2020 (3) TMI 171 - AT - Income Tax

Determination of turnover - Penalty u/s 271A and 271B - violation of provisions of section 44AA and 44AB - failure to maintain books of accounts - failure to get accounts audited - speculative transactions on NCDEX/MCX commodity exchange - turnover of about 27 crores - net loss is about 3.60 lacs - HELD THAT - In case of speculative transactions in absence of term turnover defined in the Act as per the guidance note issued by ICAI the turnover has to be determined by taking the aggregate of both positive and negative differences arising from such speculative transactions and as an outcome of settlement of such contracts during the year which in the instant case comes to 3.60 lakhs. Where turnover is less than the threshold provided under section 44AA of the Act the assessee was not required to maintain his books of accounts in respect of such transactions. On same analogy where the books of accounts are not required to be maintained the question of getting the same audited doesn t arise for consideration and in any case the turnover is less than the prescribed threshold under section 44AB of the Act. In such a scenario there is no basis to hold that there was any violation of provisions of section 44AA and section 44AB of the Act and consequently the penalty levied u/s 271A and 271B is hereby deleted and the orders of the lower authorities are set-aside. Levy of penalty U/s 271(1)(b) - non compliance to the notice issued U/s 142(1) dated 13.10.2017 - We find that there is nothing on record in terms of any explanation furnished by the assessee for non-compliance to the said notice. Therefore levy of penalty u/s 271(1)(b) of the Act in absence of any reasonable cause shown by the assessee is hereby confirmed.

Summary

Issues Involved:
1. Levy of penalty under Section 271A for non-maintenance of books of accounts.
2. Levy of penalty under Section 271B for not getting the books of account audited.
3. Levy of penalty under Section 271(1)(b) for non-compliance with the notice issued under Section 142(1).

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271A for Non-Maintenance of Books of Accounts:
The assessee was found to be engaged in day-to-day trading of commodities and shares with a total turnover of ?27,26,87,233/- during the relevant assessment year. Despite repeated notices, the assessee failed to produce the necessary books of accounts and other documents as required under Section 44AB of the Income Tax Act. Consequently, the Assessing Officer levied a penalty of ?5,000/- under Section 271A. The CIT(A) confirmed this penalty due to continued non-compliance by the assessee. However, upon further examination, it was determined that the turnover should be calculated based on the aggregate of positive and negative differences from speculative transactions, which amounted to ?3,59,632/-. Since this amount was below the threshold requiring maintenance of books, the penalty under Section 271A was deleted.

2. Levy of Penalty under Section 271B for Not Getting the Books of Account Audited:
The Assessing Officer also imposed a penalty of ?1,00,000/- under Section 271B due to the assessee’s failure to get the accounts audited, as required when turnover exceeds the prescribed limit. This penalty was upheld by the CIT(A). However, the Tribunal noted that the turnover for speculative transactions, calculated as per ICAI guidelines, was only ?3,59,632/-, below the threshold for mandatory audit under Section 44AB. Consequently, the penalty under Section 271B was also deleted, as the requirement for audit did not apply.

3. Levy of Penalty under Section 271(1)(b) for Non-Compliance with Notice under Section 142(1):
The assessee did not comply with the notice issued under Section 142(1) dated 13.10.2017, and no explanation was provided for this non-compliance. As a result, the Assessing Officer levied a penalty of ?10,000/- under Section 271(1)(b), which was confirmed by the CIT(A). The Tribunal upheld this penalty due to the absence of any reasonable cause shown by the assessee for non-compliance.

Conclusion:
The penalties under Sections 271A and 271B were deleted as the turnover from speculative transactions was determined to be below the threshold requiring maintenance of books and audit. However, the penalty under Section 271(1)(b) was confirmed due to the assessee’s failure to comply with the notice under Section 142(1) without any reasonable cause. The appeals for penalties under Sections 271A and 271B were allowed, while the appeal for the penalty under Section 271(1)(b) was dismissed.