Trilok Goyal, New Delhi V. ITO, Ward-31(4), New Delhi

ITA 6064/DEL/2019

AI Insights

The case involves Trilok Goel, the appellant, who contested a penalty imposed by the Income Tax Officer (ITO) under Section 271B for failing to furnish a tax audit report as required by Section 44AB due to a high turnover. The ITO had estimated the assessee's commission income at 2.5% of a substantial cash deposit, treating it as turnover, which exceeded the audit threshold. However, the ITAT found that the assessee, being a commission agent, should only consider the gross commission for the purpose of Section 44AB, not the total turnover. The Tribunal referenced Circular No. 452, which clarifies that only the gross commission should be considered for such cases. Consequently, the Tribunal quashed the penalty, highlighting that the assessee's commission income was below the audit threshold and that there was reasonable cause for non-compliance with Section 44AB.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 121733 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 05-12-2022
• Assessment Year: misc
• Appeal Filed On: 15-06-2022
• Other Referred Cases: Shri Mukesh Choksi vs. ACIT (OSD)-2 CR 7
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 131; 27; 148; 92; 271B; 44AB; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H” DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.6064/DEL/2019 Assessment Year 2012-13 Trilok Goel, C/o CA S.K. Goel, 19/10, East Punjabi Bagh, New Delhi. Vs. ITO, Ward-31(4), New Delhi. TAN/PAN: AFIPG7839N (Appellant) (Respondent) Appellant by: None Respondent by: Shri Gireesh Kumar Kohli, Sr.DR Date of hearing: 06 12 2022 Date of pronouncement: 14 12 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: Th e cap tio n ed ap peal h as b een fil ed b y th e Assessee ag ain st th e o rd er o f th e Co mmiss io n er o f Inco me Tax (App eals)-XI, New Delh i [‘CIT(A)’ in sh o rt] d a ted 1 3 .0 5 .2 01 9 arisin g fro m th e assess men t o rd er d ated 3 1 .1 2 .20 16 p assed by th e Assessin g Officer (AO) un d er Sectio n 1 48 r.w. Sect io n 14 3 (3 ) o f th e In co me Tax Act, 1 9 6 1 (th e Act) co n cern in g AY 2 0 12 -13 . 2 . Th e g ro u nd s o f ap p eal ra ised b y th e assesse e read as u n d er: “ 1 . T h a t t h e o rd e r o f t h e CI T (A ) i n c o n f i r m i n g p e n a l t y o f R s. 1 , 5 0 , 0 0 0 / - m a d e b y t h e A O u / s. 2 7 1 B i s t o t a l l y w ro ng , b a d i n l a w a n d n e e d s t o b e q u a sh e d . 2 . T h a t t h e CI T (A ) h a s n o t c o n si d e re d t h e st a t e m e n t re c o r d e d u / s 1 3 1 (1 A ) o f t h e I n c o m e T a x A c t . I n t h a t s t a t e m e nt i t wa s n o t e d t h a t t h e a s s e s se e w a s g i v i n g / p r o v i d i n g a c c o m m o d a ti o n e n t r y a n d g e t t i n g g ro s s c o m m i s si o n a t t h e r a t e o f 0 . 4 0 % to 0 . 4 5 % o n t h e a m o u n t o f e n t r y p ro v i d e d . T h e a m o u n t o f e n t r y pro v i d e d I.T.A. No.6064/Del/2019 2 c a n n o t b e c o n si d e r e d a s t u rn o v e r a s i n t h e c a se o f c o m m i s si o n a g e n t / a rh a t i a s, o n l y c o m m i s si o n i s c o n s i d e r e d a s t u rn o v e r f o r t h e p u rp o se o f t a x a u d i t (C i rc u l a r N o . 4 5 2 d a t e d 1 7 .0 3 . 1 9 8 6 ). S i m i l a rl y i n c a se o f a d v e rt i s e m e n t b u si n e s s. T h e C IT (A ) c o n f i rm e d e x - p a rt e p e n a l t y o rd e r p a s se d b y t h e A O by t a k i n g wh o l e a m o u n t o f e n t ry p ro v i d e d a s t u r n o v e r wh i c h i s t o t a l l y w ro n g a n d h a s n o b a s i s . M o re o v e r, p ro v i d i n g o f a c c om m o d a t i o n e n t r y i s n o t a l a w f u l b u si n e s s. H e n c e , t h e a c t i o n of C I T (A ) c o n f i rm i n g p e n a l t y o f R s. 1 , 5 0 , 0 0 0 / - u / s 2 7 1 B i s t ot a l l y w ro n g , b a d i n l a w a n d n e e d s t o b e q u a sh e d . 3 . T h a t t h e A s s e s si n g O f f i c e r a s w e l l a s t h e CI T (A ) i g n o r e d a l l t h e j u d g m e n t s q u o t e d b y t h e A R o f t h e a s s e s se e w h e r e i n si m i l a r c a se a n d o n t h e sa m e f a c t s p e n a l t y wa s d e l et e d b y t h e h i g h e r a u t h o ri t i e s i . e . , T ri b u n a l a n d Co u r t s . ” 3 . As p er its g ro u nd s o f ap p eal, th e asse ssee h as ch allen g e d th e imp o si t io n o f p enalty u n d er Sectio n 2 71 B fo r n o t furn ish in g tax au d it rep o rt en jo in ed b y Sect io n 4 4 AB o f th e Act . 4. When the matter was called for hearing, none appeared for the assessee. Acco rdingly, the matter was proceeded e x -parte. 5. The Assessing Officer while passing the assessment order relevant to Assess ment Yea r 2005-06 in question, inter alia alleged failure of the assessee to get its account audited under Section 44AB of the Act despite huge turnover/receipts and consequently i mp osed penalty of Rs.1,50,000/- by invoking Section 271B of the Act. 6. Aggrieved, the assessee preferred appeal before the CIT( A). Howeve r, the CIT(A) did not agree with the submissions made on behalf of the assessee for non applicability of Section 44AB of the Act. The CIT( A) accordingly sustained the penalty i mpo sed by the Assessing Officer. Th e relevant operative paragraph of the CI T(A) is reproduced hereunder: I.T.A. No.6064/Del/2019 3 “ 5 . 1 I n t h i s c a s e a s se s s m e n t w a s c o m p l e t e d u / s. 1 4 8/ 1 4 3 (3 ) o f t h e I . T . A c t o n 3 1 . 1 2 . 2 0 1 6 a t a n i n c o m e o f R s. 1 , 0 5 ,1 0 „ 2 8 0 / - . A O o b se r v e d t h a t D D 1 T (I n v . ) , U n i t - I I (2 ) , Ne w D e l h i c o nd u c t e d S u sp i c i o u s T ra n sa c t i o n s R e p o rt (F R ) e n q u i r y i n r e s pe c t o f S h . T ri l o k G o e l P r o p . M / s K a l k a U d y o g a n d t h e a l l e g a t i on i n t h e S T R wa s t h a t t h e r e we r e m u l t i p l e d e p o s i t s o f c a sh in t h e c a se o f M / s K a l k a U d y o g , p r o p ri e t a r y f i rm o f S h . T ri l o k G o el a n d S T R a l so m e n t i o n e d t w o o t h e r b a n k a c c o u n t i n O r i e n t a l Ba n k o f Co m m e rc e wh e re h i g h v a l u e c a sh d e p o si t s h a d t a k e n pl a c e . D u ri n g t h e c o u r se o f S T R e n q u i ry b e f o r e t h e D D I T (l nv . ), U n i t -I 1 (2 ) t h e a s se s s e e f i l e d a c o p y o f r o u g h re v i s e d I TR f o r F . Y . 2 0 1 1 - 1 2 s h o wi n g g r o s s re c e i p t o f R s . 4 2 „ 0 4 , 1 1 , 2 4 1 / - a s a g a i n s t t h e a m o u n t o f R s . 1 8 , 9 7 , 3 4 0 / - d e c l a r e d i n t h e o r i g i na l r e t u r n o f i n c o m e . A O i n i t i a t e d p e n a l t y p r o c e e d i n g s u / s 2 7 1 B r. w. s . 2 7 4 a s t h e t u rn o v e r o f a p p e l l a n t ' s b u si n e s s wa s m o r e t h a n a u d i t a b l e l i m i t o f R s . 1 C r . b u t h e f a i l e d t o g e t h i s a c c o u n t s a u d i t e d u / s 4 4 A B . I n a b s e n c e o f a n y e x p l a n a t i o n b y a s s e s se e , A O h e l d t h a t a s s e ss e e f a i l e d t o g e t t h e a c c o u n t s a u d i t e d a s p e r t h e p r o v i si o n s o f se c t i o n 4 4 A B o f t h e A c t a n d t h e r e f o r e , wa s l i a b le f o r p e n a l t y u / s 2 7 1 B o f t h e A c t . A c c o r d i n g l y , s h e i m p o se d a p e na l t y o f R s. 1 , 5 0 , 0 0 0 / - u / s 2 7 1 B o f t h e A c t . A s s e s se e i s i n ap p e a l a g a i n st t h e sa m e . 5 . 2 D u r i n g t h e c o u r s e o f a p p e l l a t e p r o c e e d i n g s, i t h a s b e e n su b m i t t e d t h a t h e h a s d e c l a r e d g ro s s t o t a l i n c o m e of R s. 4 , 9 3 , 9 2 1 / - o n a t o t a l t u rn o v e r o f R s. 1 8 , 9 7 , 3 4 0 / - f ro m ru n n i n g o f a sm a l l A t t a C h a k k i a n d d o i n g p u r c h a se & s a l e o f f l o u r. F u r t h e r , i t h a s b e e n s u b m i t t e d t h a t a s h i s t u r n o v e r f r o m t h e p r o p ri e t a r y c o n c e rn M / s Ka l k a . U d h y o g w a s R s. 1 8 , 9 7 ,3 4 0 / - h e wa s n o t r e q u i re d t o g e t h i s a c c o u n t s a u d i t e d a s h i s t u r n o v e r wa s b e l o w t h e p re s c ri b e d l i m i t u / s 4 4 A B . I t h a s a l so b ee n su b m i t t e d t h a t h e i s a n a c c o m m o d a t i o n e n t r y p r o v i d e r a n d t h e re f o re , p e n a l t y u / s 2 7 1 B h a s b e e n wr o n g l y c h a rg e d a s t h e a ct o f a c c o m m o d a t i o n e n t ry p ro v i d e r i s n e i t h e r a b u s i n e s s n o r a p r o f e s s i o n . 5 . 3 I h a v e c a re f u l l y c o n s i d e r e d t h e o b se r v a t i o n s o f A O , su b m i s s i o n s o f a p p e l l a n t a n d c a se l a w s r e l i e d o n b y a p p e l l a n t . T h e r e i s n o d i s p u t e t h a t a p p e l l a n t h a s e n t e r e d i n t o t ra n sa c t i o n o f R s. 4 2 , 0 4 , 1 1 , 2 4 1 / - d u ri n g t h e y e a r wh i c h i s m o re t h an t h e a u d i t a b l e l i m i t o f R s. 1 C r. T h e r e f o re , a p p e l l a n t i s l i a b l e t o g e t h i s a c c o u n t s a u d i t e d . H o n ' b l e I T A T M u m b a i i n t h e c as e o f S h ri M u k e sh C h o k si v s. A CI T (O S D )- 2 CR 7 i n I T A No . 2 2 9 9 /M / 2 0 1 0 f o r A ss e s sm e n t Y e a r 2 0 0 2 - 0 3 , I T A No . 2 3 0 0 / M / 2 0 1 0 f o r A s se s s m e n t Y e a r 2 0 0 6 - 0 7 I T A N o . 2 3 0 1 / M / 2 0 1 0 a s se s sm en t Y e a r 2 0 0 7 - 0 8 d a t e d 1 1 . 0 2 . 2 0 1 1 h a v e h e l d t h a t a s t h e t ra nsa c t i o n w a s o n p ri n c i p l e t o p ri n c i p l e b a si s a n d n o t a s a g e n t , gro s s a m o u n t s I.T.A. No.6064/Del/2019 4 re c e i v e d i n c o n n e c t i o n wi t h e n t ry b u si n e s s h a v e t o b e c o n si d e r e d f o r t h e p u rp o s e s o f c e i l i n g u n d e r s e c t i o n 4 4 A B . I t i s a l s o se e n t h a t t h e c a s e l a w s r e l i e d o n b y a p p e l l a n t a r e o n d if f e re n t se t o f f a c t s a n d t h e re f o re , n o t a p p l i c a b l e t o a p p e l l a n t ' s c a s e . 5 . 4 Ke e p i n g i n v i e w t h e t o t a l i t y o f t h e f a c t s a n d ci rc u m s t a n c e s a s d i sc u s s e d a b o v e , s u b m i ss i o n s m a d e , ra t i o o f v a ri o u s j u d i c i a l p r o n o u n c e m e n t s , a s d i sc u ss e d su p r a , I a m o f t h e v i ew t h a t p e n a l t y p ro v i s i o n s a r e a t t ra c t e d i n t h e c a s e o f a p pe l l a n t a s a p p e l l a n t h a d t u rn o v e r o f m o r e t h a n R s. 4 0 l a c s f o r w h i c h a p p e l l a n t wa s l i a b l e t o g e t h i s a c c o u n t s a u d i t e d . Ac c o r d i n g l y , p e n a l t y o f R s . 1 , 5 0 , 0 0 0 / - u / s. 2 7 1 B i s su s t a i n e d . ” 7. Further aggrieved, the assessee preferred appeal before the Tribunal. 8. We have heard the submissions made on behalf of the Revenue and also perused the penalty order passed under Section 271B of the Act dated 23.06.2017 as well as the first appellate order. During the ye ar under consideration, the assessee e-filed its original return of income decla ring total income at Rs.4,83,920/- and the gross receipt was shown at Rs.18,97,340/-. The Depart ment thereafter conducted Suspicious Transaction Report (STR) enquiry a nd found multiple deposit of cash in different bank account aggregating to Rs.42,67,78,338/-. Consequently, an a mount of Rs.42,67,78,338/- in the for m of cash deposit was found to be not declared nor accounted by the assessee in the return of income . The Assessing Officer in the assessment treated 2.5% thereof as e stimated co mmission earned on the accommod ation entries provided by the assessee which worked out to Rs.1,05,10,281/-. The assessee on the other hand clai med to be pr oviding accommo dation entries ranging from 0.40% to 0.45%. I.T.A. No.6064/Del/2019 5 9. In this factual backdrop, we straightawa y take notice of Circular No.452 dated 17t h March, 1986 issued by the CBDT wherein the question of applicability of Section 44AB in the case of co mmission agents/arhatias was addressed. The Board has clarified that the turnover does not include the sales affected on behalf of the principals and only the gross commis sion has to be considered for the purposes of section 44AB where the agents act only as an agent of his constituent and never acts as a principal. In the instant case also, it is an admitted position that the assessee is only acting as a commission agent on behalf of the constituent. In view of s uch clarification, only the co mmission income is required to be reckoned for the purposes of deter mination of his obligation under Section 44AA of the Act as well as Sec tion 44AB of the Act. 10. The co mmission being turnover/receipt for the purposes of 44AB, which is far below the threshold limit of Rs.1 crore prescribed for the relevant assessment ye ar, when the co mmission income is esti mated a t 0.40% to 0.45% as clai med by the assessee and consequently th e assessee cannot be treated as assessee in default under Section 271B of the Act. The Assessing Officer has estimated the co mmission income at 2.5% whereb y the co mmission income e xceeds the threshold limit. However, the deter mination of commission is in the real m of estimation for which benefit of doubt should go to the assessee. In the instant case, the acco mmodation entries and consequent co mmission thereon are estimated outside the accounts of the assessee. Thus reasonable cause exists insofar as non co mpliance Section 44AB is concerned. Consequently penalt y I.T.A. No.6064/Del/2019 6 under Section 271B for default in co mpliance of Sect ion 44AB of the Act is liable to be deleted in the factual matr ix. Hence, the penalty i mposed under Section 271B of the Act is quashed. 13. In the result, the appeal of the assessee is allowed ex-parte. Order pronounced in the open Court on 14/12/2022. Sd/- Sd/- [SAKTIJIT DEY] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /12/2022 Prabhat