TULIKA KEDIA, NEW DELHI,DELHI V. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RAIPUR, RAIPUR

ITA 147/RPR/2025

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The case involves Tulika Kedia, who appealed against the penalty imposed by the Assistant Commissioner of Income Tax, Central Circle-1, Raipur, under section 271B of the Income Tax Act, 1961, for not getting her accounts audited as required under section 44AB due to her business turnover exceeding Rs. 1 Crore. The ACIT had imposed a penalty of Rs. 1,50,000, which was confirmed by the Commissioner of Income Tax (Appeals), Raipur-3. The main contention was whether the turnover from Futures and Options (F&O) transactions, which the assessee argued was less than the prescribed limit, was correctly calculated. The Tribunal found that the method of calculating turnover for F&O transactions as prescribed by ICAI needed to be verified and possibly recalculated by the ACIT.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786473 (ITAT-RAIPUR)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2020-2021
• Appeal Filed On: 25-03-2025
• Other Referred Cases: Shri Sanjay Marotrao Modak Vs. Dy. CIT, Circle 29(3), NFAC
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: S.R. RAO
• Keywords: Business income; Capital Gains; Transactions in derivatives; Futures and options; Speculative transactions
• Section: 143(3)

Judgement Text

"आयकरअपीलीयअिधकरण, रायपुर Ɋायपीठ,रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR Įी पाथ[ सारथी चौधरȣ, Ɋाियक सद˟ एवं ŵीअŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / ITA No: 147/RPR/2025 (िनधाŊरण वषŊ Assessment Year: 2020-21) Tulika Kedia, Kedia House, S-67, Ground Floor, Panchsheel Park, Malviya Nagar, Delhi,-110017, New Delhi v s Assistant Commissioner of Income Tax, Central Circle-1, Raipur PAN: AFZPK3119A (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से / Assessee by : Shri S. R. Rao, Adv. राजˢ की ओर से / Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई की तारीख / Date of Hearing : 20.11.2025 घोषणा की तारीख / Date of Pronouncement : 20.11.2025 आदेश / O R D E R Per Arun Khodpia, AM: The captioned appeal is directed against the order of Commissioner of Income Tax (Appeal), Raipur-3, [in short “Ld. CIT(A)”], u/s 250 of the Income Tax Act, 1961 (in short “the Act”) dated 29.01.2025, for the AY 2020-21, which in turn arises from the Penalty order u/s 271B, dated 28.03.2023 passed by Assistant Commissioner of Income Tax, Central Circle-1, Income Tax Department, Raipur (in short “Ld. AO”). Printed from counselvise.com 2 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur 2. The grounds of appeal raised by the assessee against the impugned order are as under: 1. In the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), Raipur-3 has erred in confirming penalty of Rs.1,50,000/- imposed u/s. 271B of the Income Tax Act, 1961, without considering the facts of the case in their entirety. 2. The facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals), Raipur-3 has erred in dismissing the legal ground challenging validity of penalty order because the Assessment Order passed without valid approval u/s 153D of the Income Tax Act, 1961 itself is invalid and nullity. 3. The order of Ld. Commissioner of Income-tax (Appeals), Raipur-3 is bad in law and on facts. 4. The appellant reserves the right to add, alter, amend, omit all or any of the grounds of appeal with permission of the Hon'ble appellate authority. 3. At the time of hearing dated 24.07.2025, Ld. AR had requested to withdraw the ground no. 2 of the present appeal regarding the validity of approval u/s 153D. Considering the request duly signed besides the relevant ground of appeal in the Appeal Memo by Ld. AR, after no objection from the revenue, the ground no. 2 of the appeal has been allowed to be withdrawn, consequently, the same is dismissed as not pressed. 4. The brief facts of the case are that the assessment in the present case was completed u/s 143(3) on 24.09.2022 accepting return income of the assessee for Rs.12,70,80,780/-, however it is noticed by the Ld. AO that the Printed from counselvise.com 3 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur business income of the assessee was more than Rs. 1 Crore, therefore, attracts the provisions of section 44AB of the Act, thereby, the assessee had to get her accounts audited which was not done, therefore, a penalty u/s 271B needs to be imposed. 5. Subsequently, proceedings u/s 271B are initiated, wherein the assessee submitted that the turnover from F & O operations/ transactions for the year under consideration did not cross the limit specified under section 44AB of the Act. As the turnover from such specified transactions needs to be worked out in accordance with the guidance note issued by the Institute of Chartered Accountant of India (ICAI), which states that the aggregate of both positive and negative differences from such transactions (derivatives, futures and options) are to be considered as “turnover” for determining the requirement to audit the accounts of an assessee in terms of provisions of section 44AB of the Act. Ld. AR placed his reliance on the decision of ITAT, Mumbai in the case of Shri Sanjay Marotrao Modak Vs. Dy. CIT, Circle 29(3), NFAC reported in 2023 (3) TMI 81 – ITAT, Mumbai. It is submitted by the assessee before the Ld. AO that according to the method prescribed by ICAI to calculate the turnover applicable in the instant case was to be computed by taking absolute figure of profit and loss from F&O Transactions, which comes to Rs. 28,79,970/- only, thus, the assessee is not liable to get Printed from counselvise.com 4 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur her accounts audited under the provisions of Section 44AB and, accordingly, the provisions of penalty u/s 271B of the Act does not get attracted. The submission of assessee was not found acceptable by the Ld. AO, as he was having the conviction that the assessee herself had shown business income of Rs. 12,75,74,315/- in her ITR, therefore, the assessee was liable to get her accounts audited as per section 44AB. Accordingly, a penalty of Rs.1,50,000/- has been imposed on the assessee. 6. Aggrieved with the penalty order dated 28.03.2023, assessee preferred an appeal before the Ld. CIT(A), however, the assessee could not succeed as the contention raised by her could not impress upon the Ld. CIT(A) and, therefore, the appeal of assessee has been dismissed, confirming the penalty of Rs. 1,50,000/- u/s 271B of the Act. 7. Being dissatisfied with the order of Ld. CIT(A), assessee preferred an appeal before us, which is under consideration in the present matter. 8. Before us, Ld. AR representing the assessee submitted and reiterated the facts that the assessee’s turnover from F & O, worked out in accordance with the guidelines note issued by ICAI was Rs. 28,79,970/- only i.e., much less than the prescribed limit of Rs. 1.00 Crore. To substantiate such factual Printed from counselvise.com 5 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur aspect Ld. AR placed before us details of F & O transactions, starting from page 15 to 21 of assessee PB, which though is not very legible and also printed in a very small font, however, it can be gathered from such information that the absolute figure of gain/ loss calculated by the assessee has been arrived at for Rs.28,79,970/-. But such facts needs verification, which may require further enquiries also. It is also submitted by Ld. AR that the assessee has suffered a loss of Rs. 3,72,066/- from trading in Future & Options, which is included in the amount of profit shown from business for Rs.12,79,46,379/- in the computation of total income (page 12-14 of APB). It is explained that after excluding the amount of F&O loss the remaining amount shown as profit from business for Rs.12,83,18,445/- comprises of income of salary, income from house property, capital gains and income from other sources, therefore, the perception of Ld. AO that the assessee’s turnover exceeds the prescribed limit as per section 44AB was a misconception and the same cannot be logically concluded unless the Ld. AO look into various heads which are comprised in the amount of profit as per Profit & loss account. According to the aforesaid submissions, it is contented that the absolute figure of profit & loss from F & O transaction undertaken by the assessee during the relevant year are only 28,79,970/- and the turnover of assessee considered for audit u/s 44AB for more than Rs. 1.00 Crore was a misconceived conclusion by Printed from counselvise.com 6 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur the Ld. AO, therefore, the penalty u/s 271B was wrongly levied on the assessee and the same therefore, is liable to struck down. 9. Per contra, Ld. Sr. DR representing the revenue submitted that when the assessee herself is declaring her profit from business at Rs. 12.79 Crores, there was no error on the part of the AO to infer that the turnover exceeds the limits prescribed u/s 44AB. The assessee is now elaborating and furnishing certain explanations which were not explained before the revenue authorities. The penalty, therefore, has been rightly levied by the Ld. AO and confirmed by the Ld. CIT(A). It is further submitted by Ld. Sr. DR that since the matter needs verification and enquiries, she do not have any objection, if the same be remanded back to Ld. AO to revisit the same,. 10. Having considered the rival submissions, on perusal of the facts and evidence on record and considering the decision relied upon by the Ld. AR, our observations are as under: (i) The turnover for the purpose of provisions of Section 44A & B from F & O transactions shall be worked out in accordance with the method prescribed by ICAI in their “Guidance Note on Tax Audit”. As per details furnished before us, the turnover from F & O computed following the method prescribed by ICAI is Rs.28,79,970/-, which is subject to Printed from counselvise.com 7 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur verification and enquiry by the Ld. AO. For the sake of completeness, the relevant guidelines issued by ICAI for computing the turnover or gross receipts for section 44AB are reproduced as under: Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961 5.14 The turnover or gross receipts in respect of transactions in shares, securities and derivatives may be determined in the following manner. (a) Speculative transaction: A speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips. Thus, in a speculative transaction, the contract for sale or purchase which is entered into is not completed by giving or receiving delivery so as to result in the sale as per value of contract note. The contract is settled otherwise and squared up by paying out the difference which may be positive or negative. As such, in such transaction the difference amount is 'turnover'. In the case of an assessee undertaking speculative transactions there can be both positive and negative differences arising by settlement of various such contracts during the year. Each transaction resulting into whether a positive or negative difference is an independent transaction. Further, amount paid on account of negative difference paid is not related to the amount received on account of positive difference. In such transactions though the contract notes are issued for full value of the purchased or sold asset the entries in the books of account are made only for the differences. Accordingly, the aggregate of both positive and negative differences is to be considered as the turnover of such transactions for determining the liability to audit vide section 44AB. (b) Derivatives, futures and options: Such transactions are completed without the delivery of shares or securities. These are also squared up by payment of Printed from counselvise.com 8 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur differences. The contract notes are issued for the full value of the asset purchased or sold but entries in the books of account are made only for the differences. The transactions may be squared up any time on or before the striking date. The buyer of the option pays the premia. The turnover in such types of transactions is to be determined as follows: (i) The total of favourable and unfavourable differences shall be taken as turnover. (ii) Premium received on sale of options is also to be included in turnover. (iii) In respect of any reverse trades entered, the difference thereon, should also form part of the turnover. (c) Delivery based transactions Where the transaction for the purchase or sale of any commodity including stocks and shares is delivery based whether intended or by default, the total value of the sales is to be considered as turnover. 5.15 (a) Further. an issue may arise whether such transactions of purchase or sale of stocks and shares undertaken by the assessee are in the course of business or as investment. The answer to this issue will depend on the facts and circumstances of each case taking into consideration the nature of the transaction, frequency and volume of transactions etc. For this, attention is invited to the following judgements where this issue has been considered. (i) CIT v. PKN. and Co Ltd (1966) 60 ITR 65 (SC) (ii) Saroj Kumar Mazumdar v CIT (1959) 37 ITR 242 (SC) (iii) CIT v. Sutlej Cotton Mills Supply Agency Ltd. (1975) 100 ITR 706 (SC) (iv) G. Venkataswami Naidu & Co. v. CIT (1959) 35 1TR 594 (SC) Further, CBDT Circular No. 4/2007. dated 15-6-2007-Appendix II (Page no. 217) may also be referred to. Printed from counselvise.com 9 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur (b) In case such transactions are for the purposes of investment and income/loss arising therefrom 1s to be computed under the head 'Capital Gains'. then the value of such transaction is not to be included in sales or turnover for deciding the applicability of audit under section 44AB. However, in case such transactions are in the course of business, then the total of such sales are to be included in the sale. turnover or gross receipts as the case may be, of the assessee for determining the applicability of audit under section 44AB. 5.16 The term \"gross receipts\" is also not defined in the Act. It will include all receipts whether in cash or in kind arising from carrying on of the business which will normally be assessable as business income under the Act. Broadly speaking, the following items of income and/or receipts would be covered by the term \"gross receipts in business\" (i) Cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India; (ii) Any duty of customs or excise or service tax re-paid or repayable as drawback to any person against exports under the Customs and Central Excise Duties and Service tax Drawback Rules, 1995; (iii) The aggregate of gross income by way of interest received by the money lender; (ii) In present case, the loss on derivatives has been shown by the assessee at Rs.3,72,066/- in her computation of income stating the same as speculative business loss, but how the same has arrived at from the transaction details of F & O has not been explained. This also needs verification by Ld. AO. Printed from counselvise.com 10 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur (iii) The assessee also has income from LTCG amounting to Rs.8,45,36,897/- the same also needs verification to the aspect that there is no element of F & O transactions embedded in the said figure or whether the same would also constitute turnover or gross receipts in terms of para 5.15 (b) of the aforesaid guidance note. 11. In backdrop of aforesaid observations, we are of the considered opinion that the turnover of assessee needs to be scrutinized and verified from her books of accounts and relevant documents, the method for calculating the turnover should be in accordance with the methods prescribed by the ICAI, which are held to be adoptable by the Hon’ble Supreme Court in the case of CIT vs. Punjab Stainless Industries (2014) 364 ITR 144 (SC) and Hon’ble Hyderabad High Court in the case of CIT vs. Pact Securities and Financials Ltd (2003) 86 ITD 115 (HYD), wherein it is observed that the method of accounting prescribed by ICAI can be relied upon for computing turnover in case of share and derivatives. We also concur with and take support from the decision of ITAT, Mumbai in the case of Shri Sanjay Marotrao Modak (Supra) on this aspect. Printed from counselvise.com 11 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur 12. The matter in view of aforesaid analysis, jurisprudence and observations is restored back to the file of Ld. AO directing him to recompute the business turnover of the assessee in accordance with the methods prescribed by ICAI and re-adjudicate the issue of imposition of penalty u/s 271B of the Act on the assessee, to check that whether the assessee is liable to get her accounts audited under the provisions of section 44AB or not. In conclusion, the matter is restored back to the file of Ld. AO for adjudicating the issue of penalty u/s 271B afresh. 13. Needless to say, the assessee shall be provided with reasonable opportunities of being heard in the set-aside proceedings. The assessee is directed to assist, comply and provide necessary details and information proactively before the Ld. AO, failing which the Ld. AO would be at liberty to decide the issue in accordance with the mandate of law. 14. In result, the appeal of assessee is allowed for statistical purposes. Order pronounced in the open court on 20/11/2025. Sd/- (PARTHA SARATHI CHAUDHURY) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर / Raipur; िदनांक Dated 20/11/2025 Printed from counselvise.com 12 ITA No.147/RPR/2025 Tuleka Kedia, New Delhi vs. ACIT, Central Circle-1, Raipur Vaibhav Shrivastav, Stenographer आदेशकी Ůितिलिप अŤेिषत / Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर / ITAT, Raipur 1. अपीलाथŎ/ The Appellant- Tulika Kedia, New Delhi 2. ŮȑथŎ/ The Respondent- ACIT, Central Cirlce-1, Raipur 3. The Pr. CIT, Raipur (C.G.) 4. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 5. गाडŊ फाईल / Guard file. // सȑािपत Ůित True copy // Printed from counselvise.com "