not maintain books of accounts, the penalty under Section 271B was not applicable, and the correct section for any penalty for non-maintenance of books would be Section 271A.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302408 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 31-07-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 15-05-2023
• Other Referred Cases: CIT vs SK. Gupta and Co. [2010]322 ITR 86 (Allahabad), CIT, Bareilly vs. Bisauli Tractors [2007] 165 Taxman (All), CIT vs Surajmal Parsuram Todi [1996] 222 ITR 691 (Gauhati)
• Laws Referred To: Section 271B, Section 44AB, Section 44AA, Section 271A
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271B; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘F‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No.1716/Mum/2023 (Assessment Year :2015-16) Varadagovind Parthasarthy Iyer (through legal heir Arvind Iyer) D-702, Asha Nagar Phase-2 Off. P.K.Road Mulund West Mumbai-400080 Vs. Income Tax Officer Ward 41(2)(5) Mumbai PAN/GIR No.AALPI0617E (Appellant) .. (Respondent) Assessee by Shri Aditya Ramchandran Revenue by Shri Mahesh Parwani Date of Hearing 01/08/2023 Date of Pronouncement 23/08/2023 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 16/03/2023 passed by NFAC, Delhi in relation to the penalty proceedings u/s.271B for the A.Y.2015-16. 2. The assessee is mainly aggrieved by levy of penalty of Rs.1,50,000/- u/s. 271B. The brief facts are that in this case assessee has filed return of income of Rs.12,50,340/-. He is ITA No.1716/Mum/2023 Varadagovind Parthasarthy Iyer (Through legal Heir Arvind Iyer) 2 engaged in the business of trading, financing, reality and commodities etc. Assessee has declared short term capital loss of Rs.34,94,555/- from trading in future and option and loss was arrived from business of trading in shares and derivatives. AO has treated this loss as business loss instead of short term capital loss declared by the ld. AO on the ground that assessee was trading in F & O and it is not sale of asset. The AO noted that the total turnover from transaction in future and option was of Rs. 89,78,78,650/- which is more than the limit prescribed in Section 44AB of the Act. Since, the assessee has failed to submit the report of the auditors and has not got the accounts audited, therefore, there was a contravention of Section 44AB and accordingly, penalty u/s.271 B was initiated. 3. In response to the show-cause notice, assessee submitted that he has done all the investment considering himself as an investor and not as a trader. However, the ld. AO held that assessee has not given plausible reason for not auditing the accounts and therefore, he levied penalty at Rs.1,50,000/- u/s.271B. This penalty has been confirmed by the ld. CIT (A) also. 4. Before us ld. Counsel submitted that assessee has not maintained any books of accounts and once assessee has not maintained any books of accounts, then there is no question of the getting the books of accounts audited and therefore, no penalty u/s.271B can be applied. In support, he relied upon the following decisions of the Hon’ble High Court:- ITA No.1716/Mum/2023 Varadagovind Parthasarthy Iyer (Through legal Heir Arvind Iyer) 3 1. CIT vs SK. Gupta and Co. [2010]322 ITR 86 (Allahabad) 2. CIT, Bareilly vs. Bisauli Tractors [2007] 165 Taxman (All) 3. CIT vs Surajmal Parsuram Todi [1996] 222 ITR 691 (Gauhati) 5. On the other hand, ld. DR submitted that turnover was more than Rs.1 Crore and assessee was required to get the accounts audited. 6. After considering the relevant facts placed on record and also the orders passed by the authorities below, we find that the penalty has been levied u/s. 271B for violation of Section 44AB, i.e., failure to get the accounts audited. It is not in dispute that assessee has not maintained any books of accounts as required u/s.44AA. For violation of non maintenance of books of account u/s 44AA, there is a separate penal provision for levying penalty for non-maintaining of books of accounts prescribed u/s. 271A and therefore if at all penalty should have been levied under this section. The Hon’ble Allahabad High Court in the case of CIT vs. Bisauli Tractors reported in 299 ITR 219 had held that Section 271B of the Act is not attracted in the case where no account has been maintained and instead recourse u/s.271A can be taken. This principle has again been reiterated by the Hon’ble Allahabad High Court in the case of CIT vs. S.K Gupta reported in 322 ITR 86. Similar view has been taken by the Hon’ble Guahati High Court in the case of CIT vs. Surajmal Parsuram Todi supra. Accordingly, we hold that no penalty u/s.271B is leviable when assessee has not maintained the books of accounts. Accordingly, penalty is deleted. ITA No.1716/Mum/2023 Varadagovind Parthasarthy Iyer (Through legal Heir Arvind Iyer) 4 6. In the result, appeal of the assessee is allowed. Order pronounced on 23 rd August, 2023. Sd/- (GAGAN GOYAL) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 23/08/2023 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//