Chander Prakash Batra, New Delhi V. ITO, New Delhi

ITA 4305/DEL/2011

• Counselvise Citation: 430520114 RSA 2011
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PARMINDER KAUR
• Keywords: Business income
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU : JUDICIAL MEMBER ITA NO. 4305/DEL/2011 ASSTT. YR: 2007-08 CHANDER PRAKASH BATRA VS. ITO WARD 26(3), PROP. MANISH ADVERTISING SERVICES, NEW DELHI. SHOP NOS. 1 & 2, 2 ND FLOOR, PANKAJ ARCADE-II, PLOT NO. 5, POCKET-IV, SECTOR 11, DWARKA, NEW DELHI. PAN: AARPB 3126 F ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI K. SAMPATH ADV. RESPONDENT BY : SMT. PARMINDER KAUR SR. DR DATE OF HEARING : 08-10-2014 DATE OF ORDER : 14-11-2014. O R D E R PER S.V. MEHROTRA, A.M:- THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIRECT ED AGAINST THE ORDER OF CIT(APPEALS)-II, NEW DELHI DATED 29-07-2011 IN APPE AL NO. 95/10-11 FOR A.Y. 2007-08, CONFIRMING THE PENALTY OF RS. 1,00,00 0/- IMPOSED BY THE AO U/S 271B OF THE I.T. ACT, 1961. 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATON, THE ASSESSEE HAD BEEN CARRYING ON THE BUSINESS OF WALL PAINTING/ BANNERS & HOARDING AND ALSO DOING THE BUSINESS OF SHARES. HE HAD FILED HIS RETURN OF 2 ITA NO. 4305/DEL/11 CHANDER PRAKASH BATRA INCOME DECLARING TAXABLE INCOME AT RS. 1,21,220/-. THE AO NOTICED THAT AS PER AIR INFORMATION, THE ASSESSEE HAD DONE FOLLOWIN G TRANSACTIONS: CONTRACTUAL RECEIPTS RS. 40,58,051/- PAYMENT TO CITI BANK CREDIT CARD RS. 2,48,143/- SHARE TRANSACTIONS WITH M/S INDIA BULLS SECURITIES LTD. RS. 3,62,52,919/ - 2.1. THE AO OBSERVED THAT THESE TRANSACTIONS WERE N OT DECLARED BY THE ASSESSEE AND WERE SUBMITTED ONLY AFTER THE RECEIPT OF AIR INFORMATION, SUPPLIED TO HIM. FROM THE COPY OF A/C OF M/S INDIA BULLS SECURITIES LTD., FOLLOWING INFORMATION WAS NOTICED: 1. ASSESSEE HAS MADE TRANSACTION OF FUTURE & OPTIO NS IN WHICH TOTAL SALES OF RS. 4,56,10,252.40 HAS BEEN MA DE BUT NO SALES WERE DECLARED BY THE ASSESSEE IN HIS P ROFIT & LOSS ACCOUNT. HOWEVER, THE SAME ARE TREATED AS BUSI NESS TRANSACTION AS PER SECTION 43(5) OF THE IT ACT, 196 1. 2. ASSESSEE HAS PURCHASED AND SOLD CERTAIN SHARES O N DELIVERY BASIS. 3. ASSESSEE AH INDULGED INTO DAY TRADING IN WHICH N O SHARE DELIVERY WERE MADE AND SPECIFICALLY DEFINED AS SPECULATIVE TRANSACTION IN SECTION 43(5) OF THE IT ACT, 1961. 2.2. FROM THE COPY OF ACCOUNT FILED BY THE ASSESSEE , THE AO OBSERVED THAT SALES OF FUTURE AND OPTIONS AMOUNTING TO RS. 4,56,1 0,252.40 HAD BEEN MADE BY THE ASSESSEE, WHICH WERE BUSINESS RECEIPTS BUT N OT INCLUDED AND SHOWN BY THE ASSESSEE AND NO TAX AUDIT REPORT HAD BEEN SUBMI TTED BY THE ASSESSEE OF 3 ITA NO. 4305/DEL/11 CHANDER PRAKASH BATRA THESE BUSINESS RECEIPTS. ACCORDINGLY, THERE WAS DE FAULT U/S 44AB AND THEREFORE, HE INITIATED PENALTY PROCEEDINGS U/S 271 B OF THE I.T. ACT. AS ASSESSEE DID NOT FILE ANY REPLY, THE AO AFTER EXAMI NING THE PROVISIONS OF SECTION 44AB READ WITH SECTION 271B, LEVIED A PENAL TY OF RS. 1,00,000/- U/S 271B. IN APPEAL, THE LD. CIT(A) CONFIRMED THE PENAL TY LEVIED BY THE AO. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S AND HAS RAISED AS MANY AS EIGHT GROUNDS TO CHALLENGE THE SUSTENANCE OF PEN ALTY U/S 271B OF THE ACT. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSE SSEE WAS NOT DEALING IN SHARES BUT ONLY TREATING THESE TRANSACTIONS AS INVE STMENT TRANSACTIONS AND, ACCORDINGLY, DID NOT CLAIM IT AS BUSINESS LOSS. HE SUBMITTED THAT DEFAULT AT BEST IS OF SECTION 271A FOR NOT MAINTAINING THE BO OKS OF ACCOUNT IN RESPECT OF INVESTMENTS MADE, BUT NOT U/S 44AB. 3.1. LD. COUNSEL REFERRED TO THE DECISION OF HUMBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. DR. K. SATISH SHETTY 310 ITR 366(KAR.), WHEREIN IT WAS HELD AS UNDER: HELD, THAT THE ASSESSEE WAS UNDER A BONA FIDE BELI EF THAT HE WAS REQUIRED TO OBTAIN AUDIT REPORT ONLY IN RESPECT OF THAT BUSINESS, THE TURNOVER OF WHICH CROSSES THE LIMIT O F RS. 40 LAKHS FOR EACH ASSESSMENT YEAR. FROM THE CONDUCT, BEHAVIO UR AND ATTITUDE OF THE ASSESSEE, IT WAS CLEAR THAT HE WAS NOT AWARE THAT THE AGGREGATE OF THE THREE BUSINESSES HAD TO BE TAK EN INTO CONSIDERATION FOR COMPLIANCE WITH THE PROVISIONS CO NTAINED IN SECTION 44AB. IT WAS ALSO CLEAR FROM THE RECORDS TH AT T HIS WAS FOR THE FIRST TIME HE HAD COMMITTED THIS DEFAULT. T HE ASSESSEE 4 ITA NO. 4305/DEL/11 CHANDER PRAKASH BATRA HAD ACTED IN BONA FIDE BELIEF AND HAD NO DISHONEST INTENTION IN NOT OBTAINING AUDIT REPORT FOR ALL THE THREE BUSINE SSES CARRIED ON BY HIM. THE TRIBUNAL HAD RIGHTLY CANCELLED THE P ENALTY. 3.2. LD. COUNSEL ALSO RELIED ON THE ORDER OF ITAT I N THE CASE OF MOHAN LAL ASHOK KUMAR V. ITO 1 ITR (TRIB) 103 (DEL.), WHEREIN THE AO LEVIED PENALTY U/S 271B OF THE I.T. ACT, 1961, ON THE GROU ND THE ASSESSEE FAILED TO GET HIS ACCOUNTS AUDITED U/S 44AB OF THE ACT EVEN T HOUGH HIS GROSS TURNOVER EXCEEDED RS. 40 LACS. THE CIT(A) CONFIRMED THE PENA LTY LEVIED BY AO. IN SECOND APPEAL, THE ITAT DELETED THE PENALTY, HOLDIN G AS UNDER: HELD, ALLOWING THE APPEAL, THAT THE AMOUNT OF ARHA T COMMISSION AND INTEREST INCOME HAD BEEN TAKEN INTO ACCOUNT WITHOUT ADJUSTING THE INTEREST PAID AGAINST THE INT EREST RECEIPT FOR THE PURPOSE OF DETERMINING THE GROSS TURNOVER. THE ASSESSEE HAD SUFFICIENT AND BONA FIDE BELIEF THAT HIS ACCOUN TS WERE NOT REQUIRED TO BE AUDITED IF IN CASE, THE NET INTEREST INCOME AND THE NET ARHAT COMMISSION WERE ONLY TO BE TAKEN INTO ACC OUNT AND MADE PART OF THE TOTAL TURNOVER. THE TURNOVER WAS M ARGINALLY ABOVE THE LIMIT OF RS. 40,00,000 AND THE ASSESSEE W AS UNDER A BONA FIDE BELIEF THAT HIS TURNOVER WAS ONLY RS. 30, 61,424 BEING SALES FROM THE WHOLESALE TRADING OF GOOD GRAINS, OI L SEEDS ETC. THE PENALTY LEVIED BY THE ASSESSING OFFICER AND CON FIRMED BY THE COMMISSIONER (APPEALS) WAS TO BE DELETED. 3.3. LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSE E HAD GOT HIS ACCOUNTS AUDITED BY CA AND HAD FILED THE TAX AUDIT REPORT AL ONG WITH THE INCOME-TAX RETURN FOR THE YEAR UNDER APPEAL. PHOTO COPY OF THE TAX AUDIT REPORT IS CONTAINED AT PAGES 31 TO 38 OF THE PB. FURTHER, THE ASSESSEE HAD FILED COPY OF 5 ITA NO. 4305/DEL/11 CHANDER PRAKASH BATRA THE STATEMENTS ISSUED BY INDIA BULLS SECURITIES LTD ., IN RESPECT OF DELIVERY ACCOUNT AS WELL AS IN RESPECT OF FUTURE & OPTIONS B EFORE THE CIT(A) AND ITO. DEALINGS WITH THE SAID SHARE BROKER WAS ONLY I NVESTMENT. IN VIEW OF THESE FACTS, THE CA DID NOT TAKE INTO ACCOUNT THE S AID LOSSES IN RESPECT OF THE SAID INVESTMENTS AND TAX AUDIT REPORT WAS MADE IN R ESPECT OF ASSESSEES ADVERTISING BUSINESS. 4. LD. DR SUBMITTED THAT LOSS/ PROFIT ON SHARE TRAN SACTIONS WAS NOT DECLARED. THE ASSESSEE HAD NOT DISCLOSED ABOUT THE ACTIVITY IN RETURN OF INCOME AND, THEREFORE, THE AUDIT REPORT WAS NOT COM PLETE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE RECORD OF THE CASE. AS PER SECTION 44AB THE ASSESSEE IS RE QUIRED TO GET HIS ACCOUNTS AUDITED IF THE PARTICULAR CRITERIA AS PRESCRIBED IN THE SECTION IS FULFILLED. ONCE THE ACCOUNTS ARE AUDITED U/S 44AB, IN ANY VIEW OF T HE MATTER, MERELY BECAUSE A PARTICULAR ITEM OF INCOME HAS NOT BEEN IN CLUDED IN THE SAID TAX AUDIT REPORT, IT CANNOT BE HELD THAT THERE WAS DEFA ULT OF NOT GETTING THE ACCOUNTS AUDITED. IN THE PRESENT CASE, ADMITTEDLY T HE ASSESSEE DID NOT CLAIM LOSS ON SHARE TRANSACTIONS IN ITS RETURN OF INCOME ON ACCOUNT OF BONA FIDE BELIEF THAT THE TRANSACTIONS WITH INDIA BULLS SECUR ITIES LTD. WERE INVESTMENT TRANSACTIONS. THE ASSESSEE WAS UNDER BONA FIDE BELI EF THAT IT WAS NOT IN SHARE TRADING BUSINESS BECAUSE HIS MAIN BUSINESS WAS ADVE RTISING ETC., AS IS EVIDENT 6 ITA NO. 4305/DEL/11 CHANDER PRAKASH BATRA FROM THE TAX AUDIT REPORT. UNDER SUCH CIRCUMSTANCES , WE ARE OF THE OPINION THAT THE PENALTY IS NOT EXIGIBLE IN THE PRESENT SET OF FACTS. ACCORDINGLY, WE CANCEL THE PENALTY LEVIED U/S 271B. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 14-11-2014. SD/- SD/- (H.S. SIDHU ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14-11-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR