TMI Blog2000 (5) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ed gross freight receipts in the profit and loss account, which was filed alongwith the return of income. In response to said notice, the assessee vide its letter dated 8-2-1996 stated that it is a transport booking agent and commercial vehicles/trucks are being arranged from the market for carrying goods to different places and in lieu of these services, normal commission was being charged from the said truck owners which was shown in the profit and loss account as commission income. In support of above, the assessee furnished a copy of commission account, freight and octroi account and also addresses of those parties for whom such freight work was done. It was further stated that the parties whose goods are mainly handled are M/s. JCT Ltd. Hoshiarpur, M/s. Mahavir Spinning Mills Ltd., Hoshiarpur, M/s. Hawkins, Cookers Ltd., Hoshiarpur and M/s. OPT Eng. Consultants Pvt. Ltd., New Delhi. It was also claimed that whatever freight is charged from these parties by the assessee is paid to the individual truck owners who actually carried the goods, and they are only charged commission for arranging the booking of their trucks. According to the Assessing Officer, the total freight charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was prevented by sufficient cause in not furnishing the audit report alongwith its return of income. He accordingly deleted the penalty imposed by the Assessing Officer. 5. Before us, Shri S.C. Pahwa, the learned D.R. strongly supported the order of the Assessing Officer and he further submitted that the learned CIT(A) was not justified in relying upon the decision of the Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. According to him, the assessee cannot take this plea that he does not know the law of the land. He, therefore, submitted that considering the assessee's nature of business and the gross freight receipts earned during the year under consideration, the assessee was required to get its accounts audited as provided in section 44AB. The net contention of the learned D.R. was that in this case the assessee has miserably failed to prove that there was reasonable cause for the said failure. He, therefore, submitted that the Assessing Officer was fully justified in imposing the penalty under section 271B of the Act. He accordingly urged that the order of the learned CIT(A) may be set aside and that of the Assessing Officer may be restored. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the learned CIT(A) was fully justified in deleting the penalty. 7. We have carefully considered the rival submissions and have also gone through the orders of the authorities below. The decisions cited at the time of hearing of the appeal were also duly considered by us. We find that the CBDT vide its Circular No. 452 dated 17-3-1986 regarding the applicability of section 44AB in the cases of commission agents, arhatias etc. provided certain clarifications, which are as follows:-- "4.(i) A kuchha arhatia acts only as an agent of his constituent and never acts as a principal. A pucca arhatia, on the other hand" is entitled to substitute his own goods towards the contract made for the constituent and buy the constituent's goods on his personal account and, thus, he acts as a principal as regards his constituent, (ii) A kuchha arhatia brings a privity contract between his constituent and the third party so that each becomes liable to the other. The pucca arhatia, on the other hand, makes himself liable upon the contract not only to the third party but also to his constituent; (iii) Though the kuchha arhatia does not communicate the name of his constituent to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of the Revenue that the assessee was doing the transport business or was having its own commercial vehicles. As we have already noted that the Board has clarified that in the case of agents, whose position is similar to that of kuchha Arhatia, the turnover is only the commission and does not include the sales on behalf of the principals. From the facts of the present case it is clear that the assessee is a transport booking agent and the turnover is only the commission received from truck owners and suppliers of goods and, therefore, it can be safely held that the assessee's position is similar to that of Kuchha Arhatia. In the instant case, the Assessing Officer without appreciating the facts of the case has held that the provisions of section 44AB of the Act are applicable. In fact, he has not properly appreciated the facts of the case as well as the relevant provisions of law. Thus, in view of the Board's Circular referred to above, the assessee was not required to audit its accounts under section 44AB of the Act. There is also force in this contention of the learned counsel for the assessee that whether the freight charged by the assessee from different parties and paid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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