TaxTMI 
TaxTMI 
2024 (3) TMI 423
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....ties. 4. Solitary challenge in the present appeal is against confirmation of levy of penalty under section 271B of the Act of Rs. 1.50 lacs. 5. The provisions of section 271B of the Act are reproduced in the assessment order, and a perusal of the same reveals that as per the said section, penalty is levied for failure to get accounts audited in terms of provisions of section 44AB of the Act. The provisions of section 44AB are reproduced in the assessment order also, a perusal of which reveals that every person carrying on business, if his total sales/turnover exceeds a prescribed limit, which in the impugned year is rupees one crore, they are required to get the accounts audited by an accountant. 6. For the sake of clarity, both the provisions of section 271B and provisions of section 44AB are being reproduced hereunder: Failure to get accounts audited. 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, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum equal to one-half per cent of....
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....income-tax in any previous year, get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed: Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year" 7. Therefore, in the present case, the charge on the assessee for levy of penalty is not getting his books of accounts audited in terms provisions of section 44AB of the Act despite its turnover exceeding Rs. 1 Cr. The AO noted the turnover of the assessee from sale of shares as being Rs. 6,06,87,030/- and levied penalty @ ½ % of turnover amounting to Rs. 1.50 lacs 8. Before proceeding, it is relevant to note that as per section 44AB of the Act audit of the Books of accounts is prescribed when - (i) assessee is carrying on some business or ....
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....sion was to be treated as the turnover the business, and (ii) ITAT, Ahmedabad Bench in the case of ACIT Vs. Hasmukh M. Shah, 85 ITD 99 (Ahd) in an identical issue deleted the levy of penalty, holding that in the case of broker, it is the only commission income which is to be treated as turnover for the purpose of 44AB of the Act. 13. The assessee contended that since the commission income earned by it during the year admittedly was only to the tune of Rs. 1.5 lacs there was no question of the assessee being liable to get its books audited as per section 44AB of the Act and no case for levy of penalty therefore for not getting its books audited, in terms of section 271B of the Act. The ld.DR, on the other hand, has contended that the proviso to section 44AB refers to aggregate of amounts received, and therefore, contentious of the ld.counsel for the assessee that only the commission income is to be considered for the purpose of turnover, is not acceptable. And its aggregate receipts including sale turnover of shares, which was noted by the AO Rs. 6,06,87,030/- was to be considered. 14. We have gone through the decision of the ITAT, Ahmedabad Bench in the case of Ha....
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....r and on behalf of his constituents are far in excess of the ceiling limit of Rs. 40 lakhs. If such transactions are to be considered as sales and turnover of the assessee, the case would be hit by the mischief of Section 44AB. The point to be considered is the nature of function and activities of a broker or an agent who brought the seller and buyer of equity market together. In our considered opinion the word turnover, as appearing in Section 44AB is not appropriate to the transaction which is done by an agent in the way of bringing together a buyer and a seller for brokerage or commission. The commission is the charges for his labour of bringing together the two parties to the transactions of sale and purchase of shares and the transaction cannot amount to his "sale, turnover or receipts". As a share broker, the assessee does not have any interest whatsoever in the goods agreed to be purchased or sold on behalf of his constituents. In fact a share broker is subject to rules and regulations of the stock exchange, whose working is monitored and overseen by the SEBI so as to ensure transparency in the transactions entered into by the share broker on behalf of his principals. There ....
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....vices rendered by him in bringing the purchaser and seller together. Thus, the Board's circular cited by the AO rather supports the case of the assessee that the transactions in the accounts of the constituents are not to be considered for the purposes of turnover under Section 44AB." 15. In the facts in the present case also, the assessee is admittedly a share broker, therefore, the decision of the ITAT in the case of Hasmukh M. Shah(supra) will clearly apply to the present case, following which we hold that the sale consideration of the shares sold by the assessee, on which it earned commission/brokerage is not turnover, and cannot be constitute its turnover. It is only the commission income earned by it which can be rightly treated as its turnover and the income in the present case falling well below the limit prescribed by section 44AB of the Act for subjecting the Books of accounts to audit, amounting to Rs. 1,55,614/- only, there was no case for the assessee to have got its books audited in terms of provisions of the said section. In the light of the same, therefore, we find that there is no case for levy of penalty under section 271B of the Act for not getting its ....