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2024 (3) TMI 423 - AT - Income TaxLevy of penalty u/s 271B - failure to get accounts audited in terms of provisions of section 44AB - Determination of turnover in the context of a share broker's income for the purpose of Tax Audit - HELD THAT - As the assessee is admittedly a share broker, therefore, the decision in the case of Hasmukh M. Shah 2002 (3) TMI 199 - ITAT AHMEDABAD-A will clearly apply to the present case, following which we hold that the sale consideration of the shares sold by the assessee, on which it earned commission/brokerage is not turnover, and cannot be constitute its turnover. It is only the commission income earned by it which can be rightly treated as its turnover and the income in the present case falling well below the limit prescribed by section 44AB of the Act for subjecting the Books of accounts to audit, amounting to Rs. 1,55,614/- only, there was no case for the assessee to have got its books audited in terms of provisions of the said section. In the light of the same, therefore, we find that there is no case for levy of penalty under section 271B of the Act for not getting its books audited u/s 44AB of the Act. Exception to the applicability of the main section - Where the majority of the transactions are through transparent banking channel, the requirement of getting books audited gets diluted to a certain extent, and therefore, the proviso raises the limit of getting audit done from the turnover of rupees one crores to rupees five cores. The basic plank for audit to be done, where the turnover exceeds a particular limit, is not taken away by the proviso. It only raises the bar from rupees one crores to rupees five crores. Therefore, the contentions of the ld.DR that the proviso refers to the aggregate of receipts, is an incorrect understanding of the provision. Therefore, the contention of the ld.DR, we find is of no merit, and is rejected. The penalty levied in the present case therefore is not sustainable and we direct deletion of the same. Decided in favour of Assessee.
Issues Involved:
1. Legality of the penalty order under section 271B of the Income Tax Act, 1961. 2. Legality of the order passed by the National Faceless Appeal Centre (NAFC). 3. Justification for the penalty levied by the Assessing Officer (AO) under section 271B of the Act amounting to Rs. 1,50,000. Summary: 1. Legality of the Penalty Order under Section 271B: The core issue in the appeal was the confirmation of the penalty levied under section 271B of the Income Tax Act, 1961, for the assessee's failure to get accounts audited as required under section 44AB. The assessee's turnover from the sale of shares exceeded Rs. 1 crore, specifically Rs. 6,06,87,030, leading to a penalty of Rs. 1.50 lacs being imposed by the AO. 2. Legality of the NAFC Order: The assessee argued that the penalty order by the NAFC was flawed both in law and facts. The primary contention was that the turnover considered for the purpose of audit under section 44AB should only include the commission income from sub-brokerage activities, not the total sale consideration of shares. 3. Justification of the Penalty Levied: The assessee contended that the commission income, which was Rs. 1.5 lacs, was the only relevant turnover for audit purposes under section 44AB. The assessee relied on the Guidance Note of the ICAI and the ITAT Ahmedabad Bench decision in ACIT Vs. Hasmukh M. Shah, which supported that for agents earning commission, only the commission income should be treated as turnover. The Tribunal noted that the assessee's argument was supported by the ITAT Ahmedabad Bench decision, which clarified that the sale consideration of shares by a broker does not constitute turnover. The Tribunal found that the assessee's commission income of Rs. 1,55,614 was below the threshold limit for mandatory audit under section 44AB, thus negating the need for an audit and the subsequent penalty. The Tribunal also addressed the ld.DR's contention regarding the proviso to section 44AB, clarifying that the proviso only raises the audit threshold from Rs. 1 crore to Rs. 5 crores for non-cash transactions and does not alter the basic requirement of turnover exceeding Rs. 1 crore for audit applicability. Conclusion: The Tribunal concluded that the penalty under section 271B was not justified as the assessee's turnover, being only the commission income, did not exceed the limit prescribed for mandatory audit. The Tribunal directed the deletion of the penalty of Rs. 1.5 lacs and allowed the appeal of the assessee. The order of the ld.CIT(A) was set aside for not considering the assessee's submissions adequately. Result: The appeal of the assessee was allowed, and the penalty imposed was deleted.
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