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TMI Blog2022 (10) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... y provides that no penalty shall be imposed if the assessee proves that there was reasonable cause for the said failure . Jurisdictional High Court in the case of Sachinam Trust . [ 2009 (3) TMI 186 - HIGH COURT OF GUJARAT] also held that the appropriate expression to be considered for deciding the applicability of the provisions of section 44AB would be the term 'gross receipts', the assessee, carrying on the business of financing, bona fidely believed that gross receipts of interest, and not gross amount of advances, would constitute the basis for ascertaining the limit of Rs. 40 lakhs so as to attract section 44AB, the assessee could be said to have a reasonable cause for not getting its accounts audited under section 44AB, and as such no penalty could be imposed on the assessee. In the facts of the present case, it is seen that the explanations offered by the assessee have been ignored by the Assessing Officer as well as Ld. CIT(A) on the ground that the Guidance Note issued by the ICAI is not binding on the Income Tax Authorities whereas the Hon ble Supreme Court and Co-ordinate Bench of the Tribunal recognizes the same and applicable in the case of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of Rs. 7,23,872/-. The provisions of Section 44AB which prescribes the turnover in business or profession exceeds 100 lakhs when the assessee should get his books audited under 44AB. The assessee further relied upon the Delhi Benches Tribunal decision in the case of Chander Prakash Batra in ITA No. 4305/Delhi/2011 dated 14.11.2014 and pleaded that no penalty u/s. 271B leviable in the assessee s case. 2.2. The above explanation was not accepted by the Assessing Officer and held that ignorance of law is not an excuse for noncompliance of the statutory provisions of law. The case law relied upon by the assessee Chander Prakash Batra is not applicable to the assessee s case and thereby levied penalty of Rs. 1,50,000/- u/s. 271B of the Act. 3. Aggrieved against the same, the assessee filed an appeal before the ld. CIT(A). During the appellate proceedings, the assessee submitted that he has carried transactions in shares, mutual funds and derivatives (Futures and options) with two brokers namely Axis Direct and R.K. Global Shares Securities Ltd. The assessee also submitted Guidance Note on Tax Audit u/s. 44AB of the Income Tax Act, 1961 issued by the Institute of Chartere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e thereon, should also form part of the turnover. (c) Delivery based transactions: Where the transaction for the purchase or sale of any commodity including stocks and shares is delivery based whether intended or by default, the total value of the sates is to be considered as turnover. 1.4. In view of the above guidelines, turnover for determining the liability to tax audit u/s.44AB of the Income Tax Act, 1961 in respect of each class of assets in which the appellant has carried out transactions, is to be considered as tabulated hereunder: Sr. No. Asset Class Turnover will be 1 Derivatives The total of favourable and unfavourable differences. Premium received on sale of options. In respect of any reverse trades entered the difference thereon 2 Equity Shares Speculative The aggregate of both positive and negative differences. 3 Equity S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned CIT(Appeals) has grievously erred in upholding the action of the learned AO in levying penalty u/s.271B of the Income Tax Act, 1961. 5. Kindly stay the demand during pendency of the appeal. 5. Ld. Counsel Mr. Fenil Mehta reiterated the arguments made before the lower authorities and strongly relied upon by the guidelines issued by the Institute of Chartered Accountants of India (ICAI) and relied upon judgment of Hon ble Supreme Court in the case of CIT vs. Punjab Stainless Steel Industries reported in [2014] 46 taxmann.com 68 wherein it was held that the ICAI has published same material under the head Guidance Note on Tax Audit under Section44AB of the IT Act. Interpreting the meaning of turnover by ICAI which is having a statutory recognition . The said material has been published so as to guide the members of the ICAI. In our opinion, when a recognized body of Accountants, after due deliberation and consideration publishes certain material for its Members, one can rely upon the same. 5.1. The Ld. Counsel further relied upon by the Jurisdictional High Court in the case of ITO vs. Sachinam Trust [2009] 320 ITR 445 wherein the Hon ble jurisdictional High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1986, it may be pointed out that by applying the principles laid down in the said circular, it is clear that a stockbroker, like a kachcha arathia in foodgrains is merely entitled to brokerage and does not have any domain over the goods and is not interested in the profits and losses made by his constituent. Similarly, like a kachcha arathia, a stockbroker acts only as an agent of his constituent and never acts as a principal. So -whatever be the modalities of the transactions for the purchase and sale of shares made by the sharebroker for and on behalf of his constituents, the position is undisputed that he does not have any interest whatsoever in the transactions except brokerage for the services rendered by him in bringing the purchaser and seller together. Thus, the CBDT's circular cited by the Assessing Officer rather supported the case of the assessee that the transactions in the accounts of the constituents were not to be considered for the purposes of turnover under section 44AB. Regarding the interpretation of the word 'turnover' as made by the Institute of Chartered Accountants in the context of section 44AB, the publication, 'Guidance Note on Tax Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o get his accounts audited in respect of any previous year or years relevant to an assessment year or [furnish a report of such audit as required under section 44AB], [Assessing] Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of [one hundred fifty thousand rupees], whichever is less.] 7.1. A perusal of the above provision shows that the Parliament has used the words may and not shall , thereby making their intention clear in as much as that levy of penalty is discretionary and not automatic. The said conclusion is further justified by Section 273B of the Act namely penalty not to be imposed in certain cases . A careful reading of Section 273B encompasses that certain penalties shall be imposed in cases where reasonable cause is successfully pleaded. It is seen that penalty imposable u/s 271B is also included therein. By the said provisions, the Parliament has unambiguously made it clear that no penalty shall be imposed, if the assessee proves that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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