Sahil Gupta Vs DCIT (ITAT Delhi)
ITAT Delhi Deletes Penalty u/s 271A – F&O Turnover to be Computed as per ICAI Guidance, Not AO’s Method
ITAT Delhi Deletes Penalty u/s 271A – F&O Turnover to be Computed as per ICAI Guidance, Not AO’s Method Delhi Tribunal deleted penalty of ₹25,000 levied u/s 271A for alleged failure to maintain books of account in respect of F&O trading.
Assessee, engaged in trading of derivatives & speculation, filed return declaring income of ₹4.92 lakh. AO, however, computed income at ₹30.31 lakh treating entire F&O transactions of ₹55.64 crore as turnover, whereas Assessee contended that as per ICAI’s Guidance Note, the actual turnover was only ₹29.28 lakh (F&O) & ₹2.87 lakh (speculation). AO held that assessee was required to maintain books u/s 44AA, & for failure to do so levied penalty of ₹25,000 u/s 271A. CIT(A) confirmed the penalty.
Before ITAT, assessee submitted that ICAI’s method of turnover computation for derivatives-based on aggregate of favourable & unfavourable differences, option premium & reverse trades- was binding in absence of statutory formula under the Act. It was further argued that proper P&L & balance sheet were maintained, & that there was reasonable cause under s.273B.
Tribunal noted that the Income-tax Act itself does not prescribe a method to compute turnover in F&O transactions, while ICAI’s Guidance Note (2022, revised 2023) specifically clarifies the methodology. Since assessee had followed ICAI guidance & maintained relevant financial statements, there was a reasonable cause for not maintaining books in the manner presumed by AO. Thus, levy of penalty u/s 271A was unjustified. Accordingly, ITAT deleted the penalty & allowed the appeal, granting consequential relief to Assessee.
