TMI Blog2016 (10) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the percentage commission earned from two different activities is quite justified which cannot be taken as an allegation to the conclusion drawn by the AO that the order is erroneous and prejudicial to the interest of the Revenue. The present case cannot be held as a lack of enquiry. Therefore, we are unable to agree with the conclusion drawn by the CIT, Hissar that the order of the AO passed u/s 143(3) of the Act dated 19.10.2010 is erroneous and prejudicial to the interest of the Revenue which requires invocation of revisional powers u/s 263 of the Act. - Decided in favour of assessee - ITA No. 3104/Del /2013 - - - Dated:- 29-8-2016 - SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER, AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER For The Appellant : Shri Gurjeet Singh Rakesh Jain, Advs For The Respondent : Shri A.K. Saroha, CIT-DR ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER This appeal fi led by the assessee is directed against the order of the CIT(A), Hissar, dated 14/03/2013 for A.Y 2008-09 passed u/s 263(1) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'. 2. The grounds raised by the assessee read as follows : 1. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.3.2008 [copy placed at page 63 of the assessee s paper book 1] has shown freight amounting to ₹ 2.90 crores and commission receipt of ₹ 3,45,800/- which has been properly examined by the A.O during the original assessment proceedings by way of issuing questionnaire dated 27.8.2010 [pages 1 and 2 PB 1] and the assessee filed detailed reply to this questionnaire on 12.10.2010 [Pages 3 and 4 PB 1]. The ld. AR pointed out that in the said questionnaire 5 and 8, the A.O asked the assessee to furnish complete details of commission receipt of ₹ 3,45,800/- with documentary evidence and also directed to produce complete books of accounts with bills and vouchers which were submitted during the assessment proceedings by way of reply dated 12.10.2010. The ld. AR contended that in reply to question No. 11, the assessee specifically stated that the firm has not deducted TDS of any person because there was no liability of TDS and thus no return of TDS has been filed. The ld. AR also contended that in the reply at Sl. No. 5 and 18, the assessee submitted copy of accounts of commission receipt of ₹ 3,45,800/- and regular books of accounts, bills and vouchers were also sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and modus operandi of the assessee s business as stated above. The ld. AR also pointed out that if there is no written agreement, then TDS provisions of section 194 C is not applicable and the assessee acted as kaccha arhatia on verbal agreement only and therefore, the assessee was entitled to receive commission only and freight was directly paid by the consigner or consignee to the transport vehicle owner after deducting TDS in the name of the assessee because he is undertaking services of make available vehicles for transportation of goods to the destination of the consigner to the destination of the consignee in which the assessee is receiving cash commission, TDS certificates which also form part of commission receipts and the assessee offered entire commission receipts to tax which also includes amount of TDS vouchers which were credited to the commission account on 31.3.2008 within the financial period and in this situation the order of the AO could not allege as erroneous or prejudicial to the interest of the Revenue because the AO made specific enquiry with regard to commission receipt received by the assessee on the act of kaccha arhatia which includes amount of TDS c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination and it worked as principal to principal basis and the assessee s contention that he is commission agent is not acceptable. The ld. DR also contended that the AO did not ask the assessee to file reconciliation and he did not see because of the difference between the amount of freight receipts and TDS claim and he did not examine the issue properly and adequately, therefore, it is a case of adequate enquiry which assessment order is erroneous and prejudicial to the interest of the Revenue. The ld. DR further drew our attention to APB 1 pages 3-4 and 39-40 and contended that at page 10, the CIT entered the difference between the figure of TDS certificates and receipt of freight accounted by the assessee and no enquiry was made by the AO to verify this difference, therefore, the order was rightly held as erroneous and prejudicial to the interest of the Revenue. 7. The ld. DR further drew our attention towards para 7.3.1. at pages 8 of the CIT s order and contended that on examination of contention of the assessee, it was found that the account statement received from the six companies reveals that he details of freight receipts, as shown in the books of accounts has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocated at different places. Therefore, it cannot be stated that the assessee itself undertook the liability of transportation of goods from consigner s destination to the consignee destination and the assessee merely worked as a liaison agent between the consignersconsignees/ truck vehicle owners/drivers by charging commission. Therefore, the provisions of section 194C of the Act are not applicable to the assessee. 9. On careful consideration of the above, we are of the view that the CIT(A) has not alleged that the assessee is truck or vehicle owner and undertakes the responsibi lities of transportation of goods from the consigner s destination to the consignee destination. From the receipt and payment account and PLA for the relevant period placed at page 63 of APB-1, we note that the assessee has shown freight receipts of 2.90 crores and commission receipt of ₹ 3,45,800/-. Against this receipt, the assessee claimed freight paid of ₹ 2.79 crores. From the questionnaire dated 27.8.2010, the AO during the assessment proceedings u/s 143(1) of the Act and reply of the assessee to the said questionnaire dated 10.12.2010, we clearly note that the AO asked the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be an inquiry at all, much less an inquiry needed to reach the level of satisfaction of the AO on the given issue. The level of satisfaction would obviously mean that he has conducted the inquiry in a manner whereby he places on record the material enough to reach the satisfaction, which a rational person, being informed of the nuances of tax laws would reach after due appreciation of such material. If this component is missing, it will always be a case of lack of inquiry and not inadequate inquiry. We find that ld. Commissioner, while considering this argument of assessee has observed that the representative of the assessee was assured that this issue will be considered with independent application of mind while passing the order u/s 263. Therefore, when specific issues will be considered, it will be examined whether the AO had reached the level of satisfaction by carrying out necessary inquiries qua that issue or not. Ground is disposed of accordingly. 11. In the light of the above proposition, when we analyse the facts and circumstances of the present case, we note that the AO accepted the amount of freight receipts and freight paid/ shown in the PLA but disputed the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te it consider the ratio of the decisions relied upon by the ld. AR. In the case of CIT Vs. Sunbeam [supra] the Hon'ble High Court of Delhi held that if the AO having made enquires, elicited replies and thereafter allowed the expenditure on tools and dues as revenue expenditure, it cannot be said that it is a case of lack of enquiry and, therefore, the assessment order passed by the AO allowing deduction of said expenditure could not be revised u/s 263 of the Act, more so, as the view taken by the AO was one of the possible views and the CIT himself was not clear as to whether the said expenditure is to be treated as capital or revenue expenditure. Therefore, the order cannot be alleged as erroneous or prejudicial to the interest of the Revenue. 13. In the case of CIT Vs. United Rice Land [supra], it has been held that there being neither any oral or written agreement between the assessee and the assessee transporters of goods not it is proved that any freight charges were paid to them in pursuance of a contract for a specific period, quantity or price, the assessee was not liable to deduct tax u/s 194C of the Act from the payments made to the transporters. 14. Revertin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of truck owners and it is further paid to truck owners, therefore, the percentage of commission earned therefrom is little higher than the commission earned from kaccha arhatia wherein no risk of receiving freight amount and further paying the drivers and no risk is involved and there was no need of appointing any staff, cashier or maintaining bank account or cash in hand. Therefore, this difference is quite justified which was also noticed by the AO after analysing the reply to the questionnaire of the assessee filed on 12.10.2010 before the AO. 15. On the basis of foregoing discussion, we are satisfied and convinced that the AO picked up the issue of commission received by the assessee and shown in the credit side of the PLA and made enquiry from the assessee and after receving reply from the assessee and verifying the books of accounts and relevant bi lls and vouchers submitted by the assessee, accepted the claim of the assessee. We may further point out that when the assessee is adopting this practice of crediting commission in cash and TDS vouchers to the commission account pertaining to the services rendered as kaccha arhatia and crediting total amount of commission to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the CIT, Hissar that the order of the AO passed u/s 143(3) of the Act dated 19.10.2010 is erroneous and prejudicial to the interest of the Revenue which requires invocation of revisional powers u/s 263 of the Act. On the basis of foregoing discussion, we are inclined to hold that the ld. CIT invoked revisional powers u/s 263 of the Act without any legal or justified basis. Therefore, the notice and impugned order passed u/s 263 of the Act setting aside the impugned assessment order cannot be held as valid and sustainable in the eyes of law and thus we decline to accept the allegations of the ld. CIT(A) that the A.O did not notice the issue, did not make necessary investigations and consequently make suitable addition in respect of ₹ 1,32,40,073/- for which TDS was claimed but not shown in the PLA as in any case the A.O cannot made addition regarding this amount because this cannot be deemed as income of the assessee. The A.O noticed the issue, hence he issued questionnaire asking details from the assessee and after taking and considering the reply of the assessee, allowed the claim and thus it is not a case f no enquiry or inadequate enquiry which cannot be alleged as ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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