Turnover for audit purposes excludes difference-settled futures contracts without delivery, so no audit or penalty applies.

"Turnover" under section 44AB of the Income-tax Act is to be understood in its commercial sense as sale proceeds, not the notional contract value of a difference-settled futures transaction. Where units were neither delivered nor transferred in property under the Sale of Goods Act, 1930, and the contract was settled only by payment of the difference, no actual sale proceeds arose from the assessee's trading activity. On that basis, the contract values could not be treated as turnover; the audit threshold was not crossed, and no liability arose for compulsory audit or penalty under section 271B.

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Issues: Whether the assessee's purchase and sale of units, settled only by payment of the difference without delivery, constituted turnover for the purpose of section 44AB of the Income-tax Act, 1961, so as to attract compulsory audit and penalty under section 271B of the Income-tax Act, 1961.

Analysis: The expression "turnover" is not defined in the Income-tax Act, 1961, and must be understood in its commercial sense as sale proceeds of goods. On the facts, the assessee had not obtained delivery of the units and no property in the units had passed to it under the Sale of Goods Act, 1930, because the contract related to future and unascertained goods. The transaction was settled only by crediting the difference amount, and no actual sale proceeds arose from the assessee's own trading activity. In those circumstances, the contract values mentioned in the notes could not be treated as turnover. Since no turnover exceeded the statutory threshold, the obligation to get accounts audited under section 44AB did not arise, and the penalty based on alleged default was unsustainable.

Conclusion: The transaction did not constitute turnover within section 44AB of the Income-tax Act, 1961, and the assessee was not liable for audit or penalty under section 271B of the Income-tax Act, 1961.

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