JUDE ANGELO MENEZES, CHENNAI V. ITO NON CORPORATE WARD 7(4), CHENNAI

ITA 3126/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2327 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 16-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Keywords: Bonafide belief; Reasonable cause; Futures and options
• Section: 273B; 143(3); 271B; 44AB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NO.3126/CHNY/2018 ! / ASSESSMENT YEAR : 2015-2016. JUDE ANGELO MENEZES, NO.9, 2 ND KAMARAJ STREET, SRINIVASA NAGAR, PADI, CHENNAI 600 050. VS. INCOME TAX OFFICER, NON CORPORATE WARD 7(4) CHENNAI 600 034. [PAN ALFPM 3068G] ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : SHRI. B. RAMAKRISHNAN, FCA &' '# $ % /RESPONDENT BY : MS. R. ANITHA, IRS, JCIT ( ) $ * /DATE OF HEARING : 28-082019 +,! $ * /DATE OF PRONOUNCEMENT : 30-08-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-7 , CHENNAI (CIT(A) FOR SHORT) DATED 28.09.2018 FOR THE ASS ESSMENT YEAR (AY) 2015-2016. ITA NO.3126/2018 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. FOR THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING GROSS RECEIPT OF THE APPELL ANT TO BE RS. 5,33,526/- WITHOUT APPRECIATING THE FACT THA T THE APPELLANT IS THE BUSINESS OF FUTURE AND OPTIONS AND THE TOTAL GROSS RECEIPTS SHALL BE ONLY THE MARGIN AMOUN T WHICH IS LESS THAN THE THRESHOLD LIMIT U/S 44AB OF THE AC T. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE PENALTY LEVIED U/S 271B AMOUNTING TO RS.1,50,000/- FOR NON-FILING OF TAX AU DIT REPORT. FOR THESE GROUNDS AND SUCH OTHER GROUNDS THAT MAY B E ADDUCED BEFORE OR DURING THE HEARING OF THE APPEAL, IT IS PRAYED THAT THE HONBLE TRIBUNAL MAY BE PLEASED TO DELETE THE PENALTY LEVIED OR PASS SUCH OTHER ORDERS AS THE HONBLE TRIBUNAL MAY DEEM FIT. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS AN INDIVIDUAL. THE RETURN OF INCOM E FOR THE ASSESSMENT YEAR 2015-2016 WAS FILED ON 22.09.2016 DISCLOSING TOTAL INCOME OF F50,089/-. AGAINST THE SAID RETURN OF IN COME, THE ASSESSMENT WAS COMPLETED BY THE INCOME TAX OFFICER , NON CORPORATE WARD 7(4), CHENNAI VIDE ORDER DATED 30.11.2017 PASS ED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). S UBSEQUENTLY, ASSESSEE WAS ISSUED SHOW CAUSE NOTICE AS TO WHY ORD ER IMPOSING PENALTY U/S.271B OF THE ACT SHOULD NOT BE PASSED AS ASSESSEE HAD ITA NO.3126/2018 :- 3 -: FAILED TO GET HIS BOOKS OF ACCOUNTS AUDITED AS STI PULATED UNDER THE PROVISIONS OF SECTION 44AB OF THE ACT. IN RESPONSE TO SHOW CAUSE NOTICE, IT WAS SUBMITTED THAT ASSESSEE IS IN THE BU SINESS OF DERIVATES, FUTURES AND OPTIONS, WHERE THE TRANSACTIONS ARE COM PLETED WITHOUT DELIVERY OF SHARES. SECURITIES WERE SQUARED OFF BY PAYMENT OF DIFFERENCE. THOUGH THE CONTRACT NOTES WERE ISSUED FOR FULL VALUE, BASED ON THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (IN SHORT ICAI), THE TURNO VER IN SUCH TYPE OF BUSINESS IS DETERMINED BY TAKING ONLY MARGIN DIFFE RENCES, SINCE THE MARGIN DIFFERENCES IN ASSESSEES CASE IS BELOW T HE PRESCRIBED LIMIT, BOOKS AND ACCOUNTS WERE NOT AUDITED. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND LEVIED PENALTY OF F1,50,000/- U/S.271B OF THE ACT VIDE ORDER DATED 24.05.2018. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER HAD CONFIRMED LEVY OF PENAL TY. 5. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE AP PELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT IN TERMS OF GUIDANCE NOTE ISSUED BY ICAI ONLY VALUE OF THE MARGIN DIFFERENCES TO BE R ECKONED FOR THE PURPOSE OF TURNOVER. SINCE THE VALUE OF MARGIN IS LESS THAN THE PRESCRIBED LIMIT, THE BOOKS OF ACCOUNTS WERE NOT L IABLE TO BE AUDITED. ITA NO.3126/2018 :- 4 -: HE SUBMITTED THAT IN ANY EVENT THE ASSESSEE IS UNDE R BONAFIDE BELIEF THAT THE BOOKS OF ACCOUNTS ARE NOT LIABLE FOR AUDIT IN THE LIGHT OF THE GUIDANCE NOTE ISSUED BY ICAI, MOREOVER RELIANCE W AS PLACED ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CAS E OF GROWMORE EXPORTS LTD VS. ACIT, (2001) 78 ITD 95 , IT WAS SUBMITTED THAT LEVY OF PENALTY IS NOT WARRANTED. 6. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL RELA TES TO LEVY OF PENALTY U/S.271B OF THE ACT. ASSESSEE IS UNDOUBTEDLY IS IN THE BUSINESS OF DERIVATES, FUTURES AND OPTIONS. IN SUCH BUSINESS I CAI PRESCRIBES THAT ONLY THE DIFFERENCE OF MARGIN SHOULD ALONE BE RECKO NED FOR THE PURPOSE OF COMPUTING TURNOVER. IN THE PRESENT CASE , ADMITTEDLY, THE VALUE OF MARGIN IS BELOW THE PRESCRIBED LIMIT SPECI FIED U/S.44AB OF THE ACT. THEREFORE THE BOOKS OF ACCOUNTS OF THE ASSESSE E WAS NOT AUDITED. HOWEVER, ACCORDING TO THE ASSESSING OFFICER, GROSS VALUE OF THE PURCHASES AND SALES TRANSACTION SHOULD ALONE BE REC KONED AND ACCORDINGLY LEVIED PENALTY U/S.271B OF THE ACT FOR FAILURE TO GET THE BOOKS OF ACCOUNTS AUDITED. THE PROVISIONS OF SECTIO N 273B OF THE ACT PROVIDES THAT IN CASE THERE IS REASONABLE CAUSE FOR FAILURE TO GET THE ITA NO.3126/2018 :- 5 -: BOOKS OF ACCOUNTS AUDITED, NO PENALTY SHALL BE LEVI ED U/S.271B OF THE ACT. IN THE PRESENT CASE, ASSESSEE IS UNDER BONAFI DE BELIEF THAT HIS BOOKS OF ACCOUNTS ARE NOT LIABLE TO BE AUDITED IN T HE LIGHT OF THE GUIDANCE NOTE ISSUED BY THE ICAI. IN OUR OPINION, THIS CONSTITUTE REASONABLE CAUSE, AS THE APPELLANT IS UNDER THE B ONAFIDE BELIEF THAT THE BOOKS OF ACCOUNTS ARE NOT SUBJECT TO TAX AUDIT, THE ASSESSING OFFICER OUGHT NOT HAVE LEVIED PENALTY. WE ARE FOR TIFIED IN OUR VIEW BY THE DECISIONS OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASES OF GROWMORE EXPORTS LTD (SUPR), AATUR HOLDINGS (P) LTD (ITA NO.5896/MUMBAI/1995) AND HARSH ESTATES (P) LTD (IT A NO.5897(BOM)/1995 ). 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON 30TH DAY OF AUGUST, 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER - ) / CHENNAI . / DATED:30TH AUGUST, 2019 KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF