Futures and options turnover must follow the prescribed difference-based method, preventing tax-audit penalty below the threshold.

For futures and options transactions, turnover for tax-audit purposes is computed from favourable and unfavourable differences, option premium received, and differences on reverse trades, treating each purchase-and-sale transaction independently. Aggregating the full value of transactions as turnover is inconsistent with this method. Where turnover calculated under the applicable method remains below the prescribed tax-audit threshold, failure to obtain a tax audit does not attract penalty under Section 271B. The notes state that the penalty was directed to be deleted.

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Issues: Whether penalty for failure to obtain a tax audit was sustainable where the assessee's futures and options turnover, computed under the applicable method, did not cross the tax-audit threshold.

Analysis: For futures and options transactions, turnover is determined from favourable and unfavourable differences, option premium received, and differences arising on reverse trades, with each buy-and-sell transaction treated independently. The assessment had treated the aggregate value of transactions as turnover, whereas the assessee's turnover computed on this basis was below the prescribed threshold for tax audit.

Conclusion: The penalty under Section 271B was unsustainable and was directed to be deleted, in favour of the assessee.

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