ITAT Deletes Penalty on Share Broker for Failure to Submit Tax Audit Report:

ITAT Deletes Penalty on Share Broker for Failure to Submit Tax Audit Report The Income Tax Appellate Tribunal (ITAT), Delhi, ruled in favour of a share broker by quashing a penalty of Rs 1.5 lakh related to the non-submission of a tax audit report under section 271B of the Income Tax Act for AY 2010-11. The assessee, Brijesh Kumar Goswami, was engaged in the business of stock and share advisors. The Income Tax Officer had levied a penalty under section 271B of the Income Tax Act on the assessee for not furnishing a tax audit report under section 44AB, even though he earned brokerage income of more than Rs 40 lakh from a gross turnover of over Rs 4,09,34,234. The assessing officer contended that the assessee's income exceeded Rs 40 lakh, so he was required to file a tax audit report. The National Faceless Appeal Centre (NFAC) upheld the penalty. However, the assessee submitted that he was a sharebroker and had earned the brokerage income for acting as a sharebroker on behalf of his clients. He argued that since the transactions were made on his own behalf or on his client's behalf, he is not liable for the tax audit under section 271B of the Act.

Also Read

Allahabad ITAT Deletes Section 271B Penalty for Absence of Books of Accounts

The ITAT criticised the NFAC and the AO for not verifying the claim of the assessee being a sub-broker. Both failed to check whether the transactions were made by the assessee as a sub-broker or not. The assessee also cited a CBDT Circular No. 452 dated 17-3-1986, which stated that a "kachha arahtia" (a sub-broker) should only consider brokerage income, not the full turnover, for determining turnover. The tribunal accepted this argument and ruled that the assessee was not required for a tax audit, and it deleted the Rs 1.5 lakh penalty levied under section 271B of the Income Tax Act.