2012 (10) TMI 607 - HC - Income Tax

Commission on the transported goods - estimation of income - AO found that from perusal of the P&L A/c, it appears that the assessee has not shown gross receipt of Rs.7,15,69,345/- and the assessee has credited Rs.6,83,669/- under the heading commission of transportation in the P&L Account . - held that - C.I.T.(A) as well as the I.T.A.T. have recorded a finding contrary to the written agreement that the assessee has deducted an amount of Rs.3/- per metric ton and paid the rest of the amount to the transporters or the persons from whom the trucks were obtained by the assessee. There is no mention of the letter dated 1.4.2004 conveying some decision of the awardee company that is New Chhotanagpur Truck Owners Association, wherein there is a stipulation of giving commission of Rs.3/- per metric ton to the assessee. If there is any such letter dated 1.4.2004 of the Truck Owners Association, then whether that was the basis for finding of the C.I.T.(A) and the I.T.A.T. then, that is also not apparent from the orders passed by the C.I.T. (A) and the I.T.A.T. - matter remanded back to AO for fresh assessment.

Summary

Issues:
1. Misdirection by ITAT in accepting commission income.
2. Misdirection by ITAT in not addressing Department's appeal ground.
3. Misdirection by ITAT in concluding the dispute.
4. Perversity in ITAT's decision due to misappreciation of facts.

Analysis:
1. The appellant challenged the ITAT's decision regarding the acceptance of commission income at Rs.6,83,669/-, despite unverifiable books of account. The Assessing Officer found discrepancies in the P&L account, leading to a notice for fresh assessment. The appellant claimed to be a Commission Agent for transporting goods and received Rs.3/- per metric ton as commission. However, the Assessing Officer rejected this claim based on the agreement with Hindalco and unverifiable truck hiring expenses. The CIT(A) held that the rejection of books was correct but disagreed with the income estimation method, leading to the allowance of the appeal.

2. The ITAT's failure to address the Department's appeal ground regarding the unverifiable truck hiring expenses was a crucial issue. The Department contended that the Assessing Officer correctly rejected the result shown by the appellant and estimated income at 5% of gross receipts. However, the ITAT's decision did not adequately consider this ground, leading to a dispute over the proper assessment method.

3. Another issue raised was the ITAT's misdirection in concluding that the dispute was solely about the percentage of deduction. The appellant argued that the ITAT overlooked critical aspects of the case, such as the validity of the written agreement and the actual commission structure. This misdirection impacted the overall decision-making process and raised concerns about the thoroughness of the assessment.

4. The final issue addressed the alleged perversity in the ITAT's decision due to a misappreciation of facts. The appellant's counsel highlighted errors in interpreting the agreement between the appellant and Hindalco, leading to a wrongful characterization of the appellant as a Commission Agent. The failure to consider crucial documents and agreements resulted in an erroneous decision, prompting the High Court to set aside the orders of the CIT(A) and ITAT for a fresh assessment by the Assessing Officer based on all available evidence.