Parag Jain, New Delhi V. ITO, Ward-58(2), New Delhi

ITA 278/DEL/2022

AI Insights

The case involves an appeal by Parag Jain against the penalty order issued by the Income Tax Officer under Section 271B of the Income Tax Act, 1961, for not filing a tax audit report as required under Section 44AB due to exceeding the prescribed limit of transactions in multi-commodity exchange. The primary contention was whether the turnover from derivative transactions should be considered as the gross amount or only the net differences (profits or losses) from such transactions. The tribunal, referencing the ICAI's Guidance Note, sided with the assessee, determining that only the net differences should be considered, which was below the threshold limit for the audit.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121634 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 15-05-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 08-02-2022
• Other Referred Cases: Sachin Marotr ao Rangari vs. A CIT (2022), 143 taxmann.com 318 (Rajkot) (Trib.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 27; 201; 271B; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.278/DEL/2022 Assessment Year 2011-12 Parag Jain Building No.1 Vijay Block First Floor Laxmi Nagar New Delhi Vs. The Income Tax Officer Ward-58(2) New Delhi TAN/PAN: AIEPJ0438K (Appellant) (Respondent) Appellant by: Shri Priyansh Jain, CA Respondent by: Shri Atiq Ahemad, Sr.DR Date of hearing: 16 05 2023 Date of pronouncement: 23 05 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he capti oned app eal has b ee n f il ed b y the A sse ssee a gainst the o rde r of the C ommiss ione r o f In come T ax (A ppe als), NFA C D elhi (‘ C IT (A )’ in s h ort ) da ted 14. 12.2 021 aris ing from the penal t y orde r da ted 28. 06. 2019 pass ed b y t he Assessing O f fi ce r (A O ) under Sec t io n 27 1B of th e I nc ome T ax Act, 1961 (the A ct) conce rn ing Assess me nt Yea r 201 1-12 . 2. T he capt ione d a ppeal has bee n file d by t he assess ee a gainst the impos i ti on of penal t y of Rs. 1, 50 ,000/ - u nde r Secti on 271B of the Act a lle gi ng t hat asses see has not fi led t ax audit rep ort i n terms of p rovi si ons of Sec tio n 44A B of t he Act despit e the total value of tran sac tions ma de in mul ti c ommodi t y e xc han ge of Rs. 4, 41, 30, 475/- w hich exc eeds the li mi t presc ribed for a udi t o f I.T.A. No.278/Del/2022 2 the bo oks of ac cou nt u nder Sec t io n 44A B of t he A ct. 3. When the matter w as calle d fo r hearin g, the ld. couns el for the assess ee r el ied upon the ‘G uidance N ote of Tax A udit unde r Sect ion 44A B of the A ct ’ iss ue d by ICA I and sub mi tte d that for the e xpress i on ‘s ale, t urno ver, g ross rece ipts ’ used in S ect i on 44A B o f t he A ct , the gu id anc e note has obse rv ed that s uc h expressio ns onl y re pr ese nts the s um tota l of favou ra bl e and unfavo ura bl e di ffere nces aris i ng from such t ra ns actio ns in de ri vati ves, fut ure s and options segment. S ince s uch t ra nsact ions are compl ete d w ithou t deli ve ry of sha res o r sec uri tie s o r the trans ac tion are s quar ed up by payme nt of d if fe rences a nd ther ef ore, onl y s uch di ff er ences be it prof it or loss has t o be summed up f or the purpos es of de ter mi na ti on of turnover etc. The ld. c ounse l s ub mi tted t ha t the assess ee is enga ged in non-del i ve ry based deri vati ve t ransa ct ions of busi ness nat ure and t here fore, th e turno ver has been w rongly adopted by the R evenue for ful l va lue of transac ti ons i ns tea d of on ly res ultant differ ences ari sing a t the time of squa re up. T he ld. couns el su bmi tted that where the turno ver is ta ke n on net d if ference, bot h favourable and unfavo ura bl e t urn ove r, th e t urn over t o be r eckoned f or t he p urpose of S ect ion 44A B of t he A c t w ould be fa r low e r than t he thres hol d limit applicable t o the A ssess men t Y ear 2 010-11. 4. T he l d. D R for t he Revenue, on the ot he r hand, re lied up on the pe na lt y order a s well as the fi rst app el late orde r and su bmi t ted that t he as sesse e h as not a tte nded th e pr oceedings befor e the low e r auth ori tie s at al l w hic h has put con strai nt on the reve nue to p ass ex-p arte order. 5. We have ca re ful l y c onsi de re d t he rival s ub mi ss ion s and I.T.A. No.278/Del/2022 3 strai ghtw a y fi nd oursel ves i n agree me nt wi th the plea raised on behal f of th e asse ssee on fi rs t p rinciples. A s pe r the G uidanc e N ote issued b y the ICA I fo r the pu rpos es of tax a udit unde r Sect ion 44A B of the A ct, th e turno ver in t he case of de ri va tive and spe cula tive transac tions (w hi ch are non del i very b ase d trans ac tions ), on ly t he res ulta nt di fference arisi ng t o the asse ssee fro m s uch trans act ion has to be taken for the purpos es of turnove r ins tea d of gross amount. T he A ssessi ng O f fice r h as w rongl y adopted t he gro ss amoun t ins tead of the di ffe rences. Whil e the approac h of t he assesse e t ow ards non -a tt enda nce and non- coope ra tion be fore the low er authori tie s is highl y i mproper a nd canno t be countenanced but howe ve r in t he sa me ve in, w e notice that t he t otal turno ver as pe r t he G uida nce N ote sta nds at Rs. 4, 59, 321/ - o nl y, as per the mate ri al p laced be fore the R eve nue A uthori t ies i n the cours e of the a s sess men t pr oce edings. Suc h turno ver a rising fr om der iv at ive / s peculati ve trans ac tions are fa r low er t ha n t he th resh ol d li mit presc ri bed unde r Secti on 44AB of the Ac t. Consequent l y, a reas ona ble caus e has been show n b y the assessee for non c omp lia nce of provisions of Se ct ion 44A B o f the A ct. T he issue is squar el y co vered in favour of t he asse ssee b y th e decisi on of the C o-o rdi na te Bench in t he c ase of Sachi n Marotr ao Rangari vs. A CIT (20 22), 14 3 ta xm ann.com 318 (R ajk ot) (Trib. ) 6. While holdi ng i n f avo ur of A ssess ee, w e also a dve rt to the content i on o f t he Reven ue that no materia l h as b een pl ace d apparen tl y placed in t he penal t y pro ceed ings. We sim ul ta neous l y obs erve tha t t he re levant material was mad e avai lable i n the cours e of the assess men t procee dings its elf and there for e, appl icati on of Se cti on 44A B was ou t of a con te nt i on in the assess me nt pr ocee di ngs its el f. In such a si tuat ion, i nst ead of I.T.A. No.278/Del/2022 4 re mi t ti ng th e matt er back to t he fi le of t he A ssessing O fficer, w e consi der it exp edi ent t o adj udica te the i ssue on meri ts wi thout encou ra ging the prot ra cte d lit igat ion on su ch s mal l iss ue. 7. In the l ig ht of th e de li nea tions, t he penal ty i mp osed u nde r Sect ion 271B i s re ve rsed and canc el l ed. 8. In the res ul t, the appeal of t he asses see is allow e d. Order pronounced in the open Court on 23/05/2023 Sd/- Sd/- [KUL BHARAT] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /05/2023 prabhat