2013 (1) TMI 234 - AT - Income Tax

Penalty u/s 271B - Tax Audit u/s 44AB - Turnover - Speculative transaction - failure to get the accounts audited by a Chartered Accountant as per 44AB - assessee is an HUF which is engaged in online trading in commodities - Held that - As the transaction of buying and selling of commodities is a speculative activity where no physical delivery is taken or given and in this view of the matter following the parity of reasoning given in the case of Growmore Exports Ltd. (2000 (6) TMI 774 - ITAT MUMBAI) herein also inclined to hold that there was no turnover constituted in the amount of Rs. 1, 86, 66, 488/- for the purposes of considering the liability of assessee to get the accounts audited u/s 44AB and hence there was no requirement to get the accounts audited u/s 44AB. Thus the penalty u/s 271B imposed by the AO is hereby directed to be deleted - in favour of assessee.

Summary

Issues:
Penalty imposed under section 271B for failure to audit accounts under section 44AB based on turnover exceeding Rs. 40 lakhs in online trading of commodities.

Analysis:
The appeal challenged the penalty of Rs. 93,332 imposed on the assessee for not getting accounts audited under section 44AB of the Income-tax Act, 1961, due to the turnover in commodities exceeding Rs. 40 lakhs. The assessee contended that the turnover limit should apply to net income from speculation activity, not gross sauda booked. The assessee argued that no physical goods were exchanged in the speculative trading, hence no audit was required. The Assessing Officer levied the penalty despite the assessee auditing accounts during assessment. The CIT(A) upheld the penalty, leading to the appeal.

The main issue was whether the turnover from online trading of commodities constituted turnover for audit purposes under section 44AB. The assessee's activity involved speculation without physical delivery, similar to a precedent where no turnover was found due to no property transfer. The Tribunal ruled that in the absence of physical delivery and no property transfer, there was no turnover, aligning with previous decisions. Consequently, the Tribunal held that the assessee was not liable to audit accounts under section 44AB based on the turnover of Rs. 1,86,66,488. Therefore, the penalty under section 271B was deleted, and the appeal was allowed.