2016 (3) TMI 1010 - AT - Income Tax

Penalty u/s 271B - accounts of the assessee from speculative business were not audited u/s 44AB - whether the assessee s speculative transaction on NCDEX can be considered as actual transaction liable for provision of audit u/s 44AB read with Section 271B or they are mere speculative profit and transaction value and the entire notional transaction value cannot be treated as turnover of the assessee? - Held that - ITAT Pune Bench in the case Banwari Sitaram Pasari HUF vs. ACIT 2013 (1) TMI 234 - ITAT PUNE and Growmor Exports Ltd. vs. Asstt. Commissioner (2000 (6) TMI 774 - ITAT MUMBAI) have held that the notional value of such speculative transactions cannot be held as turnover as the assessee is eligible only to income or loss and delivery of the commodities is not exchanged. Thus find force in the contentions of the ld. AR of the assessee that ITAT Mumbai Bench in the case of Anahaita Nalin Shah Vs. DCIT 2014 (1) TMI 1582 - ITAT MUMBAI has not considered these two published decisions in the cases of ITAT Pune Bench in the case Banwari Sitaram Pasari HUF vs. ACIT and Growmor Exports Ltd. vs. Asstt.Commissioner (supra). The contention of the ld. AR of the assessee is that when there are two views on same issue, the issue favorable to the assessee should be considered for which the ld. AR of the assessee relied on the decisions of CIT vs. Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME Court and CIT vs. Vatika Township (P) Ltd. (2014 (9) TMI 576 - SUPREME COURT). - Decided in favour of assessee

Summary

Issues:
Appeals against penalty u/s 271B for assessment years 2005-06, 2007-08, and 2008-09.

Analysis:
1. The assessee conducted speculative transactions in commodities through NCDEX without physical delivery. The AO imposed penalties under section 271B for not auditing accounts u/s 44AB. Assessee argued that speculative transactions should not be considered turnover as per the definition and relied on various judgments.

2. The first appeal confirmed penalties, stating that turnover includes transaction value on NCDEX. Assessee contended that no sales occurred as per Sale of Goods Act, transactions did not exceed Rs. 40 lakhs, and there was a bona fide belief that audit was not required. Assessee cited ITAT Pune Bench and ITAT Mumbai Bench decisions.

3. The DR cited a Bombay Bench decision, emphasizing that turnover includes all revenue receipts, irrespective of speculative or normal business. The Tribunal upheld the penalty, considering the principles governing the imposition of penalty u/s 271B.

4. Assessee argued that the Bombay Bench judgment did not consider relevant decisions by other benches. Assessee relied on Supreme Court decisions to support the contention that when two views exist, the one favoring the assessee should be adopted. The Tribunal allowed the appeals, considering the two views on the issue.

In conclusion, the Tribunal allowed the appeals, emphasizing that speculative transactions on NCDEX should not be considered turnover for audit under section 44AB and penalty under section 271B. The decision was based on the principle that when two views exist, the one favorable to the assessee should be adopted, as supported by relevant legal precedents.