NARENDRA A SHETH, MUMBAI V. ITO 12(1)(2), MUMBAI

ITA 3736/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0201 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bonafide belief; Transactions in derivatives
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3736/MUM/2013 (ASSESSMENT YEAR- 2008-09) SHRI NARENDRA A SHETH 501, JANMABHOOMI CHAMBERS, 29, W.H. MARG, BALLARD ESTATE, MUMBAI-400001. PAN: AAPPS8313R VS. ITO -12(1)(2), AAYAKAR BHAVAN, MUMBAI- 400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI SUMAN KUMAR (DR) DATE OF HEARING : 20.04.2017 DATE OF PRONOUNCEMENT : 26.05.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE U/S 253 OF THE INCOME-TAX A CT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-23, MUMBAI DATED 04 .02.2013 FOR ASSESSMENT YEAR (AY)-2008-09. THOUGH, THE ASSESSEE HAS RAISED TWO ALTERNATIVE GROUNDS OF APPEAL. HOWEVER, AS PER OUR CONSIDERED VIEW, THE ON LY SUBSTANTIAL GROUND OF APPEAL IS IF THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED U/S 271B OR TRADING IN DERIVATIVES TRANSACTION AND/ OR THE AS SESSEE IS NOT LIABLE TO GET THE BOOKS OF ACCOUNTS AUDITED U/S 44AB OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE RELEVAN T AY, THE ASSESSEE FILED RETURN OF INCOME ON 29.03.2010 DECLARING TOTAL INCOME OF RS. 32,61,150/-. DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER (AO) N OTICED THAT THE TOTAL TURNOVER ITA NO. 3736/M/2013- SHRI NARENDRA A SHETH 2 OF THE ASSESSEE WAS AT RS. 87,38,784/- WHICH EXCEED THE TURNOVER OF RS. 40,00,000/- LIMIT AS PRESCRIBED U/S 44AB. THUS, TH E AO INITIATED THE PENALTY U/S 271B VIDE ORDER-SHEET DATED 19.11.2010. NOTICE U/S 274 R.W.S. 271 DATED 24.12.2010 WAS SERVED UPON THE ASSESSEE. IN RESPONS E TO THE ORDER-SHEET DATED 19.11.2010, THE ASSESSEE FILED HIS REPLY DATED 30.1 1.2010 AND CONTENDED THAT AS PER THE GUIDANCE NOTE OF TAX AUDIT U/S 44AB OF THE ACT ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS (ICAI), IF TURNOVER OF FUTURE & OPTIONS DEFINED AS AGGREGATE OF FAVORABLE AND UNFAVORABLE TRANSACTION EXCEED RS. 40,00,000/-, THEN ONLY THE ASSESSEE IS LIABLE TO GET HIS ACCOUNT AUDI TED. THE ASSESSEE FURTHER CONTENDED THAT HE IS A SR. CITIZEN AND EARNING INCO ME FROM FUTURE & OPTION ACTIVITIES MANAGED BY HIS BROKER. HIS ACCOUNTS ARE MAINTAINED BY A PERSON WHO IS NOT A QUALIFIED ACCOUNTANT AND IS UNAWARE OF I.T. P ROVISIONS. THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT HIS ACCOUNTS ARE NOT REQ UIRED TO GET AUDITED U/S 44AB. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY AO H OLDING THAT THE GUIDANCE NOTE OF ICAI RELIED BY ASSESSEE IS NOT MENTIONED ANYWHERE IN THE INCOME-TAX ACT. THOUGH, THE DEFINITION OF TURNOVER IS NOT DEFI NED IN THE ACT BUT TURNOVER AS MENTIONED IN SECTION 44AB IMPLIES GROSS RECEIPT WHI CH INCLUDED BOTH LOSS AND GAINS. THE TURNOVER OF THE ASSESSEE WAS ARRIVED AT RS. 87,38,784/-. THUS, THE AO LEVIED THE PENALTY @ .5% OF THE TOTAL TURNOVER. THE AO LEVIED THE MINIMUM PENALTY AS PRESCRIBED U/S 271B AND WORKS OUT TO RS. 40,694/-. ON APPEAL BEFORE THE LD. CIT(A), THE PENALTY WAS SUSTAINED. AGGRIEV ED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US . ITA NO. 3736/M/2013- SHRI NARENDRA A SHETH 3 3. THIS APPEAL WAS FIXED ON 20.04.2017; NONE APPEARED ON BEHALF OF ASSESSEE DESPITE REPEATED CALLS AND PASS OVER. WE HAVE NOTICED THAT ASSESSEE HAS NOT APPEARED THROUGHOUT THE PROCEEDING. THE AUTHORITY LETTER OF S/SHRI P.N. SAHA, A.H. SAHA AND DALPAT SAHA IS ON RECORD. THE NOTICE OF HEARING OF APPEAL FOR 20.04.2017 WAS ALSO DULY SERVED ON THE ASSESSEE BY RPAD. THE AD CA RD BEARING ACKNOWLEDGMENT OF RECEIPT IS ALSO AVAILABLE ON RECO RD. WE LEFT NO OPTION EXCEPT TO HEAR THE LD. DR FOR THE REVENUE AND TO PROCEED ON T HE BASIS OF MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW AND WOULD ARGUE THAT IN REPLY TO THE SHOW-CAUSE NOT ICE, THE ASSESSEE HAS NOT GIVEN ANY PLAUSIBLE AND CONVINCING EXPLANATION. THE ASSES SEE HAS TAKEN LAME EXCUSE. THE LOWER AUTHORITIES CONSIDERED THE REPLY FILED BY ASSESSEE AND AFTER AFFORDING FULL OPPORTUNITY, THE PENALTY WAS LEVIED. THE LD. D R FOR THE REVENUE PRAYED FOR DISMISSAL OF APPEAL. 4. WE HAVE CONSIDERED THE CONTENTION OF LD. DR FOR THE REVENUE AND FURTHER GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN REPLY T O THE SHOW-CAUSE NOTICE FOR LEVY OF PENALTY U/S 271B, THE ASSESSEE HAS TAKEN THE PLE A THAT HE IS A SR. CITIZEN, HIS ACCOUNTS ARE LOOKED AFTER BY ACCOUNTANT, WHO IS NOT QUALIFIED PERSON, HE WAS UNDER BONAFIDE BELIEF THAT ACCOUNTS ARE NOT REQUIRE D TO BE ISSUED U/S 44AB OF THE ACT. IT WAS FURTHER CONTENDED THAT GUIDANCE NOTE O F TAX AUDIT U/S 44AB ISSUED BY ICAI THAT IF THE TURNOVER OF FUTURE & OPTION DEF INED AS AGGREGATE OF FAVORABLE AND UNFAVORABLE TRANSACTION EXCEED RS. 40,00,000/- THAN THE ASSESSEE IS LIABLE TO GET HIS ACCOUNT AUDITED. THE CONTENTION OF ASSESSE E WAS NOT ACCEPTED BY AO HOLDING THAT THE GUIDANCE NOTE OF ICAI ON FUTURE & OPTION ACTIVITIES HAVE NO ITA NO. 3736/M/2013- SHRI NARENDRA A SHETH 4 OVERRIDE EFFECT TO THE PROVISIONS OF INCOME-TAX ACT . THE LD. CIT(A) WHILE CONSIDERING THE CONTENTION OF THE ASSESSEE OBSERVED THAT SECTION 44AB BECAME OPERATIVE FROM AY 1985-86. THE CONTENTION OF THE AS SESSEE IS THAT THE PERSON WHO WAS MAINTAINING THE ACCOUNTS WAS NOT A QUALIFIED PE RSON, DO NOT CARRY ANY CONVICTION. THE LD. CIT(A) FURTHER CONCLUDED THAT T HE REPLY FURNISHED BY ASSESSEE IS NOT SUFFICIENT AND JUSTIFIED FOR HIS OMISSION FO R NOT AUDITING HIS ACCOUNT. THE REPLY IS NEITHER PLAUSIBLE NOR CONVINCING. THE LD. CIT(A) FURTHER CONCLUDED THAT THE ASSESSEE BEING A SR. CITIZEN AND ENGAGED IN THE BUSINESS OF DERIVATIVE, FUTURE & OPTION WITH A TREMENDOUS COURAGE AND DYNAMISM AND ON THE OTHER HAND, HE IS TAKING SUCH EXCUSE WHICH IS NOT ACCEPTABLE. WE HAVE SEEN THAT THE ORDER OF LD. CIT (A) IS REASONED ONE AND DOES NOT SUFFER FROM ANY IN FIRMITY OR ILLEGALITY, WHICH REQUIRES OUR INTERFERENCE. WE HAVE SEEN THAT IN REP LY TO THE SHOW-CAUSE NOTICE FOR INITIATION OF PENALTY, THE ASSESSEE HAS REPLIED THA T HE IS A SR. CITIZEN; HIS ACCOUNTS ARE LOOKED AFTER BY ACCOUNTANT. THE ACCOUNTANT OF T HE ASSESSEE IS NOT QUALIFIED PERSON. THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT ACCOUNTS ARE NOT REQUIRED TO BE ISSUED U/S 44AB OF THE ACT. THE ASSESSEE SPECIFI CALLY PLEADED IN THE REPLY THAT THE GUIDANCE NOTE, NOTE OF TAX AUDIT U/S 44AB I SSUED BY ICAI THAT, IF THE TURNOVER OF FUTURE & OPTION DEFINED AS AGGREGATE OF FAVORABLE AND UNFAVORABLE TRANSACTION EXCEED RS. 40,00,000/- THAN THE ASSESSE E IS LIABLE TO GET HIS ACCOUNT AUDITED. AS PER OUR VIEW THE ASSESSEE HAS SUFFICIEN TLY EXPLAINED THE CIRCUMSTANCES, AS PER THE PROVISIONS OF SECTION 273B OF THE INCOME -TAX ACT. CONSIDERING THE REPLY OF THE ASSESSEE THE PENALTY LEVIED BY ASSESSING OFF ICER UNDER SECTION 271B FOR RS.40,694/- IS DELETED. ITA NO. 3736/M/2013- SHRI NARENDRA A SHETH 5 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF MAY 2017. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 26/05/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/