Speculative commodity trading without delivery does not create turnover for audit threshold purposes, so audit penalty may not apply.

Speculative online commodity trading settled only by price differences, with no delivery of goods, was treated as not generating turnover in the legal sense for section 44AB audit purposes. On that basis, the assessee was not required to get accounts audited within the specified threshold, and the penalty under section 271B for failure to do so was held not to apply and was deleted.

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Issues: Whether the assessee, engaged in speculative online trading in commodities without physical delivery, had any turnover for the purpose of section 44AB of the Income-tax Act, 1961, so as to attract penalty under section 271B of the Income-tax Act, 1961 for getting the accounts audited within time.

Analysis: The activity involved booking of commodities on a speculative basis, with no delivery of goods given or taken and settlement only by the difference in price. In such a case, the concept of turnover had to be examined in legal sense. Applying the reasoning that in speculative transactions without transfer of property there is no sale in the legal sense, the amount of sauda booked could not be treated as turnover for the purpose of the audit threshold under section 44AB. Since the assessee was not liable to get the accounts audited on that basis, the penal provision under section 271B was not attracted.

Conclusion: The penalty under section 271B was not sustainable and was deleted.

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