TMI Blog2019 (2) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter, their treatment and reflection in the books of accounts to be examined. In absence of transaction documents, merely looking at the nomeclature of certain ledger accounts, it cannot be held conclusively in terms of nature of transaction individually or hold conclusively that the assessee is acting as a ‘Pacca Arahtia’ and not as ‘Kachha Arahtia’. In view of the same, in absence of any clear findings so recorded by the lower authorities, we are unable to accede to the position so adopted by the Revenue where it proceeded to depart from the past settled position wherein the assessee has been held as ‘Kachha Arahtia’. - decided in favour of assessee. - ITA No. 826/JP/2018 - - - Dated:- 4-2-2019 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri K. L. Moolchandani(Adv.) For the Revenue : Shri Rajendra Jha (Addl.CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-3, Jaipur dated 14.05.2018 for A.Y. 2010-11 wherein the assessee has taken following grounds of appeal. 1(a) On the facts and in the circumstances of the case the Authorities below have fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rests like a trader has. (ii) The assessee has shown debtors at ₹ 74,28,541/- which is not a phenomena in case of commission agent or a kachcha arahtia. It is a common feature in a business of a trader or pacca arahtia. (iii) The assessee has paid transporters and debited the amount to the account of the supplier. This again shows that the assessee had an interest in the goods beyond a mere commission agent should have. (iv) Further, the assessee has claimed bad debts of ₹ 87,758/- during the year which proves it beyond doubt that it had the ownership of goods sold by it. 3. On appeal, the ld CIT(A) confirmed the finding of the Assessing officer that the assessee firm is a pacca arahtia or a trader. However, he deleted the lumpsum trading addition of ₹ 1,00,000/- made by the Assessing officer holding that he has not given any reason while making such an addition and even the books of accounts were not rejected which is necessary to make trading addition. 4. We find that the only addition made by the Assessing officer has since been deleted by the ld CIT(A) and the Revenue is not in appeal against the said findings of the ld CIT(A). Therefore, the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid Circular and subscribed by the judicial authorities in number of pronouncements. Briefly, the principles so laid down are summed up as under for the sake of ready reference: (i) A kachha arahtia acts only as an agent of his constituent and never acts as a principal. A pacca arahtia, on the other hand, is entitled to substitute his own goods towards the contract made for constituent and buy the constituent s goods on his personal account and thus he acts as regards his constituent. (ii) A kachha arahtia brings a privity contract between his constituent and the third party so that each becomes liable to the other. The pacca arahtia, on the other hand, makes himself liable upon the contract not only to the third party but also to his constituent. (iii) Though the kachha arahtia does not communicate the name of his constituent to the third party, he does communicate the name of the third party to the constituent. In other words, he is an agent for an unnamed principal. The pacca arahtia, on the other hand, does not inform his constituent as to the third party with whom he has entered into a contract on his behalf. (iv) The remuneration of a kachha arahtia consists ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mentioned in the Board s Circular to define the nature of business as Kachha Arahtia or Pacca Arahtia. In case of Kachha Arahtia it is rather essential to maintain ledger of each and every party to monitor the smooth and effective collection of the sale proceeds of the commissioned goods. Similarly, records of the debtors are also essential to pursue the collections of the sale proceeds of the commissioned goods. The freight to the transporters is paid by the appellant on behalf of its constituents and is duly debited and accounted for in the Bheejaks of the goods sold on commission as per accounting principles of Kachha Arahtia . Similarly in the course of such commission business, goods are sold on credit basis resulting in debtors. As the commission agent is responsible for the collection of the sale proceeds of such commissioned goods so the payment of entire sale proceeds is made by the appellant to its constituents as per Bheejaks irrespective of the fact that such sale proceeds were collected from the purchasers or not; resulting in bad debts in some of the cases of sales of the commissioned goods. The ld. AO had however failed to appreciate such eventuality in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... official records of the Krishi Upaj Mandi, Jaipur and the books of the firm. Except the commission income, no other receipt or trading profit etc. was assessed. Thus except commission income, no other income was noted and assessed by the ld. AO as evident from the assessment order. (iv) In the past and in subsequent years, the nature of business of the appellant firm had been continuously and regularly taken as Kachha Arahtia only (barring this assessment year). Even in scrutiny assessments passed after thorough scrutiny u/s 143(3) of the Act, the nature of business as Kachha Arahtia only. In support of such contention, copy of some assessment orders passed u/s 143(3) of the Act by the Department were also submitted before the ld. CIT (A). It is also an admitted fact that the appellant firm had continued to operate its business operations in the same manner and style during this year also. The ld. CIT (A) did neither dispute this fact nor bring any material on record to demonstrate any deviation in the working style of the appellant firm. Despite of such admitted fact, the ld. CIT (A) had opted to ignore this vital fact for no reason and had deviated from the past history ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeds, it is rather essential to maintain proper and accurate account of the sale proceeds through ledgers only. Thus the Authorities Below have misconstrued the working of the Kachha Arahtia . (b) Again the authorities below have misunderstood the meaning of the debtors of ₹ 74,28,541/- shown in the books of the appellant firm. In fact such debts represented the sale proceeds of the commissioned goods affected through the appellant to various buyers on commission basis only. These were not the goods owned by the appellant firm. This fact is quite clear from the Bheejaks (not sale Bills) issued for the purpose. However the Authorities below had failed to appreciate the nature of the Bheejaks and the Sale Bills . Bheejaks are issued in respect of the commissioned goods whereas the Sale Bills are issued in respect of the self owned goods. In this case, the debtors of ₹ 74,28,541/- as shown were on account of the sale proceeds of the commissioned goods made through such bheejaks only. The Authorities Below had however misconstrued this fact and had treated such debtors as a result of the sale of the goods owned by the appellant. Obviously such findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, there is no deviation of any sort in its working, nor could the department had brought any material on record to demonstrate any deviation in the working manner and style of the appellant so the Revenue has no valid reason to deviate from such settled past history to treat the appellant firm as Pacca Arahtia . The appellant firm is a Kachha Arahtia and may kindly be treated as such. 14. The ld. DR is heard who has taken us through the findings of the lower authorities and relied on their findings which we have noted above. 15. We have heard the rival contentions and perused the material available on record. The primary contention of the ld AR is that the firm had been functioning as Kachha Arahtia since inception for last forty years and during this period, the modus operandi of the appellant firm and the nature of its business operations as Kachha Arahtia had been examined and accepted by the Department. It was further submitted that even after the impunged assessment year, the nature of business operations of firm had been shown and assessed as Kachha Arahtia . It was accordingly submitted that there are no changes in the facts and circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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