Brijesh Kumar Goswami Vs ITO (ITAT Delhi)
Brokerage Is Turnover, Not Client Trades: ITAT Delhi Deletes 271B Penalty on Sub-Broker
Delhi ITAT deleted the penalty of ₹1.50 lakh u/s 271B, holding that a share sub-broker’s turnover for the purpose of section 44AB is only the brokerage income and not the gross value of trades executed on behalf of clients.
The Tribunal noted that the assessee acted merely as a sub-broker/agent for various main brokers and earned brokerage of about ₹9.70 lakh, while the gross trading value of ₹4.09 crore represented client transactions. The AO and NFAC had levied penalty without conducting any basic verification with the principal brokers to ascertain whether the assessee traded on his own account. Relying on CBDT Circular No. 452 dated 17-03-1986, the ITAT held that the assessee’s role was akin to a kachha arahtia, where only commission income constitutes turnover. Since brokerage did not exceed the audit threshold, tax audit u/s 44AB was not required, and consequently, penalty u/s 271B was unsustainable. The appeal was accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No.2414/Del/2025 for AY 2010-11, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] dated 12.02.2025 against the order of assessment passed u/s 271B of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 25.11.2021 by the Assessing Officer, NFAC, Delhi (hereinafter referred to as ‘ld. AO’).
