Kaccha Arahtia turnover test under tax audit rules excludes principal sales proceeds; penalty for no audit was deleted.

For a Kaccha Arahtia, sales effected on behalf of principals are excluded from turnover for section 44AB, and only gross commission is relevant. On that basis, sale proceeds credited to the bank account could not be treated as the assessee's own turnover for audit purposes. Since the assessee's status as a Kaccha Arahtia was undisputed, the foundation for compulsory audit failed, and penalty under section 271B for not obtaining audit under section 44AB was unsustainable and deleted.

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Issues: Whether penalty under section 271B of the Income-tax Act, 1961 for failure to get accounts audited under section 44AB was leviable where the assessee acted as a Kaccha Arahtia and only commission income, not the sale proceeds of vegetables handled on behalf of principals, was to be taken into account for the audit threshold.

Analysis: The assessee was found to be a small-time commission agent acting on behalf of farmers, with sale proceeds deposited in his bank account and payments made to the farmers from the same account. The relevant CBDT Circular No. 452 dated 17.03.1986 specifically provides that, in the case of Kaccha Arahtias, the turnover does not include sales effected on behalf of the principals and only the gross commission is relevant for section 44AB. In light of that circular, the receipts credited in the bank account could not be treated as the assessee's turnover for the purpose of audit liability. Once the assessee's status as Kaccha Arahtia was not in dispute, the foundation for treating him as liable to compulsory audit failed.

Conclusion: The penalty under section 271B was unsustainable and was deleted.

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