INCOME TAX ACT, 1961

Section 271A

Penalty under section 271A - Failure to maintain books of account - Reasonable cause - Issue of turnover in case of derivative transactions

AO noted that assessee was having turnover from transactions of purchase and sale of shares of Rs. 47.86 crores but the assessee was not maintaining proper books of account. Accordingly the AO levied penalty under section 271A as well as under section 271B. Further, CIT (A) deleted the penalty under section 271B but confirmed the penalty under section 271A. Assessee submitted that the AO took the turnover in respect of derivative transactions in shares and securities by considering the total amount, instead of considering the positive and negative outcome of the derivative transactions. He further submitted that even the CIT (A) while deleting the penalty under section 271B, accepted that the assessee entered into derivative/F & O transactions and the turnover of F & O transactions was only Rs. 53,54,967 and, therefore, the assessee was not required to get his accounts audited under section 44AB. Held: It is settled that turnover in respect of derivative transactions has to be computed by taking the total sum of positive and negative outcome of the transactions instead of the total amount of the transactions. Accordingly, the turnover of the assessee was wrongly considered by the AO while levying penalty under section 271A. Even otherwise, when the issue of turnover in case of derivative transactions was a debatable issue, then the assessee could not be penalized for not maintaining the books of account as the case would definitely fall under the provision of section 273B which contemplates that no penalty shall be imposable on a person or the assessee for any failure inter alia attracting the provisions of section 271A if he proves that there was a reasonable cause for the said failure. Further, showing of the turnover by the assessee from a derivative transaction was a bona fide explanation. Accordingly, the penalty levied under section 271A was deleted.

REFERRED : Shri Santosh Kumar S/o. Shri Hari Shanker Sharma, Bharatpur v. The ITO, Ward-3, Bharatpur. [ITA No. 1093/JP/2019, dt. 3-7-2020] : 2020 TaxPub(DT) 2728 (Jp-Trib)

FAVOUR : In assessee's favour

A.Y. : 2015-16

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