Case Law Details
Parag Jain Vs ITO (ITAT Delhi)
In an appeal filed by Parag Jain against the ITO, the Income Tax Appellate Tribunal (ITAT) Delhi has ruled that only the difference in non-delivery derivative transactions should be taken into account when determining turnover for a tax audit under Section 44AB of the Income Tax Act. The case revolved around the imposition of a penalty under Section 271B of the Act.
The tribunal agreed with the argument made by the assessee’s counsel, which referred to the ICAI’s Guidance Note on Tax Audit under Section 44AB. According to this note, only the resultant difference from derivative and speculative transactions should be counted towards turnover, not the gross amount. The ITAT found that the Assessing Officer had incorrectly adopted the gross amount, leading to an inflated turnover. Despite the assessee’s lack of cooperation with the lower authorities, the tribunal noted that the total turnover according to the Guidance Note was significantly lower than the threshold limit prescribed under Section 44AB. This led to the deletion of the penalty as the assessee had shown a reasonable cause for non-compliance with Section 44AB provisions.
This judgment by the ITAT Delhi brings much-needed clarity to the interpretation of turnover for tax audit under Section 44AB, particularly for non-delivery derivative transactions.
FULL TEXT OF THE ORDER OF ITAT DELHI
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