Laxmi Pramod Gupta, Indore V. ITO-1(2), Indore

ITA 207/Ind/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5409 (ITAT-INDORE)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 28-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S AMBEDKAR
• Assessee Lawyers: RAJENDRA KHANDELWAL
• Keywords: Business income; Set aside
• Section: 142(1); 143(2); 271B; 44AB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE KUL BHARAT, JUDICIAL MEMBER AND HONBLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.207/IND/2019 ASSESSMENT YEAR 2014-15 REVENUE BY SHRI R.S. AMBEDKAR , SR.DR ASSESSEE BY SHRI RAJENDRA KHANDELWAL, CA DATE OF HEARING 0 5 . 0 2 .20 20 DATE OF PRONOUNCEMENT 19 . 0 2. 2020 O R D E R PER MANISH BORAD, AM THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE OF THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2014-15 IS DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEA LS)-I (IN SHORT LD.CIT(A)], INDORE DATED 03.12.2018 WHICH IS ARIS ING OUT OF THE ORDER U/S 271B OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATED 23.11.2016 FRAMED BY ITO -1(2), INDORE. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEA L; SHRI LAXMI PRAMOD GUPTA, E-65, E-TYPE QUARTER, SECTOR-5, CAT COLONY, INDORE VS. ITO - 1 ( 2 ) , INDORE (APPELLANT) (RESPONDENT ) PAN NO. A JJPG0785E SHRI LAXMI PRAMOD GUPTA ITA NO. 207/IND/2019 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE PENALTY UND ER SECTION 271B OF THE ACT. THE APPELLANT PRAYS THAT THE SAID PENALTY BE DELETED 2. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, AME ND, MODIFY, SUBSTITUTE, DELETE AND OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL ON OR BEFORE FINAL HEARING, IF NECESSARY SO ARISES. 3 . BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF SHARES. THE RETURN FO R ASSESSMENT YEAR 2014-15 FILED ON 10.11.2014 DECLARING INCOME OF RS. 45,320/-. CASE SELECTED FOR SCRUTINY UNDER CASS. STATUTORY NOTICE U/S 143(2) AND 142(1) OF THE ACT WITH QUESTIONNAIRE WERE SERVED UP ON THE ASSESSEE. ON THE BASIS OF INFORMATION AVAILABLE ON RECORD LD. A.O ON OBSERVED THAT THE ASSESSEE IS ENGAGED IN TRADING IN EQUITY S HARES IN THREE MODES VIZ FUTURE AND OPTIONS, INTRA-DAY TRANSACTION S AND DELIVERY BASED TRANSACTION. LD. A.O ON EXAMINATION OF BOOKS OF ACCOUNTS NOTICED THAT TOTAL SALES OF THE ASSESSEE IN SHARE T RANSACTION IS RS.22,52,74,187/- BUT ASSESSEE FAILED TO OBTAIN AUD IT REPORT U/S 44AB OF THE ACT AND FOR THIS FAILURE ASSESSEE IS LI ABLE TO BE PENALIZED U/S 271B OF THE ACT. HOWEVER, LD. A.O MADE NO ADDI TION TO THE INCOME SHOWN BY THE ASSESSEE AS THERE WAS LOSS IN S HARE TRANSACTIONS AND THUS ASSESSED INCOME AT RS.45,320/ -. SHRI LAXMI PRAMOD GUPTA ITA NO. 207/IND/2019 3 4. SUBSEQUENTLY PENALTY PROCEEDINGS U/S 271B OF THE A CT WERE INITIATED AND PENALTY OF RS. 1,50,000/- WAS LEVIED FOR THE FAILURE ON THE PART OF THE ASSESSEE FOR NOT GETTING THE BOOKS OF ACCOUNTS AUDITED U/S 44AB OF THE ACT EVEN WHEN THE TURNOVER EXCEEDED THE LIMIT PRESCRIBED N THE ACT. ASSESSEE CHALLENGED TH E LEVY OF PENALTY BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED WHO CON FIRMED THE PENALTY OBSERVING AS FOLLOWS; 3. GROUND NOS.1 & 2: BOTH OF THESE GROUNDS OF APPEAL HAVE BEEN RAISED AGAINST THE LEVY OF PENALTY AMOUNTING T O RS.1,50,000/- U/S 271B OF THE INCOME TAX ACT, 1961 FOR NON AUDIT OF THE BOOKS OF ACCOUNT. THE AO HAS DISCUSSED THE ISSUE IN DETAIL AT PAGE NOS.2 TO 7 OF THE ASSESSMENT ORDE R. THE AO AT PAGE NO. 6 HAS CALCULATED /WORKED OUT THE AMOUNT-OF TURNOVER FROM THE LEDGERS OF HDFC AND INDIA BULLS WHICH IS REPRODUCED HEREUNDER:- 1. HDFC RS.1,42,19,000/- 2. HDFC RS. 46,77,743/- 3. INDIA BULLS RS. 9,98,59,738/- 4. INDIA BULLS RS.11,15,85,389/- TOTAL RS.23,03,41 ,870/- SHRI LAXMI PRAMOD GUPTA ITA NO. 207/IND/2019 4 3.1 IT IS CLEAR FROM THE ABOVE THAT THE APPELLANT HAD A TURNOVER OF MORE THAN RS.23.03 CRORES AND WAS REQUIRED TO MA INTAIN AND GET THE BOOKS OF ACCOUNT AUDITED U/ S 44AB OF THE I NCOME TAX ACT, 1961. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAD MAINLY CONTENDED THA T TURNOVER IN THE CASES OF DELIVERY BASED SALES, FUTURE OPTION S AND INTRADAY TRANSACTIONS ARE SUPPOSED TO BE DIFFERENT FROM NORMAL BUSINESS TURNOVER. BUT, THE INCOME TAX ACT, 1961 DO ES NOT PRESCRIBE ANY DIFFERENT DEFINITION OF TURNOVER FOR ABOVE MENTIONED TRANSACTIONS. A DETAILED WRITTEN SUBMISSI ON HAS ALSO BEEN FILED BEFORE THE ASSESSING OFFICER. HOWEVER, D URING THE COURSE OF APPEAL PROCEEDINGS, THE APPELLANT HAS SUB MITTED THAT PENALTY U/S 271B OF THE INCOME TAX ACT, 1961 IS NOT LEVIABLE IN THIS CASE FOR BEING 'NO ACCOUNTS CASE'. THE APPELLANT HAS ALSO RELIED UPON A NUMBER OF CASE LAWS, AFTER CONSI DERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CONTENTION OF THE APPELLANT HAS NOT BEEN FOUND ACCE PTABLE. THE CASE LAWS CITED BY THE APPELLANT HAVE BEEN FOUND DISTINGUISHABLE FROM FACTS OF THE PRESENT CASE. HAD THE PENALTY BEEN ALREADY LEVIED IN THIS CASE U/S 271A OF THE IN COME TAX ACT, 1961 FOR NON MAINTENANCE OF BOOKS OF ACCOUNTS, THEN THE APPELLANT COULD HAVE BEEN SAVED FROM LEVY OF PENALT Y U/S 271B OF THE INCOME TAX ACT, 1961. THEREFORE, IN VIEW OF ABOVE DISCUSSION, THE AO HAS BEEN FOUND JUSTIFIED IN LEVY ING THE PENALTY U I S 271 B OF THE INCOME TAX ACT, 1961 WHICH IS HEREBY CONFIRMED. THESE GROUNDS OF APPEAL ARE DISMISSED. 5. NOW THE ASSESSEE IS IN APPEAL FOR THE TRIBUNAL. SHRI LAXMI PRAMOD GUPTA ITA NO. 207/IND/2019 5 6. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE PAPE R BOOK DATED 28.1.2020 AND 03.02.2020 SUBMITTED THAT THE TURNOVE R OF THE ASSESSEE IS ONLY AT RS.51,78,174/- WHICH INCLUDED T HE TURNOVER OF DELIVERY BASED SALES OF SHARES AT RS.26,97,721/-, F UTURE OPTIONS AT RS.15,49,185/- AND INTRADAY TRANSACTIONS AT RS.9,31 ,268/-. HE FURTHER REFERRING TO THE GUIDANCE NOTES ON TAX AUD IT UNDER SECTION 44AB OF THE ACT ISSUED BY INSTITUTE OF CHARTERED AC COUNTS OF INDIA (IN SHORT ICAI) CONTENDING THAT THE TURNOVER FOR THE PURPOSE OF AUDIT U/S 44AB OF THE ACT WITH RELATION TO FUTURE OPTION AND INTRA DAY TRANSACTIONS IS NOT THE VALUE OF SHARES BECAUSE THERE IS NO DELIVERY OF SHARES AND ONLY THE NET DIFFERENCE OF T HE TRANSACTION EITHER DEBIT OR CREDIT IN TOTAL IS TO BE TAKEN AS T HE BASIS TO COMPUTE THE TURNOVER OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE TURNOVER IS NOT DEFINED IN THE ACT AND MEANING IS T O BE BORROWED FROM THE DEFINITION PROVIDED IN THE PROVISIONS OF S ALE OF GOODS ACT U/S 6(3) OF THE SAID ACT. IT WAS FURTHER SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE TURNOVER IS LESS THAN THE ONE PRESCRIBED U/S 44AB OF THE ACT THE ASSESSEE IS NOT REQUIRED TO GET THE BOOKS OF ACCOUNTS AUDITED. IT WAS ALSO ASS ERTED THAT NO BOOKS OF ACCOUNTS WERE KEPT BUT LD. A.O HAS MENTION ED TO HAVE SHRI LAXMI PRAMOD GUPTA ITA NO. 207/IND/2019 6 CHECKED ON TEST CHECK BASIS. RELIANCE PLACED ON THE FOLLOWING DECISIONS; (I) I.T.A.T. PUNE BENCH B IN THE CASE OF BANWARI SITARAM PASARI HUF V/S ACIT IT APPEAL NO.1489 (PUNE) OF 20 11 (22.11.2012) (II) I.T.A.T. MUMBAI BENCH IN THE CASE OF BABULAL ENTERPRISES (IT APPEAL NO.6031 (MUM) OF 1996 DATED 12.02.1997 (III) I.T.A.T., AMRITSAR BENCH IN THE CASE OF MOHA N SINGH CHHABRA HUF V/S DCIT CIRCLE-5 (IT APPEAL NO.270 (A SR) 2012 DATED 10.10.2012 7. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEMEN TLY ARGUED SUPPORTING THE ORDERS OF BOTH THE LOWER AUTH ORITIES. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RE CORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DEC ISIONS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. THE ONLY ISSUE F OR ADJUDICATION IN THE INSTANT APPEAL RAISED BY THE ASSESSEE IS THAT W HETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE LEVY OF PENA LTY U/S 271B OF THE ACT FOR NOT GETTING THE BOOKS OF ACCOUNTS AUDIT ED U/S 44AB OF THE ACT. SHRI LAXMI PRAMOD GUPTA ITA NO. 207/IND/2019 7 9. IN ORDER TO ADJUDICATE THE ISSUE WE NEED TO FIRST M AKE FACTS STRAIGHT. THE ASSESSEE FILED INCOME TAX RETURN ON 10.11.2014 SHOWING NET INCOME FROM OTHER SOURCES AT RS. 46,000 /- AND AFTER CLAIMING DEDUCTION U/S 80TTA ON INTEREST FROM SAVIN G BANK ACCOUNT RS.684/- , TOTAL INCOME OF RS.45,316/- DECL ARED. THERE IS NO MENTION ABOUT ANY BUSINESS INCOME EARNED OR LOSS SUFFERED DURING THE YEAR. ASSESSEE DID NOT DISCLOSED THE SH ARE BUSINESS IN INCOME TAX RETURN. IT WAS ONLY ON THE BASIS OF INFO RMATION BROUGHT TO THE NOTICE OF A.O THAT THE ASSESSEES CASE WAS S ELECTED FOR SCRUTINY. INFORMATION RELATED TO TRANSACTIONS CARR IED OUT BY THE ASSESSEE RELATING TO DELIVERY BASED PURCHASE AND SA LES OF SHARES, FUTURE OPTIONS AND INTRADAY TRANSACTIONS CARRIED OU T THROUGH HDFC & INDIA BULLS. IN THE ASSESSMENT ORDER A.O HAS REF ERRED TO THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WHICH HAVE BEEN EXAMINED ON TEST CHECK BASIS AND TURNOVER IS COMPUT ED AT RS.22,52,74,187/-. HOWEVER THE ASSESSEE HAS STATED THAT NO BOOKS OF ACCOUNTS WERE MAINTAINED BY HIM AND SINCE HE INC URRED THE LOSS DURING THE YEAR, THE SHARE TRANSACTIONS WERE NOT DI SCLOSED. WHEN THE MATTER CAME UP BEFORE LD. CIT(A) IN THE SUBMISS IONS ASSESSEE SHRI LAXMI PRAMOD GUPTA ITA NO. 207/IND/2019 8 SUBMITTED THAT TURNOVER DURING THE YEAR IS RS.51,78 ,174/- WHICH COMPRISES OF THE FOLLOWING; NATURE OF TRANSACTIONS BASIS OF TURNOVER AMOUNT (RS.) DELIVERY BASED SALES SALES VALUE 26,97,721/ - FUTURE AND OPTION NET BALANCE IGNORING +/ - 15,49,185/ - INTRADAY TRANSA C TIONS NET BALANCE IGNORING +/ - 9,31,268/ - TOTAL TURNOVER 51,78,174/ - 10. HOWEVER LD. CIT(A) HAS CALCULATED TOTAL TURNOVER AT RS.23,03,41,870/- ON THE BASIS OF THE CREDITS APPEARING IN THE LEDGER OF HDFC AND INDIA BULLS IN THE FOLLOWING MAN NER :- 1. HDFC RS.1,42,19,000/- 2. HDFC RS. 46,77,743/- 3. INDIA BULLS RS. 9,98,59,738/- 4. INDIA BULLS RS.11,15,85,389/- TOTAL RS.23,03,41 ,870/- 11. NOW THE FIRST AND FOREMOST THING IS VERIFICATION O F TURNOVER OF THE ASSESSEE. IN THE PAPER BOOK PLACED BEFORE US A SSESSEE HAS ONLY FILED THE DMAT ACCOUNT STATEMENT OF INDIA BULLS SEC URITIES LIMITED AT PAGE 29 TO 38 SHOWING THE QUANTITY OF SHARES PUR CHASE AND SOLD BY THE ASSESSEE THROUGH INDIA BULL. ASSESSEE HAS N OT FILED LEDGER SHRI LAXMI PRAMOD GUPTA ITA NO. 207/IND/2019 9 ACCOUNT OF HDFC & INDIA BULLS SECURITIES LTD WHICH COULD ASCERTAIN THE ACTUAL TURNOVER OF THE ASSESSEE. IT IS TRUE TH AT ICAI ISSUED GUIDANCE NOTES FOR TAX AUDIT U/S 44AB OF THE ACT BU T SINCE THE WORKING OF CALCULATION OF TURNOVER IS NOT COMING TO THE LOGICAL END FROM THE MATERIAL AVAILABLE ON RECORD TO EXAMINE TH E JUSTIFICATION OF LEVY OF PENALTY U/S 271B OF THE ACT WILL BE LITTLE EARLY. IN THE ASSESSMENT ORDER LD. A.O HAS NOT GIVEN CORRECT FIND ING AND IS MENTIONING ABOUT THE BOOKS OF ACCOUNTS WHICH THE AS SESSEE HAS NEVER MAINTAINED. THE JUDGMENT REFERRED AND RELIED BY THE ASSESSEE WILL NOT HELP AT THIS STAGE. ONCE THE TURNOVER AS S TATED BY THE LD. COUNSEL FOR THE ASSESSEE IS VERIFIED AT THE END OF THE LD. A.O WHICH IS TO BE CALCULATED ON THE BASIS OF GUIDANCE NOTE I SSUED BY ICAI FOR TAX AUDIT U/S 44AB OF THE ACT, THE QUESTION THAT WH ETHER THE ASSESSEE WAS LIABLE TO GET BOOKS OF ACCOUNTS AUDITE D U/S 44AB OF THE ACT NEEDS TO BE TAKEN BY LD. A.O THEREAFTER. 12 . WE ACCORDINGLY IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE SET ASIDE ALL THE ISSUES RAISED IN THIS APPEAL TO LD. A.O, TO CARRY OUT NECESSARY VERIFICATION WITH THE ASSISTANC E OF ASSESSEE WHO WOULD FILE ALL NECESSARY DETAILS IN SUPPORT OF ITS CONTENTION THAT THE TURNOVER IS ONLY RS.51,78,174/- AND NOT RS.23,0 3,41,870/- AS SHRI LAXMI PRAMOD GUPTA ITA NO. 207/IND/2019 10 HELD BY LD. CIT(A). HOWEVER THE LD. A.O IS DIRECTE D TO COMPUTE THE TURNOVER AS PER THE GUIDANCE NOTE ON SECTION 44AB O F THE ACT ISSUED BY ICAI AS WELL AS THE SETTLED JUDICIAL PR ECEDENCE AND PROVISIONS OF LAW. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSE. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.02.20 20. SD/- SD/- ( KUL BHARAT) (MANI SH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 19 FEBRUARY , 2020 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE