Priyavarat, New Delhi V. ITO ward-42(1), Delhi

ITA 6645/DEL/2019

AI Insights

The case involves an appeal by Shri Priyavarat against the penalty imposed by the Assessing Officer for not furnishing a tax audit report as required under Section 44AB of the Income Tax Act, 1961, for the Assessment Year 2010-11. The Assessing Officer had imposed a penalty of Rs. 1 lakh, which was confirmed by the Commissioner of Income Tax (Appeals). The Tribunal, however, found merit in the assessee's argument that the turnover, when calculated by considering only the net result of derivative transactions, did not exceed the threshold limit for mandatory audit under Section 44AB. The Tribunal referenced a similar case and guidance from the ICAI, concluding that the assessee had reasonable cause for not undergoing the tax audit.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 121628 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-11-2022
• Assessment Year: misc
• Appeal Filed On: 08-05-2022
• Other Referred Cases: Sachin Marotrao Rangari vs. A CIT (2022) 143 taxman n.com 318 (Rajkot)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 27; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.6645/DEL/2019 Assessment Year 2010-11 Shri Priyavarat, C/o CA Sanjay Kumar Gupta, 661-A, Gaushala Road, Near Vishwakarma Dwar Najafgarh, New Delhi Vs. ITO, Ward-42(1), Delhi. TAN/PAN: AQWPP8066F (Appellant) (Respondent) Appellant by: None Respondent by: Shri S.M. Singh, Sr.DR Date of hearing: 17 11 2022 Date of pronouncement: 25 11 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 mmis sio n er o f In co me Tax (App eals)-XIV, New Delh i [‘CIT(A)’ in sh o rt] d a ted 1 0 .0 5 .2 01 9 arisin g fro m th e p en alty o rd er d ate d 2 8 .0 6 .20 1 8 p assed b y th e Assessi n g Offi cer (AO) u nd er Sectio n 27 1 B o f th e In co me Tax Act, 1 9 61 (th e Act) co n cern in g AY 201 0 -11 . 2 . As p er th e cap tio ned ap p eal, th e asse ssee h as chall en g ed th e p en alty l ev ied b y t h e Assessin g Offi c er u n d er Sectio n 2 7 1 B o f th e Act a mo u n tin g to Rs.1 l ak h fo r n ot fu rn ish in g tax au d it rep o rt en jo in b y Sect io n 4 4 AB o f th e Ac t. I.T.A. No.6645/Del/2019 2 3 . Wh en th e ma tt er was cal led fo r h ea rin g , n o n e ap peared fo r th e ass essee . Ac co rd in g ly , th e ma tt er was p ro ceed ed ex- p a rte. 4 . Th e Assessin g Offi cer wh ile p ass in g th e assess men t o rd er relev an t to Asses smen t Year 2 0 0 9-1 0 in qu estio n , in ter a l ia all eg ed th at th e g ro ss tu rno v er o f th e assess ee stan d s u p to Rs. 8 0 ,7 4 ,91 ,6 2 5 /- which ap p aren tly ex ceed s th e th resh old p rov id ed b y Sectio n 4 4AB o f th e Act an d th erefo re th e assessee was u nd er sta tu to ry o b lig atio n to g et th e acco u nt au d ited u n der Sectio n 4 4 AB o f th e Act . Th e Assessin g Offic er t h u s imp o sed p en alty o f Rs.1 lak h b y in v o k in g Sect io n 2 7 1 B o f th e Act fo r d efau lt in co mp li an ce o f Se c tio n 4 4 AB o f th e Act. In th e firs t a p p eal, th e CIT(A) co n firmed th e a fo resa id ac tio n o f th e Assessin g Officer . 5 . Ag g riev ed , th e assesse e p referred ap p eal b efo re th e Trib u n al. 6 . We h av e p eru sed th e p en alty o rd er an d th e firs t ap p e lla te o rd er th ereon p assed u nd er Sectio n 27 1 B o f th e Act. We h av e also tak en in to acco u n t th e co n ten tio n s raised o n b ehal f o f th e Rev en u e. 7 . To b eg in with , it i s o b serv ed th at th e ex p ression tu rn o ver or g ro ss receip t an d sales fo rm th e q u ali fy in g cri ter ia to d etermin e wh eth er a tax p ayer is liab l e to tax au d it as co n temp l ated u n d er Sect io n 4 4 AB o f th e Act . 8 . It is th e s tan d o f th e assesse e b efo re t h e Rev enu e Au tho rit ies th at th e ag g reg ate o f Mark to Mark et (MTM) lo ss an d MTM p ro fi t is th e ‘to t al tu rn o ver’ fo r th e p u rp o ses o f Se ct io n 4 4 AB o f th e Ac t as ag a in st th e to ta l v alu e o f tr an sact i o n s ex ecu ted o n th e p la t fo rm o f th e co mmo d i tie s ex ch an g e. Th u s, th e g ro ss v alu e o f tran sac tio n s wh ich are se t tled w ith o u t an y d eliv ery wo u ld n o t b e I.T.A. No.6645/Del/2019 3 reg ard ed as tu rno ver o f th e assesse e b u t in stead n et res u lt o f su ch d eriv ativ e tran sac t io n s wo u ld b e tak en to ascer ta in th e tu rn o v er. We fin d su b stan ce in th e a fo resa id p lea o f th e ass essee ra ised b efo re th e Rev en u e. It is th e ag g reg ate o f b o th po sitiv e an d n eg ativ e d ifferen c e in th e case o f in t rad ay trad in g o f co mmo d i ti es (sp ecu lat iv e tran s act io n with o u t d eliv ery ) is to b e reg ard ed as tu rn o v er. Simi larl y , th e ag g reg ate of b o th p o sitiv e an d n eg ativ e d ifferen ce is to b e co n sid ered as tu rn o v er in th e case o f ‘fu tu res’ (in th e d eriv at iv e s eg men t). Lik ewis e p remiu m rece iv ed o n sale o f ‘o p tio n s’ is reg ard ed as tu rn o v er in t h e case o f ‘op tio n s’ trad in g . 9 . On p eru sal o f th e su b miss io n s p lace d b y th e assessee b efo re th e Rev en u e Au tho ritie s, i t is n o ted th at th e assesse e was un d er b o na fid e b eliev e th at as p er g u id ance n et issu ed b y ICAI o n tax au d it u n d er Sect i o n 4 4AB, n et re su lt in d eriv at iv e is to b e co n sid ered as tu rn o v er in d istin ct io n to th e g ro ss v alu e o f su ch tran sac tio n s. Th e Co -o rd in ate Ben ch o f Trib u n al in th e case o f S a ch in Ma ro tra o Ra n ga ri vs. A CIT (2 0 2 2 ) 1 4 3 ta xman n.co m 318 (Ra jko t ) h e ld in t h e si mi lar c ircu ms tan ces th at reaso n ab le cau se ex ists in th e cas e fo r n o t u n d erg o in g th e tax au d it wh ere th e tu rn o v er do es n o t su rp ass th e th resh o ld li mi t wh en o n ly n et d ifferen ce , i .e ., p ro fit o r lo ss in sp ecu lat iv e an d d eriv ativ e tran sac tio n s are ta k en in to acco u n t. Th e Co -o rd in ate B en ch wh ile co min g to su ch c o n clu sio n h as tak en in to acco u n t s ev eral o th er ju d g men ts as wel l as c ircu lar n o . 6 o f 2 0 1 6 issu ed b y th e CBDT. In p arity with th e d ecisio n o f Co -o rd in ate Ben ch , we fi n d merit in th e case o f th e assesse e fo r g i v in g b en efit o f mi t ig at in g circu ms tan ce s in th e ab sen ce o f d e fin it io n o f ex p ressio n ‘Tu rno v er’ etc. p ro v id es in th e Act. We th u s set asid e t h e o rd er o f th e CIT(A) an d d irect th e Assess in g Officer to d elete p en alty so I.T.A. No.6645/Del/2019 4 imp o sed u n d er Sec tio n 2 7 1 B o f th e A ct. 1 0 . In th e resu l t, th e a p p eal o f th e asses s ee is a llo wed ex-p a rte. Order pronounced in the open Court on 25/11/2022. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /11/2022 prabhat