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2016 (10) TMI 687 - ITAT DELHI

2016 (10) TMI 687 - ITAT DELHI - TMI - Revision u/s 263 - TDS liability u/s 194C - Held that:- In the present case, when the assessee is showing its modus operandi of business on two segments and making accounting entries accordingly, then, we are unable to see any reason to hold that the conclusion drawn by the AO or in accordance with the provisions of the Act or was unsustainable as per relevant provisions of the Act. In the present case, since the assessee firm is not owning any trucks or ve .....

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nd paying cash whereas, in the kaccha arhatia working, the assessee requires no staff members and the risk factor is very less and thus the difference 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 .....

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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. Because the action is under challenge on facts and law qua the assumption and application of revision jurisdiction u/s 263 since there is 'material facts' containing 'materia .....

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n facts and law particularly looking into the facts and circumstances and nature of business. 3. Briefly stated, the facts giving rise to this appeal, as emanating from the assessment order are that on a perusal of assessment records, the ld. CIT Hissar noticed that the assessee has claimed credit of TDS of ₹ 9,66,267/- on gross receipts of ₹ 4,22,44,740/- as per Form(s) No.16A whereas gross receipts of ₹ 2,90,04,667/- only have been shown in the Profit & Loss Account [PLA .....

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010 passed u/s 143(3) of the Act. Now the aggrieved assessee has filed this appeal challenging the issuance of notice and invocation of revisional powers contemplated u/s 263 of the Act. 4. We have heard the rival submissions and have carefully perused the relevant material on record. The ld. Counsel for the assessee [ld. AR] first of all drew our attention towards page 1 para 3 of the impugned order and submitted that the A.O, in the original assessment proceedings, issued notice and conducted .....

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s 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 re .....

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ceedings by way of issuing questionnaire and receiving reply from the assessee. The ld. AR also submitted that the commission ledger account from 1.4.2007 to 31.3.2008 was submitted to the assessee during the assessment proceedings which is available at pages 1 to 40 of the APB-II. The ld. AR also submitted that in para 4.3.1, the assessee s reply vide letter dated 26.12.2012 has been reproduced by the ld. CIT wherein the assessee elaborately submitted that as per modus operandi of the assessee, .....

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ectly paid to the vehicle owners by the consignor to the consignee and they charged fixed amount of commission for their services which act is a Kachcha Arhatiya on commission basis. The ld. AR further contended that the amount directly received by them from consignor or consignee (as Pacca Arhatiya) has been declared as 'Gross Receipts in Profit & Loss Account whereas the amount received as commission on booking of vehicles (as kachcha Arhatiya) has been shown under the head Commission .....

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re treated by the assessee as its income. The ld. AR vehemently contended that the assessee rendered services as kaccha arhatia which brought commission to the assessee in the form of cash and TDS certificates which created doubt in the mind of the CIT and in this, the CIT has to apply his mind to the facts 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 th .....

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ich 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 T .....

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interest of the Revenue. To support this contention, the ld. AR has placed reliance on the decision of the Hon'ble High Court in the case of CIT Vs. Sunbeam Auto Ltd reported at [2011] 332 ITR 167 [DHC] and the decision of the Hon'ble Punjab and Haryana High Court in the case of United Role Land Ltd reported at [2010] 322 ITR 594 [P&H]. The ld. AR also drew our attention towards the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Max India Ltd [2007] 295 ITR 282 [SC] .....

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O in ITA No. 560/chd/2011 for A.Y 2006-07 and submitted that the provisions of section 194C are not attracted in respect of payments made by the assessee union to its truck operators/owners and consequently deduction claimed on account of such freight charges is to be allowed as deduction and provisions of section 40a(ia) are not attracted. 6. Replying to above submissions of the ld. DR, placing reliance on the decision of the ITAT Delhi E Bench in the case of NIIT Vs. CIT in ITA No. 2057/Del/20 .....

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mmission 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 .....

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companies reveals that he details of freight receipts, as shown in the books of accounts has not been accounted by the assessee in the PLA. The ld. DR further contended that unilateral act of the assessee claiming credit of TDS, claiming it to be received as commission and not accounting freight receipts, is clearly against the provisions of the Act as well as the established principles of accounting. Therefore, the CIT was right in invoking revision provisions of section 263 of the Act. The ld .....

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enquiry which establishes the fact that the order of the AO is not only erroneous but also prejudicial to the interest of the Revenue. Therefore, the ld. CIT was just and correct in revising the assessment order. The ld. DR lastly pointed out that there is no regular entry of TDS in the commission account and the assessee made all entries on the last date of F.Y. i.e. 31.3.2008 and TDS shown from various consigners and consignees is of different percentage which creates a doubt in the mind on t .....

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s who used to bring the material to the premises of M/s Kalika Steel Alloys Pvt Ltd. and there is no other document which could establish that there was written agreement between eh assessee and the respective consigners and consignees regarding transportation of goods. The ld. AR also pointed out that the assessee does not own any truck or vehicle and the assessee is merely working as commission agent to establish the contract between the consigners who wish to send goods to the consignees loca .....

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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 .....

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er. In para 2 of the assessment order, the AO categorically noted that the assessee firm is doing the business of transport agency on commission basis and has no truck of their own. Before that, in para 1, the AO noted that audited copies of receipt and payment account cum PLA and Balance Sheet obtained from the assessee during the course of assessment proceedings. Written explanation filed from time to time was examined with reference to the details given in return and also verified from the bo .....

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te details in respect of these expenses. The AO further noted that on an examination of the books of account and the details so filed, it was found that some of the freight expenses were supported with internal vouchers. The position with regard to salary was more alarming in as much as all the expenses with regard to the salary were supported through internal vouchers and that too paid in cash. Accordingly, the AO, after discussing the matter with the counsel of the assessee who agreed to an ad .....

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er. An inquiry which is just farce or mere pretence of inquiry, cannot be said to 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 compone .....

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t 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 amount of commission of ₹ 3,45,800/- and thereafter, issued a questionnaire to the assessee on various issues including the issue of said commission. The assessee filed detailed reply alongwith copy of freight paid, copy of .....

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e also observe that the assessee also credited amount of TDS receivable from various parties, being amount of TDS certificates received from various clients which was also transferred to commission account. The CIT has not raised any doubt regarding amount of commission shown by the assessee and the modus operandi of business of the assessee wherein it undertook two kinds of activities for earning commission viz. Pucca arahtia wherein the assessee received freight from consigner/consignee and af .....

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ep to the consignee doorstep and only charging commission in the form of cash/TDS certificates issued by the respective payer either consigner or consignee. We should bear in mind that in the kaccha arhatia account, the assessee not only credited commission received in cash but also credit amount of commission received by it during the financial period and these commission amounts received in the form of TDS certificates has been credited at the end of the financial year which is the normal prac .....

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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 hel .....

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irm is doing business of transportation agency on commission basis and has no truck or vehicle of its own. So far as the issue of oral or written agreement between the assessee and the transporters is concerned, we are unable to see any document or fact which could lead us to infer that the assessee was providing services to the various consignors or consignees for transportation of goods under any oral or written agreement. We may also point out that the CIT has not alleged that it was the firs .....

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nce is paid to the truck owners/drivers who provided transportation services from the destination of the consignor to the destination of the consignee. Second type of modus operandi of the assessee firm, as noted by us and could not be demolished by the CIT or ld. DR, is that the assessee makes available trucks/vehicles for transportation of goods by fixing freight and thereafter, freight is directly paid by the consignor/consignee to the truck owners/drivers and the assessee, in the capacity of .....

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entage earned by the assessee from impugned commission of ₹ 3,45,800/- which was earned on receipt of ₹ 1.32 crores, it was contended that for working as pucca arhatia, the assessee requires more staff and undertakes risk of receiving payment on behalf 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 pa .....

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A 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 the PLA and claiming TDS during the asses .....

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tion minute detai ls of assessment proceedings in the assessment order in so many words, however, for invoking the provisions of section 263 of ht Act, it has to be established that the conclusion drawn by the AO was not in accordance with the provisions of the Act and was not sustainable. Therefore, the order is erroneous and prejudicial to the interest of the Revenue on account of inadequate enquiry on a particular issue which caused prejudice to the Revenue. In the present case, when the asse .....

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greement, then the provisions of section 194C of the Act do not apply to the transactions undertaken by the assessee. So far as difference between commission earned from pucca and kaccha arhatia is concerned, we are satisfied that for undertaking pucca arhatia services, the assessee requires number of staff members and it has to undertake the risk of receiving and paying cash whereas, in the kaccha arhatia working, the assessee requires no staff members and the risk factor is very less and thus .....

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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 not .....

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