9911796707
TMI Blog2002 (3) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... oted that the assessee has received total brokerage from the sale purchase of shares amounting to Rs. 5,64,757. The assessee also maintained vepar account which contains speculation business done by the assessee on his own account. This account shows total turnover of Rs. 20,24,855 and net profit of Rs. 13,768 in the speculation sale and purchase of shares in the own account. Apart from this the assessee maintained separate account for the client's business and the turnover in this client's business account shown during the year aggregated to Rs. 2,63,98,538. The assessee had not got his accounts audited under the provisions of section 44AB on the ground that his total turnover did not exceed Rs. 40 lakhs. The Assessing Officer on the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year would be considered for the purposes of section 44AB. 3. Aggrieved the assessee carried the matter in appeal before the Commissioner (Appeals). The Commissioner (Appeals) referred to his decision in the case of Shri Jitendra Balabhai Shah for assessment year 1991-92 and held that the position of the stockbroker is similar to that of a kachcha adatia and in respect of transactions carried on by the stockbroker for and on behalf of his clients these would not form part of total turnover for the purposes of section 44AB. The Commissioner (Appeals) accordingly deleted the impugned penalty. The revenue is aggrieved and hence the appeal. 4. During the course of hearing the ld. DR. invited our attention to the various grounds adopted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his labour of bringing together the two parties to the transactions of sale and purchase of shares and the transaction cannot amount to his "sale, turnover or receipts". As a sharebroker, the assessee does not have any interest whatsoever in the goods agreed to be purchased or sold on behalf of his constituents. In fact a sharebroker is subject to rules and regulations of the stock exchange, whose working is monitored and overseen by the SEBI so as to ensure transparency in the transactions entered into by the sharebroker on behalf of his principals. There is no dispute that the sharebroker does not sell the goods of his principal as his own and only charges commission for bringing the two parties together for the purpose of sale and purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckbroker, like a kachcha adatia in foodgrains is merely entitled to brokerage and does not have any domain over the goods. The remuneration of a sharebroker, like a kachcha adatia consists solely of brokerage and he is not interested in the profits and losses made by his constituent. Similarly like a kachcha adatia, 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 a sharebroker does not have any interest whatsoever in the transactions except brokerage for the services rendered by him in bringing the purchaser and seller togeth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstituent do not belong to the broker and therefore the transactions cannot be considered as his transactions for the purposes of section 44AB. 8. Regarding the reference made by the Assessing Officer to the registration fee levied by SEBI on the basis of total transactions entered into by the sharebroker including the clients account, we may point out that this would not per se govern the connotation of the expression 'turnover' for the purposes of section 44AB. The object and purpose of introducing section 44AB in the Income-tax Act is not to collect revenue from the assessees unlike in the case of SEBI when it levies registration fee on the sharebrokers. 9. It would be useful to refer to the format of Form No. 3CD which contains the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee would have to be considered under the provisions of section 273B whether there is a reasonable cause for not getting the accounts audited. We find that the assessee deserves to succeed on this alternative ground also. A bona fide belief if held by the assessee that provisions of section 44AB did not apply in his case would absolve the assessee from the default under section 273B. The expression "reasonable cause" would have to be considered by applying the test of preponderance of probabilities and the assessee is not required to prove its case beyond reasonable doubt. Now in the instant case there have been decisions by the Tribunal regarding non-application of section 44AB in respect of transactions in the accounts of the consti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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