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TMI Blog2024 (3) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member For the Assessee : Shri Rajendra Singhal, Ld.AR For the Revenue : Shri Ashish Kumar Pandey, DR ORDER PE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including amount received for sales, turnover or gross receipts during the previous year, in cash, does not exceed five per cent of the said amount; and (b) aggregate of all payments made including amount incurred for expenditure, in cash, during the previous year does not exceed five per cent of the said payment, this clause shall have effect as if for the words one crore rupees , the words 73 [ten] crore rupees had been substituted: 74 [Provided further that for the purposes of this clause, the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash; or] (b) carrying on profession shall, if his gross receipts in profession exceed fifty lakh rupees in any previous year; or (c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or (d) carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax: i) Income from business and profession : Rs. 10,758/- ii) Short term capital gain : Rs.4,13,202/- iii) Income from other sources : Rs. 2,056/- 10. The return of income further reveals that the business income returned by the assessee of Rs. 10,758/- comprised of commission income of Rs. 1,55,614/-, against which expenses were claimed and net profit of Rs. 10,758/- returned to tax. The submissions made by the assessee before the ld.CIT(A) in the appellate proceedings against the penalty levied u/s 271B of the Act reveals that the assessee had contended to have earned commission income from the sub-broker activity of shares and had also earned capital gains from the purchase and sales of shares which was accordingly returned to tax accepted. 11. Having stated the facts as above, it is now to be seen, whether in the light of the above facts, the assessee was liable to get its books of accounts audited under section 44AB of the Act, and if so, whether levy of penalty under section 271B of the Act, was justified or not. 12. The contentions of the ld.counsel for the assessee before us was that being in the business of sub-brokerage, its turnover or gross receipts to be considered, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale price of commodities transacted in. The ITAT also took note of Circular No.452 dated 17.3.1986 and found that principle laid down in the said circular relating to kachcha addtia would apply to the stock-broker also, since even the kachcha addtia works as an agent of its constituent and not as principal; that this Board Circular supports the case of the assessee, and that the transactions in the account of the constituent are to be considered for the purpose of turnover under section 44AB of the Act. The Tribunal also took note of the interpretation of word turnover as made by the Institute of Chartered Accountants of India in the context of section 44AB in its Guidance Note on tax audit under section 44AB of the Act, and found it clearly noted that shares purchased/sold by the share brokers for and on behalf of their constituent do not belong to the brokers, and therefore, the transaction cannot be considered as his transaction for treating as turnover for section 44AB of the Act. The relevant decision of the ITAT at para-5 6 are as under: 5. We have carefully considered the arguments of the learned Departmental Representative and gone through the orders of the tax authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t exceed Rs. 10 lakhs. However, if there is evidence to show that the goods have remained with him and it is he who has sold the goods to perspective buyers, then it will amount to sale or turnover and if it exceeds the limits prescribed in Section 44AB, i.e., Rs. 40 lakhs, the provision will apply. No hard and fast rule can be laid down. The determination of the question whether the commission agent has sold goods for brokerage or as seller would depend on the facts of each case. Insofar as a share broker is concerned he has no authority whatsoever to treat the goods as his own. His only interest in the goods is to receive his brokerage on the transaction from the principals. 6. Regarding the Circular No. 452, dt. 17th March, 1986, referred by the AO we may point out that by applying the principles laid down in the said circular it is evidently clear that a stock broker, like a kachcha adatia in foodgrains is merely entitled to brokerage and does not have any domain over the goods. The remuneration of a share broker, like a kachcha adatia consists solely of brokerage and he is not interested in the profits and losses made by his constituents. Similarly, like a kachcha adatia, a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the first proviso does is that, it raises the bar for getting the tax audit done from Rs. one crores to Rs. five crores, where the receipts are majorly not in cash. The proviso states that where the turnover in cash does not exceed 5% of the total turnover, then the limit for getting audit done is raised from rupees one crores to rupees five crores. Thus, in the background that 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. 17. We have gone through the order of the ld.CIT(A), and we find that despite the assessee making all the submissions, as n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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