2023 (10) TMI 685 - AT - Income Tax

Determination of income - Commission income or trading activity - addition to the returned income by taking 8% net profit on turnover - as per AO assessee was engaged in the business of trading of vegetables and fruits and determined its income u/s.44AD @8% of the turnover - HELD THAT - Assessee had admittedly carried out purchase/sale of fruits and vegetables in its own name and had deposited the cash sale proceeds in its own bank account. Apart from that the purchase consideration was paid by the assessee to the parties from whom purchases were made from its own bank account. As observed by the A.O and, rightly so, in case the assessee would have rendered services as a commission agent then it would have merely acted as a facilitator and not carried out purchase/sale transactions on its own account. As the assessee had failed to substantiate its aforesaid claim of having rendered services merely in the capacity as that of a commission agent, therefore, the A.O in our considered view had rightly rejected its said claim. Decided against assessee.

Summary

Issues Involved:
The appeal filed against the order passed by the Commissioner of Income-Tax (Appeals) arising from the order under Sec. 143(3) of the Income-tax Act, 1961 for the assessment year 2015-16.

Issue 1: Nature of Business Activity
The assessee claimed to be working as a Commission Agent, disputing the Assessing Officer's conclusion that the assessee was engaged in trading of vegetables. The AO determined income under Sec. 44AD @8% of turnover, adding Rs. 3,91,016 to the returned income. The CIT(Appeals) upheld the AO's decision based on the assessee's direct involvement in purchase/sale transactions and depositing cash sale proceeds in its own bank account. The appellant's failure to substantiate the claim of working solely as a commission agent led to the rejection of the said claim.

Issue 2: Consideration of Written Submission
The assessee contended that the CIT(Appeals) erred in not considering the written submission filed before passing the order. However, the failure to address this submission did not impact the final decision, as the core issue revolved around the nature of the assessee's business activity and not procedural irregularities.

Separate Judgment:
The appeal was dismissed as the assessee failed to establish itself as a commission agent and the evidence pointed towards engaging in trading activities directly. The Tribunal upheld the lower authorities' decision, emphasizing the importance of substantiating claims and conducting business transactions in alignment with the purported role.