TMI Blog2000 (6) TMI 774X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal, quite contrary to the rules, are narrative and argumentative and run into 18 pages. The assessee has placed on record, the synopsis of grounds of appeal at page 1 of the paper book. For the purposes of disposing off these appeals, we shall keep the synopsis of the grounds in view. The grounds in the synopsis are also eight in number. However, they revolve around a central issue as to whether the assessee is liable to get its accounts audited under section 44AB of the Income-tax Act, 1961 ( the Act ), and if so, whether the penalty of Rs. 1,00,000 levied by the Assessing Officer under section 271B of the Act is justified or not. 2. The facts in brief are as under : The assessee is a private limited company. For the year under consideration, assessee purchased 53 lakh units of Unit Trust of India, 1964 Scheme. The date of purchase as per the contract note of the broker is 21-8-1989 and the contract note specifies the date of delivery as 30-9-1989. The units were purchased at the rate of Rs. 13.785 per unit which makes the total value at Rs. 7,34,05,000. By way of another contract dated 29-9-1989, assessee sold these units at a price of Rs. 13.850 per unit. For this contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent as contemplated in the said circular. In the course of penalty proceedings, assessee also relied on the decision of the Mumbai Bench of the Tribunal in the case of Royal Cushion Vinyl Products Ltd. [IT Appeal No. 7859 (Bom.) of 1992 dated 8-1-1993] wherein the difference in sale and purchase of shares was not treated as turnover. The Assessing Officer rejected this contention of the assessee also by stating that the department had not accepted this decision of the Tribunal and moreover, it related to section 80HHC where the meaning of turnover is different than the turnover mentioned in section 44AB. Thus, in view of the above facts, penalty of Rs. 1,00,000 was levied in each of the three cases before us. 3. CIT(A) confirmed the penalty on the following grounds : (a)The main point, according to him, was that the company had acted as the principal and that it had purchased and sold 53 lakhs units valued over Rs. 7.00 crores through its broker. (b)It was not a speculative transaction as the transaction had been settled by delivery of the units; (c)According to the CIT(A), the definition of turnover under the Sale of Goods Act or for the purposes of interpretation of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee was under a bona fide belief that it was not liable for audit and an affidavit to this effect is placed on record. 5. Mr. R.G. Sharma strongly relied on the advice dated 30-9-1989 issued by M/s. Harshad S. Mehta to the assessee. The advice mentioned about having credited assessee s account by the difference of Rs. 3,44,500. The advice also contained the details of the transaction from which the difference of Rs. 3,44,500 arose. In it, the transaction was described as purchase and sale respectively. Thus, it was contended by Mr. Sharma that the difference had emerged from the purchase and sale of units and not from the sky. Even speculative transaction required audit under section 44AB. There was no escape from it and hence the penalty was rightly confirmed by the CIT(A), more so when even till date the audit was not carried out. 6. In his reply, Mr. Mehta submitted that when the accounts were subjected to statutory audit under the Companies Act, there was no question of running away from another such statutory obligation, if there was any. It was because the assessee held a bona fide belief that its turnover did not exceed Rs. 40 lakhs, audit under section 44AB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the term goods nor turnover are defined in the Act. Of course, we do find the terms export turnover and total turnover defined in clauses (b) and (ba) respectively of the Explanation to section 80HHC of the Act. Export turnover is defined to mean the sale proceeds of goods exported out of India excluding freight or insurance. Similar is the meaning ascribed to the term total turnover . Of course, for the present appeals we are not concerned with the exclusions of certain items specified in those clauses from the sale proceeds. In general, turnover is meant to be the sale proceeds of the goods sold. In other words, commercially it would mean the amount of money turned over or drawn in a business, in a given time (page 1923 of The Law Lexicon by P. Ramanatha Aiyar - 1997 edition). Since the term turnover is not specifically defined in the Act, nor specially for the purpose of section 44AB, its meaning should be taken as commercially and commonly understood - which we have already discussed above. 9. If this meaning is applied to the facts of the case, it cannot be said that assessee has turned over the money to the extent of Rs. 7 crores as contended by the department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 dated 12-2-1997] has on similar facts held that the amount of transactions as noted in the contract notes cannot be taken as turnover of the assessee. The Tribunal also relied on the decision of the Tribunal in the case of Royal Cushion Vinyl Products Ltd. (supra) and observed that though the said decision was rendered in the context of section 80HHC, the principle laid down in that case would equally apply to the facts obtaining to the case in hand. 12. In the present case, the transaction of buying and selling the units was a speculative transaction. No delivery has taken place. The account has been settled only by crediting the difference which is duly reflected in the profit and loss account. No other activity has been carried out by the assessee. In view of the foregoing discussion, and also respectfully following the decisions of the Tribunal cited supra, we hold that no turnover was effected at all by the assessee and hence was not liable to get the accounts audited under section 44AB of the Act and hence the penalty confirmed by the CIT(A) is deleted. 13. In the case of Growmore Exports Ltd. [IT Appeal No. 5893 (Mum.) of 1995] and Aatur Holdings (P.) Ltd. [IT Appeal N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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