Vipulkumar R. Pandya, RAJKOT-GUJARAT V. The Income Tax Officer, ward-4(3), RAJKOT-GUJARAT

ITA 441/RJT/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6838 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 15-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C P BHATIA
• Assessee Lawyers: DR ADHIA
• Keywords: Transactions in derivatives
• Section: 27; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.441/RJT/2014 ASSTT.YEAR : 2009-2010 VIPULKUMAR R. PANDYA VATSALYA 3/11, GAYATRINAGAR RAJKOT. VS ITO, WARD - 4(3) RAJKOT. '( / (APPELLANT) )* '( / (RESPONDENT) ASSESSEE BY : SHRI D.R. ADHIA, AR REVENUE BY : SHRI C.P. BHATIA, SR.DR / DATE OF HEARING : 03/11/2017 / DATE OF PRONOUNCEMENT: 04/12/2017 +,-/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-III, RAJKOT. SOLE GRIEVANCE OF THE ASSES SEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING PENALTY LEVIED UNDER SECTION 27 1A OF THE INCOME TAX ACT, 1961. 2. ACCORDING TO THE AO, TURNOVER OF THE ASSESSEE WA S MORE THAN RS.10 LAKHS, AND THEREFORE, HE WAS SUPPOSED TO MAINTAIN H IS BOOKS OF ACCOUNTS UNDER SECTION 44AA OF THE INCOME TAX ACT, 1961. SINCE TH E ASSESSEE FAILED TO MAINTAIN BOOKS OF ACCOUNTS, THEREFORE, HE DESERVES TO BE VISITED WITH PENALTY. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE OF PENALTY, IT WAS CONTENDED BY THE ASSESSEE THAT THERE WERE DIFFERENT NATURE OF TR ANSACTIONS WHICH FALLS UNDER THE HEAD SPECULATIVE TRANSACTION, DERIVATIVES, FUTU RE & OPTION, DELIVERY BASED TRANSACTION. SINCE CERTAIN TRANSACTION WHICH WERE SPECULATIVE, OR DERIVATIVES, ITA NO.441/RJT/2014 2 F&O THEY WERE NOT DESERVES TO BE INCLUDED IN THE TO TAL TURNOVER OF THE ASSESSEE, AND THEREFORE, HE HAS NOT COMMITTED ANY D EFAULT FOR NOT MAINTAINING BOOKS OF ACCOUNTS. THE LD.AO REJECTED EXPLANATION OF THE ASSESSEE AND OBSERVED THAT TOTAL TURNOVER OF THE ASSESSEE IN THE CASE OF SALE OF SHARES ON DELIVERY BASIS EXCEEDED RS.10 LAKHS, HE SHOULD HAVE MAINTAINED BOOKS OF ACCOUNTS. THE LD.AO ACCORDING IMPOSED A PENALTY OF RS.25,000/-. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE AS SESSEE. 4. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT I F ALL THREE ACTIVITIES CARRIED OUT BY THE ASSESSEE ARE TAKEN INTO CONSIDER ATION INDEPENDENTLY, THEN, HE WAS NOT LIABLE TO MAINTAIN BOOKS OF ACCOUNTS. 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM RECORD THAT THE ASSESSEE HIMSELF HAS ADMITTED HIS TURNOVER OF RS.13,32,757/- WHICH WAS M ORE THAN RS.10 LAKHS. THUS, HE WAS LIABLE TO KEEP AND MAINTAIN BOOKS OF A CCOUNTS. APART FROM THE ABOVE, THE LD.AO HAS RECORDED A FINDING THAT TURNOV ER EXCEEDED RS.51,44,017/-. THE DISCUSSION MADE BY THE AO IN T HE PENALTY ORDER IS WORTH TO NOTE, WHICH READS AS UNDER: THERE ARE LOTS OF INSTANCES WHEN THE ASSESSEE RETA INED PART OF SHARES ON A DAY AND REMAINING WERE SOLD ON THE SAME DAY. I T MAKES IT THAT THE TRANSACTIONS OF THE ASSESSEE ARE OF SPECULATIVE NAT URE AND TRANSACTIONS CAN BE CONSIDERED AS OF BUSINESS NATURE. IN VIEW OF THE ABOVE I AM OF CONSIDERED OPINION THAT THE TRANSACTIONS IN SHARES BY THE ASSESSEE ARE OF BUSINESS NATURE. THUS THE TOTAL TURNOVER OF ASS ESSEE WAS OF RS.4,23,87,463/- IN VIEW OF THE ABOVE FACTS. HE WAS LIABLE TO KEEN AND MAINTAIN THE BOOKS OF ACCOUNTS IN MANNER ENABLING T HE ASSESSING OFFICER TO MAKE ASSESSMENT OF HIS INCOME AS PROVIDE D IN SECTION 44 AA- OF THE ACT. AS DISCUSSED ABOVE, THE ASSESSEE VIOLATED THE PROVI SIONS OF SECTION 44AA. THEREFORE PENALTY PROCEEDING U/-S. 271A OF TH E ACT IS INITIATED. ITA NO.441/RJT/2014 3 WITHOUT PREJUDICE TO THE ABOVE IT IS PERTINENT TO M ENTION HERE THAT THE ASSESSEE HIMSELF HAS ADMITTED THAT HIS TURNOVER WAS OF RS.13,32,757/-. THUS AS PER THE VERSION OF THE ASSESSEE HIMSELF THE TURNOVER OF HIS BUSINESS EXCEEDS RS.10 LACS, THUS, HE WAS LIABLE TO KEEP AND MAINTAIN THE BOOKS OF ACCOUNTS AS PROVIDED IN- SECTION 44AA OF THE ACT- THE ASSESSEE WAS LIABLE TO KEEP AND MAINTAIN THE BO OKS OF ACCOUNTS TOR HIS SHARES BUSINESS AS DISCUSSED ABOVE. SINCE HE DI D NOT KEEP THE BOOKS OF ACCOUNTS THE SAME WERE NOT PRODUCED DURING THE A SSESSMENT PROCEEDINGS ALSO, HENCE THE ASSESSMENT OF HIS INCOM E FROM BUSINESS IS MADE IN THE MANNER AS PROVIDED IN-SECTION 144 OF TH E ACT CONSIDERING THE MATERIAL AVAILABLE ON RECORDS. 12. A FRESH NOTICE UNDER SECTION 274 READ WITH SECT ION 271A OF THE INCOME TAX ACT 1961 ON 13-06-2012 WAS ISSUED AND SE RVED UPON THE ASSESSEE BY REGISTERED POST IN RESPONSE TO THIS NOT ICE, HE REPLIED ON 1 5- 2012.1 CAREFULLY CONSIDER THE REPLY OF THE ASSESSEE BUT HE HAS NOT ANYTHING ABOUT MAINTAINING THE BOOKS OF ACCOUNT. 13. AS PER PROVISIONS OF SECTION 44AA OF THE ACT EV EN PERSON CARRYING ON BUSINESS OR PROFESSION SHALL KEEP AND MAIN LAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS MAY ENABLE THE ASSES SING OFFICER TO COMPUTE HIS TOTAL INCOME IN ACCORDANCE WITH THE PRO VISIONS OF THIS ACT IF HIS TOTAL SALES, TURNOVER OR GROSS RECEIPTS, AS THE CASE MAY BE, IN BUSINESS OR PROFESSION ARE OR IS LIKELY TO EXCEED T EN LAKH RUPEES, DURING SUCH PREVIOUS YEAR. AS FOUND THAT EVEN THOUGH THE T OTAL TURNOVER OF THE ASSESSEE FOR THE PREVIOUS YEAR RELEVANT TO THE ASSE SSMENT YEAR WAS RS.51,44.017/- I.E. EXCEEDING RS.TEN LAKH, HE DID N OT KEEP OR MAINTAIN THE SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS. 14. FURTHER AS PER PROVISIONS OF SECTION 271A OF T HE ACT, IF ANY PERSON FAILS TO KEEP OR MAINTAIN ANY SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS REQUIRED BY SECTION 44AA OF THE ACT HE IS LIABLE TO PAY A PENALTY OF RS.25,000/-. CONSIDERING THE ABOVE FACT S AND CIRCUMSTANCES IN TOTALITY, IT IS FOUND THAT THE ASSESSEE FAILED I N KEEPING OR MAINTAIN ANY SUCH BOOKS OF ACCOUNTS AND OTHER DOCUMENTS AS R EQUIRED BY SECTION 41AA OF THE ACT. IN THE PENALTY PROCEEDINGS ALSO, H E CANNOT SHOW ANY CONVINCING REASON FOR THE AFORESAID FAILURE. 6. FROM THE ORDER OF THE AO, WHICH HAS BEEN CONFIRM ED BY THE LD.CIT(A) WE ARE OF THE VIEW THAT THE ASSESSEE FAILED TO GIVE ANY EXPLANATION AS TO WHY ITA NO.441/RJT/2014 4 HE HAS NOT MAINTAINED BOOKS OF ACCOUNTS. THE LD.CI T(A) HAS RIGHTLY CONFIRMED THE PENALTY UPON THE ASSESSEE. APPEAL OF THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 4 TH DECEMBER, 2017 AT AHMEDABAD. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 04/12/2017