2020 (7) TMI 212 - AT - Income Tax

Penalty u/s 271B - Determination of turnover of the assessee for Tax Audit u/s 44AB - turnover in case of speculative transactions - HELD THAT - As decided in SHRI RAJJAK AHMED KHAN VERSUS THE INCOME TAX OFFICER, WARD 4 (4) , JAIPUR. 2020 (3) TMI 136 - ITAT JAIPUR as considered the guidance note of ICAI in respect of the tax audit U/s 44AB of the Act wherein the turnover or gross receipt in respect of speculative transactions has been considered as some total of positive and negative outcome of the speculative transactions. This Tribunal in a subsequent decision dated 17.02.2020 in case of Shri Sanjay Prakash vs. ITO 2020 (3) TMI 171 - ITAT JAIPUR has again considered the said this issue and by following the earlier decision accepted the contention of the assessee that turnover in respect of the speculative transactions shall be positive and negative differences of the transactions and not volume of the speculative transactions. Accordingly in view of the consist view taken by this Tribunal the turnover of the assessee would not exceed the limit as provide d U/s 44AB, the penalty levied U/s 271B is deleted.- Decided in favour of assessee.

Summary

Issues involved:
1. Appeal against penalty order under Section 271B of the Income Tax Act for the assessment year 2010-11.

Analysis:
The appeal was against the penalty order passed under Section 271B of the Income Tax Act for the assessment year 2010-11. The Assessing Officer initiated penalty proceedings based on the finding that the assessee was not maintaining proper books of account, and the turnover from derivative transactions on MCX exceeded a certain amount. The ld. CIT(A) confirmed the penalty under Section 271B while deleting the penalty under Section 271A. The AO's calculation of turnover was challenged as the total difference of positive and negative outcomes of speculative transactions was significantly lower than the turnover amount considered. The Tribunal referred to previous cases where the turnover in speculative transactions was determined as the sum of positive and negative differences, not the volume of transactions. This approach was supported by the Guidance Note on Tax Audit issued by the ICAI. The Tribunal held that the turnover should not exceed the limit under Section 44AB, leading to the deletion of the penalty under Section 271B.

The Tribunal emphasized that turnover in speculative transactions should be calculated based on the sum of positive and negative differences, as per the ICAI Guidance Note. The Tribunal's decision was consistent with previous cases and upheld the assessee's argument regarding turnover calculation. As the turnover did not exceed the threshold limit under Section 44AB, the penalty under Section 271B was deleted. The Tribunal's reliance on the ICAI Guidance Note and consistent interpretation of turnover in speculative transactions ensured a favorable outcome for the assessee. The Tribunal's decision highlighted the importance of proper turnover calculation in speculative transactions and the relevance of authoritative guidance in determining tax liabilities. The judgment provided clarity on turnover determination in such cases, offering a precedent for future assessments involving speculative transactions and penalty levies under the Income Tax Act.