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2023 (3) TMI 81 - AT - Income TaxPenalty levied u/s 271B - Turnover of the assessee was beyond the limit prescribed u/s 44AB of the Act and that the assessee has failed to submit the report of the auditors and audited statement of accounts and that the same leads to contravention of provision of section 44AB - Assessee argued CIT(A) has erred in confirming the penalty without considering the guidelines of ICAI in the working of turnover in future and option - HELD THAT:- The most commonly prevalent derivative transaction is future and options commonly known as F & O and in case of calculation of tax for such transaction, the total turnover or gross receipts in the previous year are to be taken into consideration. Section 44AD of the Act prescribes a percentage of such total turnover as gross receipts to be calculated for levying tax. In the common parlance turnover as per Companies Act, 2013 means that aggregate value of the realization amount made from sale, supply or distribution of goods or on account of services rendered or both, by a company during the financial year. This interpretation does not hold good in case of F & O transactions where there are neither physical goods involved nor any delivery of shares or securities involved in the said transaction. The entries in the books of accounts of such transactions are not made on the contracted notes issued, but are made only of the differences. For the said purpose, the Institute of Chartered Accountant of India has prescribed the method of computing the turnover in such cases through ‘Guidance Note on Tax Audit’. 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 [2014 (5) TMI 238 - SUPREME COURT] and Pact Securities and Financials Ltd [2002 (3) TMI 221 - ITAT HYDERABAD-A] 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. 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 which mandates auditing of books of accounts and furnishing audited statement of accounts. Appeal filed by the assessee is allowed.
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