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2014 (11) TMI 175 - AT - Income TaxValidity of reopening of assessment u/s 147 – Proceedings u/s 154 – Rectification of mistake apparent on record - Held that:- Assessee is engaged in transport business as a transport commission agent - the AO issued a notice u/s 154 on 12.1.2009 proposing rectification of a mistake apparent on record - It is well settled that the requirements prescribed under the Act for involving the provision of S.147 have to be fulfilled as decided in CIT vs. Rajesh Jhaveri Stock Brokers P.Ltd. [2007 (5) TMI 197 - SUPREME Court] - The word “reason” in the phrase “reason to believe” would mean cause or justification. If the AO has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment - a perusal of the Profit and Loss a/c demonstrates that the assessee has not claimed any expenditure on payments made to lorry owners, nor has he shown any income - In fact for AY 2005-06 and AY 2006-07 the total gross receipts disclosed consisting of freight income and commission income besides interest on securities - There is no expenditure claimed on account of freight charges paid - the reopening of assessment is valid for the reason that the AO had material to come to a conclusion that the assessee has under stated its receipts - The assessee has also not furnished any explanation to the AO during the original assessment proceedings on these matters as there is no occasion for doing the same – the decision in CIT vs. Usha International Ltd. [2012 (9) TMI 767 - DELHI HIGH COURT] is applicable as it cannot be held that there is a presumption of application of mind on this issue when the original assessment order was passed u/s 143(3) of the Act - Pending or disposal of proceedings u/s 154 does not result in the reopening proceedings becoming illegal. Applicability of section 40(a)(ia) – Held that:- The assessee is a transport commission agent who arranges goods carriers for various parties through truck operators/drivers is not disputed by the Revenue - The parties to whom the assessee arranges trucks, make part payment to the operators/drivers as advance and the balance amount is routed through the assessee - What the assessee gets is only commission - The amount is received by the assessee as a Trustee - The assessee is only a pass through entity - The amount is received on capital account and payment also is made on capital account - The assessee never had the right to receive this amount as its income - Merely because tax has been deducted at source on the amounts received by the assessee, it does not lead to an automatic conclusion that the entire amount is the income of the assessee - The amount is never claimed by the assessee as its income nor was paid by the truck owners as an expense – thus, the amount cannot be treated as gross receipts of the assessee on revenue account - as the assessee has not claimed any expenditure on account of freight payments the question of disallowance u/s 40(a)(ia) does not arise – Decided in favour of assessee.
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