Case Law Details
Sachin Marotrao Rangari Vs ACIT (ITAT Rajkot)
The assessee vide its reply letter dated 08.12.2018 brought to the attention of the A.O., CBDT Circular No. 6/2016 which clarified the tax payers to choose whether the gains or losses from sale of listed shares/securities either should be treated as Business Income or Capital Gains. Further the assessee is of the bonafide belief that the net result in the trading of shares, cash and commodity shall be considered as “turnover” as per the Guidance Note issued by the Institute of Chartered Accountants of India (ICAI). Thus the total turnover from Derivatives, Equity Shares and Mutual Fund is Rs. 48,43,374/- which does not exceed Rs. 1 crore specified u/s. 44AB of the Act for the present Assessment Year 2016-17. Therefore the assessee is not liable to get his books audited and furnish audited report u/s. 44AB of the Act and consequently penalty cannot be levied u/s. 271B of the Act. The imposition of penalty under section 271B of the Act is not mandatory, rather it is discretionary, because if the assessee proves that there was a “reasonable cause” for the said failure, then the Assessing Officer ought to have considered the same and then proceed with levying penalty.
A perusal of the above provision shows that the Parliament has used the words “may” and not “shall”, thereby making their intention clear in as much as that levy of penalty is discretionary and not automatic. The said conclusion is further justified by Section 273B of the Act namely “penalty not to be imposed in certain cases”. A careful reading of Section 273B encompasses that certain penalties “shall” be imposed in cases where “reasonable cause” is successfully pleaded. It is seen that penalty imposable u/s 271 B is also included therein. By the said provisions, the Parliament has unambiguously made it clear that no penalty “shall be” imposed, if the assessee “proves that there was a reasonable cause for the said failure”. As noticed, if the statutory provision shows that the word “shall” has been used in Section 271B, then the imposition of penalty would have been mandatory. Section 271B as extracted above further throws light on the legislative intent as it specifically provides that no penalty “shall’ be imposed if the assessee proves “that there was reasonable cause for the said failure”.
Hon’ble Supreme Court in the case of Punjab Stainless Steel Industries (cited supra) recognize the Guidance Note issued by ICAI. The Jurisdictional High Court in the case of Sachinam Trust (cited supra) also held that the appropriate expression to be considered for deciding the applicability of the provisions of section 44AB would be the term ‘gross receipts’, the assessee, carrying on the business of financing, bona fidely believed that gross receipts of interest, and not gross amount of advances, would constitute the basis for ascertaining the limit of Rs. 40 lakhs so as to attract section 44AB, the assessee could be said to have a reasonable cause for not getting its accounts audited under section 44AB, and as such no penalty could be imposed on the assessee.
It is seen that the explanations offered by the assessee have been ignored by the Assessing Officer as well as Ld. CIT(A) on the ground that the Guidance Note issued by the ICAI is not binding on the Income Tax Authorities whereas the Hon’ble Supreme Court and Co-ordinate Bench of the Tribunal recognizes the same and applicable in the case of the assessee.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
