The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the ICAI ICAI Guidelines for calculating turnover in transactions related to future and options can be relied on in the absence of statutory provision under the Income Tax Act, 1961.
The assessee, Shri Sanjay Marotrao Modak was aggrieved by the order of the income tax department wherein it was held that the assessee’s turnover transaction in future and option was over and above the limit prescribed in section 44AB and that the assessee’s failure to produce the report of the auditors and audited statement of accounts was liable to attract the penalty under section 271B of the Income Tax Act.
The assessee relied on ICAI guidelines in calculating the turnover from future and option and as per the said guideline, the assessee’s case would not fall under the limit for tax audit and that the levy of penalty under section 271B was erroneous.
Shri Om Prakash Kant, AM and Ms. Kavitha Rajagopal, JM observed that “the issue involved in the present scenario is the legal sanctity of guidance note issued by ICAI, for which we would like to place our reliance on the decision cited by the assessee in the case of Punjab Stainless Industries and Pact Securities and Financials Ltd, wherein it was held that the Hon’ble Apex Court has recognized ICAI as an expert body of accountants and the guidance note on tax audit issued by them can be relied upon in the absence of any statutory provision for computation of turnover in such cases.”
Allowing relief to the assessee, the ITAT held that the validity of the ICAI guidance for calculating the turnover in case of derivatives has been reiterated by various judicial precedence.
“Upon consideration of the said method of calculating the turnover in transactions related to future and options, the assessee’s case does not fall under the provisions of section 44AB of the Act which mandates auditing of books of accounts and furnishing audited statement of accounts. From the above cited decisions, and also decisions of the co-ordinate bench in case of Sachin Maratrao Rangari (supra) on identical issue, we find no merit in the order of ld. CIT(A) and we hereby delete the penalty levied u/s. 271B of the Act,” the ITAT said.
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