Preetinder Singh, New Delhi V. ITO, New Delhi

ITA 5501/DEL/2013

• Counselvise Citation: 550120114 RSA 2013
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 08-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: VINOD RAWAT
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER I.T.A .NOS.-5501 & 5504/DEL/2013 (ASSESSMENT YEAR-2008-09) SH. PREETINDER SINGH, VS. ITO, M-538, TOP FLOOR, WARD 43(1), GURU HARIKISHAN NAGAR, NEW DELHI. PASCHIM VIHAR, NEW DELHI PAN: AXRPS1988F (APPELLANT) (RESPONDENT) ASSESSEE BY:-SH. VINOD RAWAT, CA. REVENUE BY:-SH. SATPAL SINGH, SR.DR ORDER PER T. S. KAPOOR, AM. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)XXX, NEW DELHI, BOTH DATED, 31.07.2013 FOR T HE ASSESSMENT YEAR 2008-09. ITA NO. 5501/DEL/2013 2. THE ASSESSEE IS AGGRIEVED WITH THE CONFIRMATION OF PENALTY OF RS.1,LAC IMPOSED BY THE AO FOR NOT GETTING THE ACCOUNTS AUDI TED U/S 44AB OF THE INCOME TAX ACT, 1961. ITA NO. 5504/DEL/2013 I.T.A .NOS.-5501 & 5504/DEL/2013 (ASSESSMENT YEAR-2008-09) 2 3. THE ASSESSEE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) WHEREBY HE HAS CONFIRMED THE IMPOSITION OF PENALTY AMOUNTING T O RS.10,212/- FOR CONCEALMENT OF INCOME U/S 271(1) (C) OF THE ACT. 4. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED HIS RETURN OF INCOME DECLARING AN INCOME OF RS.1,99,530/- UNDER THE HEAD SALARIES. DURING THE ASSESSMENT PROCEEDINGS, THE BASIS OF AN AIR INFORMA TION, THE AO OBSERVED THAT THE ASSESSEE HAD MADE TRANSACTIONS IN SHARES A MOUNTING TO RS.1,38,48,309/-. AS THE TURNOVER OF ASSESSEE EXCEE DED RS.40 LAKH, THE ASSESSEE WAS REQUIRED TO PRODUCE BOOKS OF ACCOUNT F OR EXAMINATION AND TO FURNISH COPY OF AUDIT REPORT U/S 44AB OF THE ACT. I N RESPONSE THE ASSESSEE FILED HIS REPLY VIDE LETTER DATED 7.12.2010. HOWEVE R, AO WAS NOT SATISFIED WITH THE REPLY AND HE INITIATED PENALTY FOR NOT MAI NTAINING BOOKS OF ACCOUNTS AND FOR NOT GETTING THE SAME AUDITED U/S 44AB OF TH E ACT. THE AO ALSO OBSERVED THAT ASSESSEE HAD EARNED SPECULATIVE PROFI T OF RS.49,567/- WHICH HE HAD NOT DECLARED IN HIS RETURN OF INCOME, THEREFORE , HE MADE THE ADDITION THEREOF AND ALSO IMPOSED THE PENALTY OF RS.10,212/- FOR CONCEALMENT OF INCOME U/S 271(1)(C) OF THE ACT. 5. THE ASSESSEE DID NOT FILE ANY APPEAL AGAINST THE ASSESSMENT ORDER. HOWEVER, HE FILED APPEALS AGAINST THE PENALTIES IMP OSED U/S 271(B) & I.T.A .NOS.-5501 & 5504/DEL/2013 (ASSESSMENT YEAR-2008-09) 3 271(1)(C) OF THE ACT. HOWEVER, BOTH THE APPEALS DID NOT FIND FAVOUR WITH LD. CIT(A) AND BOTH THE APPEALS WERE DISMISSED. 6. THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE US. 7. AT THE OUTSET, LD. A.R. INVITED OUR ATTENTION TO WARDS ICAI GUIDELINES, A COPY OF WHICH WAS PLACED AT PAPER BOOK PAGE 54. THE LD. A.R. SUBMITTED THAT TURNOVER OF THE ASSESSEE AS PER THE GUIDANCE N OTE OF ICAI DID NOT EXCEED RS.40 LAKHS. IT WAS SUBMITTED THAT AS PER GUIDANCE NOTE ONLY TOTAL OF FAVOURABLE AND UNFAVOURABLE DIFFERENCES BETWEEN SAL E & PURCHASE CONSTITUTE TURNOVER IN THE CASE OF TRANSACTION IN DERIVATIVES / FUTURE & OPTION UNDERTAKEN BY THE ASSESSEE. IT WAS SUBMITTED THAT T HE AO HAD WRONGLY TAKEN THE ENTIRE VALUE OF PURCHASE AND SALES AS TURNOVER WHICH IS AGAINST THE SPRIT OF LAW AND AGAINST THE GUIDANCE NOTE PUBLISHED BY I CAI. THE LD. AR FURTHER SUBMITTED THAT THE MUMBAI BENCH IN ITA NO. 6031/MUM /1996 IN THE CASE OF BABU LAL ENTERPRISES VS. ACIT HAD ALSO HELD THAT TU RNOVER IN THE CASE OF AN ASSESSEE ENGAGED IN THE BUSINESS DERIVATIVES HAS TO BE CALCULATED ON THE BASIS OF GUIDANCE NOTE OF ICAI. 8. ARGUING ON ITA NO. 5504/DEL/2013 THE LD. AR SUBM ITTED THAT ASSESSEE HAD NOT DECLARED THE PROFIT AMOUNT FROM ST OCK MARKET AS IN FACT THE ASSESSEE HAD INCURRED NET LOSS AND IT WAS INTIMATED TO AO VIDE LETTER DATED 07.12.2010 A COPY OF WHICH WAS PLACED IN PAPER BOOK AT PAGES 49 TO 53. I.T.A .NOS.-5501 & 5504/DEL/2013 (ASSESSMENT YEAR-2008-09) 4 9. OUR SPECIFIC ATTENTION WAS INVITED TO PARA 9 OF THE SAID LETTER PLACED AT PAPER BOOK PAGE 51 TO HIGHLIGHT ABOUT THE NET LOSS SUFFERED BY ASSESSEE. THEREFORE, IT WAS SUBMITTED THAT SINCE HE HAD INCUR RED LOSS, NO TAX WAS INVOLVED AND, THEREFORE, HE HAD NOT DECLARED THE SA ME IN THE RETURN OF INCOME AND SINCE THERE WAS NO CONCEALMENT OF TAX PENALTY U /S 271(1)(C) WAS NOT IMPOSABLE. 10. THE LD. D.R. ON THE OTHER HAND HEAVILY RELIED U PON THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PART IES AND HAS GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE AO WITHOUT CONSIDERING THE ICAI GUIDELINES FOR DETERMINING THE TURNOVER IN THE CASE OF ASSESSEE ENGAGED IN TRANSACTIONS OF FUTURE & OPTION S HAD CALCULATED THE TURNOVER OF THE ASSESSEE WHICH IS NOT JUSTIFIED AS ICAI HAS CLEARLY LAID DOWN THE PROCEDURE FOR DETERMINING TURNOVER IN THE CASE OF ASSESSEE ENGAGED IN BUSINESS OF DERIVATIVES / FUTURE & OPTIONS. THE TUR NOVER IN SUCH CASES HAS TO BE CALCULATED BY TAKING DIFFERENCES OF PURCHASE & S ALES OF FAVOURABLE AND UNFAVOURABLE FIGURES. THE LD. CIT(A) HAD ALSO IGNOR ED THE SUBMISSIONS OF ASSESSEE WHEREBY HE HAD RELIED UPON THE CASE LAW OF BABU LAL ENTERPRISES VS. ACIT ITA NO. 6031/MUM/1996 WHEREIN IT HAS BEEN HELD THAT IN THE CASE OF TRANSACTIONS IN FUTURE AND OPTIONS TURNOVER HAS TO BE CALCULATED ON THE I.T.A .NOS.-5501 & 5504/DEL/2013 (ASSESSMENT YEAR-2008-09) 5 BASIS OF ADDITION OF FAVOURABLE AND UNFAVOURABLE DI FFERENCES. MOREOVER IN THE CASE OF GROW MORE EXPORTS VS. ACIT 78 ITD 95, I T WAS HELD THAT WHERE NO DELIVERY OF UNIT IS EFFECTED NO TURNOVER WAS MAD E BY THE ASSESSEE AND ASSESSEE WAS NOT LIABLE TO GET THE ACCOUNTS AUDITED U/S 44AB OF THE ACT. 12. IN VIEW OF THE ABOVE, THE ACTION OF AO IN TREAT ING THE TURNOVER OF ASSESSEE ON THE BASIS OF GROSS VALUES IS NOT JUSTIF IED AND THE PENALTY IMPOSED BY AO AND CONFIRMED BY LD. CIT(A) FOR NOT GETTING T HE BOOKS OF ACCOUNT AUDITED IS DELETED. 13. NOW, COMING TO ITA NO. 5504/DEL/2013, THE AO IM POSED PENALTY U/S 271(1)(C) ON THE BASIS THAT ASSESSEE HAD EARNED PRO FIT OF RS.49,567/- ON INTRADAY TRANSACTIONS. THE ABOVE FIGURE OF PROFIT W AS OBSERVED BY AO FROM A LETTER DATED 7.12.2010 WRITTEN BY ASSESSEE PLACED A T PAPER BOOKS 49 TO 53. FROM THE CONTENTS OF ABOVE LETTER, WE FIND THAT IN FACT ASSESSEE HAD INCURRED A NET LOSS ON TRANSACTIONS OF TRADING IN SHARES & FUT URES & OPTIONS SEGMENT. THE AO SHOULD HAVE CONSIDERED THE NET PROFIT/NET LO SS OF THE ASSESSEE INSTEAD OF TAXING THE PROFIT FIGURE ONLY AND THEN IMPOSING PENALTY FOR VIOLATION OF PROVISIONS OF SECTION 271(1)(C). THE ASSESSEE HAD I NCURRED NET LOSS, THEREFORE, HE DID NOT CLAIM THE SAME IN THE RETURN OF INCOME. HOWEVER, THERE WAS NO CONCEALMENT OF INCOME AS THERE WAS NO NET IN COME AND THEREFORE I.T.A .NOS.-5501 & 5504/DEL/2013 (ASSESSMENT YEAR-2008-09) 6 PENALTY U/S 271(1)(C) IS NOT JUSTIFIED. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS ALLOWED. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/09/2014. SD/- SD/- (H. S. SIDHU) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 05/09/2014 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR