9911796707
TMI Blog2017 (11) TMI 1493X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 - HIGH COURT OF GUJARAT] cited by the learned counsel for the assessee, The assessee carrying on the business of financing had believed that gross receipts of interest and not gross amount of advances would constitute the basis for ascertaining the limit of ₹ 40,00,000/- so as to attract u/s 44AB and since the said belief was based on the legal opinion of eminent counsel contained in tax audit manual published by the Bombay Chartered Accountant Society, the assessee was held to have a bona fide belief which constituted the reasonable cause for not getting its accounts audited u/s 44AB. Hon’ble Gujarat High Curt accordingly held that no penalty u/s 271B could be imposed on the assessee. In our opinion, the ratio of the said decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 44AB, he initiated penalty proceedings under section 271B of the Act. In reply to the show cause notice issued by the AO in this regard, it was submitted by the assessee that the total income credited in the profit and loss account for the year under consideration was only ₹ 3,498/- and it was therefore under a bona fide belief that the requirement of section 44AB was not applicable. This stand of the assessee however was not found acceptable by the AO. According to him, the assessee company had disclosed only the net income from the business of purchase and sale of securities and the gross receipts of such business were not deliberately disclosed by it in the profit and loss account to avoid the compliance of section 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin due date even though the turnover of the business was more than ₹ 40 lacs during the relevant previous year. The appellant explained before the AO that during the year the total sales, turnover or gross receipts of the appellant did not exceed ₹ 40 lacs and as such the provisions of S. 44AB were not applicable to the appellant and therefore the question of imposing penalty u/s 271B does not arise. During the appellate proceeding, it is submitted before me that since the total income credited to the P L Account was less than ₹ 40 lacs the appellant did not obtain a Tax Audit Report u/s 44AB. In the impugned order the AO has stated that during the previous year the appellant had sold debentures of Spencer Interna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with sales, turnover or gross receipts. Thus, it is argued that in para 5.11 of the said Guidance Note issued by the ICAI it has been stated as to what items would not form part of gross receipts in business . In clause (ii) of Para 5.11 it has been stated that sale proceeds of assets held as investments shall not form part of the gross receipts in business . In support of this contention, relevant extract from the Guidance Note issued by the ICAI (Fourth Edition 1999) is furnished. Thus, it is argued that where there is a sale of assets held as investments, the sale proceeds of the same shall not be forming part of gross receipts in business . Thus, relying on the contents of para 5.11 of Guidance Note issued by the ICAI, it is cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ICAI (Fourth Edition 1999) where it is mentioned that if there is a sale of assets held as investments, the sale proceeds of the same shall not be forming part of gross receipts in business . However, it is observed that this principle is applicable only when the assets have been held as investment, but in the instant case of the appellant investment in debentures and shares is the business assets in terms of Memorandum of Association of the company. Therefore, the contention of the appellant that there was a reasonable cause for not obtaining a audit report u/s 44AB and as such no penalty u/s 271B could be imposed, cannot be entertained being factually incorrect and the supportive judgement of the Hon ble Gujarat High Court (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss from purchase and sale of securities was offered to tax by it as business income, the provisions of section 44AB were clearly attracted when the gross receipts of the business of the assessee from purchase and sale of the security exceeded to ₹ 40,00,00/-. He contended that the assessee however deliberately however disclosed only net income of the said business in the profit and loss account instead of gross receipts in order to avoid its compliance of section 44AB. 6. We have considered the rival submissions and also perused the relevant material available on record. It is observed that even though the net profit / loss arising from the purchase and sale of securities was disclosed by the assessee in the profit and loss accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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