R. Wadiwala and Co. Vs. Asstt. Cit - Court Judgment

Excerpt:
this appeal by the assessee is directed against the order passed by the learned commissioner (appeals) confirming the penalty of rs. 1,00,000 levied under section 271b for assessment year 1990-91.shri manish j. shah, the learned advocate appearing on behalf of the assessee contended that the assessee is doing the business of sub-broker of shares and derives income by way of commission only.except in assessment years 1989-90 and 1990-91 the income tax department never considered the assessee liable for getting its accounts audited under section 44ab as the commission income did not exceed rs. 40 lakhs. the department did not take into consideration the total turnover of dealings in turnover made through the assessee in their capacity as sub-broker as that turnover does not belong to the assessee but it represents the sale or purchase of share by the respective buyers and sellers through the assessee (sub-broker). he also relied on board's circular no. 452, dated 17-3-1986 wherein the board has given clarification in respect of 'kaccha arathia" stating that only the commission is to be considered for purposes of determining the applicability of section 44ab and the sales made on behalf of the principles should not be taken into consideration.the learned departmental representative supported the order of the commissioner (appeals).we have considered the submissions made by the learned representatives of the parties and have perused the orders. in our view, there is no justification for levy of penalty under section 271b on the facts and circumstances of the case. the assessee could entertain a bona fide belief that the turnover of dealings in shares made on behalf of various buyers and sellers of shares through the assessee in their capacity as sub-broker is not includible for determining the applicability of section 44ab of the act. such a bona fide belief was further fortified by the fact that in several past assessments and the assessments for subsequent years the assessing officer himself has not initiated any penalty proceedings under section 271b. such a bona fide belief constitutes a reasonable cause within the meaning of section 271b which justifies cancellation of penalty levied under the aforesaid facts and circumstances. accordingly, we direct the assessing officer to cancel the penalty.

Judgment:
This appeal by the assessee is directed against the order passed by the learned Commissioner (Appeals) confirming the penalty of Rs. 1,00,000 levied under section 271B for assessment year 1990-91.

Shri Manish J. Shah, the learned advocate appearing on behalf of the assessee contended that the assessee is doing the business of sub-broker of shares and derives income by way of commission only.

Except in assessment years 1989-90 and 1990-91 the Income Tax Department never considered the assessee liable for getting its accounts audited under section 44AB as the commission income did not exceed Rs. 40 lakhs. The department did not take into consideration the total turnover of dealings in turnover made through the assessee in their capacity as sub-broker as that turnover does not belong to the assessee but it represents the sale or purchase of share by the respective buyers and sellers through the assessee (sub-broker). He also relied on Board's Circular No. 452, dated 17-3-1986 wherein the Board has given clarification in respect of 'Kaccha Arathia" stating that only the commission is to be considered for purposes of determining the applicability of section 44AB and the sales made on behalf of the principles should not be taken into consideration.

The learned Departmental Representative supported the order of the Commissioner (Appeals).

We have considered the submissions made by the learned representatives of the parties and have perused the orders. In our view, there is no justification for levy of penalty under section 271B on the facts and circumstances of the case. The assessee could entertain a bona fide belief that the turnover of dealings in shares made on behalf of various buyers and sellers of shares through the assessee in their capacity as sub-broker is not includible for determining the applicability of section 44AB of the Act. Such a bona fide belief was further fortified by the fact that in several past assessments and the assessments for subsequent years the assessing officer himself has not initiated any penalty proceedings under section 271B. Such a bona fide belief constitutes a reasonable cause within the meaning of section 271B which justifies cancellation of penalty levied under the aforesaid facts and circumstances. Accordingly, we direct the assessing officer to cancel the penalty.