AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 24
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....Rs. 82,26,82,172/-. Thus the assessee was liable to get his accounts audited and furnish Audit Report u/s. 44AB of the Act, as the assessee has failed to get his books audited, the assessee shall be deemed to be in default and penalty u/s. 271B is initiated. 2.1. The assessee vide show cause notice dated 04.12.2018 issued as to why u/s. 271B penalty not be levied. In response the assessee vide its reply dated 08.12.2018, invited the kind attention of the Assessing Officer to the CBDT Circular No. 6/2016 dated 29.02.2016 which clarified the tax payers to decide whether the gains or losses from sale of listed shares/securities should be treated as business income or as capital gain for tax purposes. The tax payers had given an option to decide to treat the income arising from such transfer as business income or capital gains and the A.O. was not put it to dispute. Further the assessee was of the bonafide belief that in case of shares, cash and commodity trading only the net result considering the profit or loss shall be considered as turnover, as the assessee believed the same are also for securities. As the assessee computed the net loss arising from the sale of shares and commodit....
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....erence paid is not related to the amount received on account of positive difference. In such transactions though the contract notes are issued for full value of the purchased or sold asset the entries in the books of account are made only for the differences. Accordingly, the aggregate of both positive and negative differences is to be considered as the turnover of such transactions for determining the liability to audit vide section 44AB. (b) Derivatives, futures and options; such transactions are completed without the delivery of shares or securities. These are also squared up by payment of differences. The contract notes are issued for the full value of the assets purchased or sold but entries in the books of account are made only for the differences. The transactions may be squared up any time on or before the striking date. The buyer of the option pays the premia. The turnover in such types of transactions is to be determined as follows. (i) The total of favourable and unfavourable differences shall be taken as turnover. (ii) Premium received on sale of options is also to be included in turnover. (iii) In respect of any reverse trades entered, the difference thereon, s....
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....lowing grounds: 1. That the learned CIT(Appeals) has grievously erred in contending that the turnover in cases of speculative transactions involving derivatives is not defined in section 44AB and therefore normal meaning of "turnover" as is generally understood is to be applied. 2. That the learned CIT(Appeals) has grievously erred in contending that the total turnover /gross receipts of the appellant from the transaction (Rs 82,26,82,172.32/-) as computed by the AO has to be considered as turnover for the purpose of section 44AB of the Act. 3. That the learned CIT(Appeals) has grievously erred in not considering the guidance note as issued by the Institute of Chartered Accountants of India (ICAI). 4. That the Learned CIT(Appeals) has grievously erred in upholding the action of the learned AO in levying penalty u/s.271B of the Income Tax Act, 1961. 5. Kindly stay the demand during pendency of the appeal. 5. Ld. Counsel Mr. Fenil Mehta reiterated the arguments made before the lower authorities and strongly relied upon by the guidelines issued by the Institute of Chartered Accountants of India (ICAI) and relied upon judgment of Hon'ble Supreme Court in the case of CIT vs. ....
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....cannot amount to his 'sale, turnover or receipts'. As a sharebroker, an assessee does not have any interest whatsoever in the goods agreed to be purchased or sold on behalf of his constituents. There is no dispute that the sharebroker does not sell the goods of his principal as his own and only charges commission for bringing the two parties together for the purpose of sale and purchase. A sharebroker has no authority whatsoever to treat the goods as his awn. His only interest in the goods is to receive his brokerage on the transaction from the principals. The sharebroker would, therefore, not obviously come within the ambit of section 44AB. Regarding the Circular No. 452, dated 17-3-1986, it may be pointed out that by applying the principles laid down in the said circular, it is clear that a stockbroker, like a kachcha arathia in foodgrains is merely entitled to brokerage and does not have any domain over the goods and is not interested in the profits and losses made by his constituent. Similarly, like a kachcha arathia, a stockbroker acts only as an agent of his constituent and never acts as a principal. So -whatever be the modalities of the transactions for the purch....
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....al Fund is Rs. 48,43,374/- which does not exceed Rs. 1 crore specified u/s. 44AB of the Act for the present Assessment Year 2016-17. Therefore the assessee is not liable to get his books audited and furnish audited report u/s. 44AB of the Act and consequently penalty cannot be levied u/s. 271B of the Act. The imposition of penalty under section 271B of the Act is not mandatory, rather it is discretionary, because if the assessee proves that there was a "reasonable cause" for the said failure, then the Assessing Officer ought to have considered the same and then proceed with levying penalty. For better understanding, Section 271B is extracted as follows: 271B. If any person fails to get his accounts audited in respect of any previous year or years relevant to an assessment year or [furnish a report of such audit as required under section 44AB], [Assessing] Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such previous year or years or a sum of [one hundred fifty thousand rupees], whichever is less.] 7.1. A pe....