2020 (2) TMI 945 - AT - Income Tax

Penalty u/s 271B - assessee failed to obtain Audit Report u/s 44AB - verification of turnover of the assessee - HELD THAT - It is true that ICAI issued guidance notes for tax audit u/s 44AB of the Act but since the working of calculation of turnover is not coming to the logical end from the material available on record to examine the justification of levy of penalty u/s 271B of the Act will be little early. In the assessment order A.O has not given correct finding and is mentioning about the books of accounts which the assessee has never maintained. The judgment referred and relied by the assessee will not help at this stage. Once the turnover as stated by the Ld. Counsel for the assessee is verified at the end of the Ld. A.O which is to be calculated on the basis of Guidance note issued by ICAI for tax audit u/s 44AB of the Act, the question that whether the assessee was liable to get books of accounts audited u/s 44AB of the Act needs to be taken by Ld. A.O thereafter. Set aside all the issues raised in this appeal to Ld. A.O, to carry out necessary verification with the assistance of assessee who would file all necessary details in support of its contention that the turnover is only as held by Ld. CIT(A). However the Ld. A.O is directed to compute the turnover as per the guidance note on Section 44AB of the Act issued by ICAI as well as the settled judicial precedence and provisions of law. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Confirmation of penalty under section 271B of the Income Tax Act.
2. Interpretation of turnover for the purpose of audit under Section 44AB of the Act.

Issue 1: Confirmation of Penalty under Section 271B of the Income Tax Act

The judgment pertains to an appeal filed by the assessee against the penalty levied under section 271B of the Income Tax Act for not obtaining the audit report under section 44AB. The assessee, engaged in trading shares, declared income of ?45,320 for Assessment Year 2014-15. The Assessing Officer (AO) observed a total sales turnover of ?22,52,74,187 but noted the absence of an audit report under section 44AB. Despite no addition to the income, a penalty of ?1,50,000 was imposed. The Commissioner of Income Tax (Appeals) upheld the penalty, emphasizing the turnover exceeding ?23.03 crores necessitated an audit report. The assessee argued different turnovers for various transactions but failed to convince authorities. The tribunal directed the AO to verify the turnover accurately based on guidance notes and judicial precedents before deciding on the penalty.

Issue 2: Interpretation of Turnover for Audit under Section 44AB of the Act

The second issue involves the interpretation of turnover for audit purposes under Section 44AB of the Income Tax Act. The assessee contended that turnover should be calculated differently for delivery-based sales, future options, and intraday transactions. The assessee relied on case laws and guidance notes from the Institute of Chartered Accountants of India (ICAI) to support this argument. However, the authorities calculated the turnover differently, leading to a significant disparity. The tribunal emphasized the need for accurate verification of turnover to determine if the audit report was necessary under section 44AB. The tribunal directed the AO to reevaluate the turnover based on ICAI guidance notes and legal provisions before making a final decision. Ultimately, the appeal was allowed for statistical purposes, pending the correct calculation of turnover by the AO.

This judgment highlights the importance of accurate turnover calculation for audit requirements under the Income Tax Act and the need for proper verification before imposing penalties. The tribunal's decision emphasizes adherence to legal provisions and guidance notes to ensure fair and just outcomes in tax matters.