2000 (11) TMI 277 - AT - Income Tax

Assessee wins appeal against penalty for turnover inclusion in tax assessment

The Appellate Tribunal allowed the appeal filed by the assessee against the penalty imposed under section 271B for the assessment year 1990-91. The ... Penalty under section 271B - Reasonable cause for failure to get accounts audited - Interpretation of turnover for section 44AB - commission versus principal turnover - Board's Circular No. 452 (kaccha arathia) - exclusion of principal sales for applicability of section 44ABPenalty under section 271B - Reasonable cause for failure to get accounts audited - Interpretation of turnover for section 44AB - commission versus principal turnover - Whether penalty under section 271B was justified for failure to get accounts audited for assessment year 1990-91. - HELD THAT: - The Tribunal held that the assessee, a sub-broker earning commission income, could reasonably and bona fide believe that the turnover comprising sales and purchases of shares effected on behalf of clients through the assessee did not constitute the assessee's turnover for purposes of determining the applicability of section 44AB, and that only the commission should be taken into account. That bona fide belief was supported by Board's Circular No. 452 regarding 'Kaccha Arathia' and by the Department's practice in earlier and subsequent assessments where no penalty under section 271B was initiated. On these facts the Tribunal concluded that a reasonable cause existed within the meaning of section 271B, rendering the levy of penalty unjustified and warranting its cancellation.Penalty levied under section 271B is cancelled; appeal allowed.Final Conclusion: The Tribunal allowed the appeal and directed the assessing officer to cancel the penalty under section 271B for assessment year 1990-91, holding that the assessee had a bona fide and reasonable belief that only commission income, and not the principal turnover of shares transacted on behalf of clients, was relevant for determining applicability of section 44AB. Issues involved: Appeal against penalty under section 271B for assessment year 1990-91.Summary:The appeal was filed by the assessee against the penalty imposed under section 271B for the assessment year 1990-91, which was confirmed by the CIT(A). The assessee, a sub-broker of shares earning income through commission, argued that the turnover of dealings in shares made on behalf of buyers and sellers should not be considered for determining applicability of section 44AB. The assessee cited a Board's Circular to support this argument. The Departmental Representative supported the CIT(A)'s order.After considering the submissions, the Appellate Tribunal found no justification for the penalty under section 271B. The Tribunal noted that the assessee had a bona fide belief that the turnover of share dealings should not be included for section 44AB applicability, especially since no penalty proceedings were initiated in past assessments. This belief was considered a reasonable cause under section 271B, leading to the cancellation of the penalty. Consequently, the appeal was allowed.