2000 (6) TMI 774 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Section 44AB of the Income-tax Act, 1961.
2. Justification of Penalty u/s 271B of the Income-tax Act, 1961.

Summary:

Issue 1: Applicability of Section 44AB of the Income-tax Act, 1961

The central issue in these appeals is whether the assessee is liable to get its accounts audited u/s 44AB of the Income-tax Act, 1961. The assessee, a private limited company, engaged in a transaction involving the purchase and sale of 53 lakh units of Unit Trust of India, 1964 Scheme. The Assessing Officer (AO) contended that the total value of Rs. 7,34,05,000 constituted the assessee's turnover, which exceeded Rs. 40 lakhs, thereby necessitating an audit u/s 44AB. The AO rejected the assessee's explanation that the transaction was speculative and did not involve actual delivery of units, thus not constituting a turnover.

Issue 2: Justification of Penalty u/s 271B of the Income-tax Act, 1961

The AO imposed a penalty of Rs. 1,00,000 u/s 271B for not getting the accounts audited. The CIT(A) confirmed the penalty, stating that the company acted as the principal in the transaction, and the definition of 'turnover' under the Sale of Goods Act or section 80HHC was not applicable for section 44AB. The assessee argued that the transaction was speculative, and no actual delivery took place, thus not constituting a turnover. The Tribunal examined the commercial and legal aspects, concluding that the transaction did not result in a turnover exceeding Rs. 40 lakhs, and hence, the assessee was not liable for audit u/s 44AB.

Conclusion:

The Tribunal held that the assessee did not effect a turnover exceeding Rs. 40 lakhs, and thus, was not liable to get the accounts audited u/s 44AB. Consequently, the penalty u/s 271B was deleted. The decision in the case of Harsh Estates (P.) Ltd. was followed in the other two cases, and penalties were canceled. All appeals by the respective assessees were allowed.