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2012 (12) TMI 698 - AT - Income TaxTransactions as principal to principal - direction to get his books of accounts audited under section 44AB - kachha arahtia or pacca arahtia - the assessee being only a commission agent (buying agent) - Held that - As in a case of agent whose position is similar to that of a kachha arahtia, the turnover is only the commission. However, in the case of pacca arahtia, the commission as well as other turnover shall be taken into account for applicability of provisions of section 44AB. The prescribed rate of commission a 2.5% for kachha arahtia and rate of 1% (variable) for pacca arahtia There is no dispute to the fact that the appellant is registered as pacca arahtia with the market committee, Palwal & has charged commission at the rate of 1% only on the sales. The appellant has sold good to the constituents after purchasing them from kachha arahtias after paying commission of 2.5%. Also the appellant has made payments to the kachha arahtias on his own account and received payment from the buyers on his own account. The transactions of purchases and sales as well as payments are duly recorded and routed through the books of accounts of the appellant. The appellant has nowhere been able to demonstrate that the goods sold to outside parties were in fact belonged to or owned by the principals or farmers. Rather, the appellant has sold the goods to outside parties after purchasing them on his own account from the kachha arahtia and the domain over the goods sold was that of appellant. Thus once the status of appellant is established to be so, the entire receipts including commission are to be considered for the purpose of applicability of section 44AB. Admittedly, the receipts of the appellant far exceed the limits prescribed u/s 44AB and the appellant was liable to get his books of accounts audited u/s 44AB. The turnover of Rs.1,46,27,433/- as shown in the sales tax return has to be considered as turnover of the appellant and not the commission of Rs.1,33,270/- only - against assessee. Invoking the provisions of section 194H making him liable for TDS from commission payments and invoking the provisions of section 40 (a)(ia) - Held that - As concluded by the Hon ble High Court, there is no res judicata, as regards assessment orders, and assessments for one year may not bind the officer for the next year. Since in the preceding year, no such facts ,as have been revealed in the year under consideration, emerge from the records, considering the totality of facts and circumstances of the case, especially when the assessee on behalf of the assessee did not place any material before us that the assessee was only a kutcha arahtia even while being registered and acting as pucca arahtia, there is no basis to interfere with the findings of the CIT(A). Moreover, the CIT(A) upheld the findings of the AO that the commission exceeding Rs.2,500/- in each case aggregated to Rs.3,04,511/ - and the provisions of sec. 194H are applicable in the case - against assessee.
Issues Involved:
1. Whether the appellant-assessee should be treated as a principal or an agent. 2. Whether the appellant-assessee was required to get his books of accounts audited under section 44AB of the Income-tax Act, 1961. 3. Whether the appellant-assessee was required to deduct TDS on the amount of Rs.3,04,511 under section 194H of the Income-tax Act, 1961. 4. Whether the addition of Rs.3,04,511 to the total income of the appellant-assessee under section 40(a)(ia) of the Income-tax Act, 1961 was justified. 5. Applicability of section 44AB of the Income-tax Act, 1961 to the appellant-assessee for the assessment year 2007-08 (FY 2006-07). Detailed Analysis: 1. Principal vs. Agent: The primary issue was whether the appellant-assessee should be treated as a principal or an agent (kacha arahtia or pakka arahtia). The appellant claimed to be a kacha arahtia, acting only as a commission agent. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] found that the appellant was registered as a pakka arahtia, had control over the goods, and conducted transactions in his own name. The CIT(A) upheld the AO's findings, stating that the appellant's actions and the nature of transactions indicated he was a pakka arahtia, thus acting as a principal. 2. Requirement to Audit Books under Section 44AB: The appellant argued that he was not required to get his books audited under section 44AB, claiming his turnover did not exceed the prescribed limits. However, the AO and CIT(A) determined that the appellant's turnover, including all sales and commissions, exceeded the threshold. The CIT(A) noted that the appellant's gross turnover was Rs.1,46,27,433, far exceeding the limit, thus necessitating an audit under section 44AB. The appellant's registration as a pakka arahtia further supported this requirement. 3. Requirement to Deduct TDS under Section 194H: The appellant contended he was not required to deduct TDS on commissions paid, as he was not obligated to audit his books under section 44AB. The AO and CIT(A) disagreed, stating that because the appellant's turnover exceeded the prescribed limits, he was required to deduct TDS on commission payments. The CIT(A) confirmed that the appellant failed to deduct TDS on commissions totaling Rs.3,04,511, thus violating section 194H. 4. Addition of Rs.3,04,511 under Section 40(a)(ia): The appellant challenged the addition of Rs.3,04,511 to his total income under section 40(a)(ia), arguing that he was not liable to deduct TDS. The CIT(A) upheld the AO's decision, stating that the appellant's failure to deduct TDS on commission payments necessitated the addition under section 40(a)(ia). The CIT(A) found no infirmity in the AO's action, confirming the disallowance of the commission expenses. 5. Applicability of Section 44AB for AY 2007-08: The appellant argued that he was not required to audit his books for the assessment year 2007-08, as his turnover in the preceding financial year did not exceed the limits. The CIT(A) noted that the appellant's turnover for FY 2005-06 was Rs.2,68,26,128, exceeding the prescribed limits, thus making section 44AB applicable for AY 2007-08. The CIT(A) dismissed the appellant's claim, citing the consistent findings of turnover exceeding the threshold. Conclusion: The Tribunal dismissed the appeal, upholding the findings of the AO and CIT(A). The appellant was deemed a pakka arahtia, required to audit his books under section 44AB, and obligated to deduct TDS on commission payments. The addition of Rs.3,04,511 to the appellant's income under section 40(a)(ia) was justified, and the provisions of section 44AB were applicable for AY 2007-08. The Tribunal found no merit in the appellant's arguments and confirmed the lower authorities' decisions.
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