Mere cash deposits not constitutes turnover for Section 44AB Audit: ITAT Delhi

Mohd Javed Vs ITO (ITAT Delhi)

In Mohd Javed vs. Income Tax Officer (ITO), the Delhi ITAT addressed an appeal concerning a penalty under Section 271B of the Income Tax Act, imposed due to unreported turnover. Javed, a commission agent for the Gujarat Milk Cooperative Federation, reported a nominal turnover of ₹4.01 lakh in his tax return, while cash deposits of ₹4.3 crore appeared in his bank account. The revenue authorities treated these deposits as turnover, thereby requiring an audit under Section 44AB, and subsequently imposed a penalty for non-compliance. Javed contended that the cash deposits represented transactions handled on behalf of the principal (Gujarat Milk Cooperative Federation), where he earned a commission based on a predetermined margin rather than sales. He argued that the deposited amounts should not be considered his own turnover, as he was simply an intermediary. The ITAT examined the case details, noting that Javed’s earnings were solely commission-based, as supported by the cooperative’s rules and records. Accepting that the cash deposits did not constitute personal turnover, ITAT concluded that Javed was not subject to audit under Section 44AB. Consequently, the tribunal dismissed the penalty levied under Section 271B, ruling in favor of the assessee.

FULL TEXT OF THE ORDER OF ITAT DELHI