Penalty 271A cannot be sustained when assessee was not covered under Rule 6F assessee furnished adequate information to enable AO to compute income
ABCAUS Case Law Citation:
ABCAUS 2951 (2019) (05) ITAT
Important Case Laws Cited/relied upon by the parties
Mehta Parvesh vs. ITO [1998] 60 TTJ (Del) 278
ACIT Vs. M/s Arora and Bharat Associates
The instant appeal was filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals) arising out of penalty order passed by the Assessing Officer (AO) u/s 271A of the Income Tax Act, 1961 (the Act).
It was noticed that the assessee had made high value transaction in futures (derivative) in recognized stock exchange. Such transactions were considered business in nature.
The business turnover of the assessee for the relevant financial year exceeded the financial limit for maintaining books of accounts u/s 44AA of the Act.
The AO was of the view that though the assessee had filed his return in ITR-2, the assessee had responsibility to maintain books of accounts and get them audited as the transactions were of business nature, voluminous and exceeded the limit mentioned in section 44AB for getting them audited.
As assessee failed to do so therefore notice u/s 271A was issued to him initiating penalty proceedings.
The assessee submitted that he invested in shares and carried out the share and future and option transaction through three different recognized brokers and the transaction statement had already been submitted showing the profit or loss earned or incurred by the assessee.
Itw as further submitted that the assessee neither had any infrastructure for doing business nor any personnel deployed for business in the, office, As such the assessee did have any business set up, so he had not maintained any books of accounts on its own but his accounts were maintained by recognized broker on behalf of him.
The Assessing Officer noted that as per the decision relied upon by the assessee in case of transactions without delivery like commodity transaction, the amount of turnover for the purposes of section 44AB of the Act shall be only profit and loss and not the whole turnover embedded therein. In the case of the assessee even in the light of above decision the assessee was liable to maintain books of accounts and get them audited as his total turnover was in excess of limit envisaged in section 44AA of the Act.
The AO also noted that in the instant case the aggregate figure of profits and losses i.e. favourable and unfavourable balances of assessee’s transactions in Future (derivatives) was also in excess of the limits u/s 44AA for maintaining books of accounts.
In view of above, Assessing Officer was satisfied that it was a fit case for imposition of penalty u/s 271A of the Act. Considering the facts and circumstances of the case, he imposed a penalty Rs. 25,000/- on the assessee u/s 271A
The CIT(A) confirmed the penalty imposed by the Assessing Officer.
The Tribunal noted that the main reason to impose the penalty u/s 271A was that the figures shown in the profit & loss account i.e. favourable and unfavourable balances of assessee’s transaction in future derivatives was found to be exceeding the limit envisaged in section 44AA of the Act for maintaining books of accounts.
The AO had imposed the penalty since the assessee had failed to maintain the books of accounts u/s 44AA of the Act.
The Tribunal noted that on the similar issue, the Hon’ble High Court had held that SThe CNDT has been authorised to prescribe by rules the books of accounts and other documents to be kept and maintained and the particulars to be contained therein and the form and the manner in which and the place at which such books of accounts shall be kept and maintained.
The Hon’ble High Court further observed that the Board had not prescribed any rule so far as persons deriving income from business but it has only prescribed Rule 6F requiring the persons deriving income from profession to maintain the specified books of accounts.
The Hon’ble High Court held that since the Board has not prescribed the necessary rules relating to maintenance of accounts by the persons carrying on business, and as the assessee had furnished adequate information, so as to enable the AO to compute his total income in accordance with the provisions of this Act, the penalty levied under s. 271A could not be sustained.
Following the judgment of the Hon’ble High Court the Tribunal deleted the penalty.
