Sale Consideration of Shares Not to Be Considered as Turnover of Share Broker | ITAT

Case Details: Parag Hashmukhbhai Davda v. ITO - [2024] 161 taxmann.com 307 (Rajkot - Trib.)

Judiciary and Counsel Details

• Smt. Annapurna Gupta, Accountant Member & T.R. Senthil Kumar, Judicial Member
• Rajendra Singhal, Ld. AR for the Appellant. 
• Ashish Kumar Pandey, DR for the Respondent.

Facts of the Case

Assessee, an individual, was engaged in the business of share trading and earned commission income from the sub-broker activity of shares. During the relevant year, the assessee’s income from share trading and commission income were accepted in the scrutiny assessment. The assessee filed the return of income without getting the books of accounts audited.

The Assessing Officer (AO) levied a penalty under section 271B as the assessee failed to get his books of accounts audited in terms of section 44AB. In the penalty order, the AO considered the turnover from the sale of shares to be Rs. 6,06,87,030 and levied a penalty of Rs. 1,50,000.

The matter reached the Rajkot Tribunal.

ITAT Held

The Tribunal held that the assessee was engaged in the business of sub-brokerage, and its turnover or gross receipts to be considered for determining whether it was liable to get its books audited under section 44AB was to be confined only to the commission income earned by it.

The sale consideration of the shares sold by the assessee, on which it earned commission/brokerage, is not turnover and cannot constitute its turnover. The assessee’s commission income was Rs. 1,55,614, and the income in the present case falls well below the limit prescribed by section 44AB.

Thus, there was no case for the assessee to have had its books audited in terms of provisions of section 44AB. Therefore, there is no case for levy of penalty under section 271B for not getting the books audited under section 44AB.

List of Cases Reviewed

• ACIT v. Hasmukh M. Shah, 85 ITD 99 (Ahd) (para 14) followed.

List of Cases Referred to

• Asstt. CIT v. Hasmukh M. Shah [2003] 85 ITD 99/80 TTJ 323 (Ahmedabad – ITAT) (para 12).