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TMI Blog2010 (5) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses at Rs. 25,840. 3. The learned CIT(A), Tirupati, failed to note that the method of accounting regularly followed by the assessee was accepted by the Department for over two decades without any deviation and therefore ought to have directed the ITO to accept the income returned on the principles of consistency." 3. Common grounds raised by the revenue read as follows : "(i) The CIT(A)'s order is erroneous on both facts and law. (ii) The learned CIT(A) erroneously regarded the assessee as a commission agent even though the assessee received the freight charges in its own name and is a transport contractor. (iii) The learned CIT(A) erroneously held that assessee would not be liable for disallowance under section 40A(3) in view of rule 6DD(I) and 6DD(k)." 4. Brief facts of the case taken from the assessment record of the assessee for the assessment year 2005-06, are that the assessee-firm is engaged in arranging transport vehicles to Beedi Manufacturers at Nizamabad and other places and is offering commission income after set off of expenditure, declared net income at Rs. 2,12,990 for the assessment year 2005-06. It was noticed by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm's assessments were completed under section 143(3) of the Act, accepting the books of account and the accounting system from 1995 to 2002. Books of account never rejected by the department or the transactions were doubted under scrutiny assessment. It is an admitted fact that the trucks and other vehicles were arranged by the assessee-firm for carrying out the lorry transport business and in lieu of the services, the assessee-firm was charging nominal commission from such truck owners. Such commission earned by the assessee has been shown in the profit and loss account. It is not the case of the revenue that the assessee was doing the transport business or having its own commercial vehicles. Hence, the assessee-firm is only a transport booking agent and its turnover is only the commission received from the owners. At the assessment stage, number of consignors of goods, who had used the services of the assessee-firm, testified on oath under section 131 of the Act and they confirmed that the assessee-firm is acting as agent only. It is further submitted that additions made under section 40A(3) for assessment years 2003-04 and 2004-05 were deleted by the first appellate authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have received the payments from the assessee-firm, either partners of the firm or their spouses and they have disclosed the income in their hands from the transportation business under section 44AE of the Act. Even though in the replies given by the various parties, the parties have stated that the assessee-firm acted as an agent for transportation, the same was stated in general term and is not proved. Hence, the payments made to the truck owners by the assessee-firm represent truck hire charges and are in the nature of revenue expenditure debitable to profit and loss account. There was no element of agency between the beedi manufacturers, assessee-firm and truck owners. The assessee-firm acted in independent capacity with the beedi manufacturers and the receipts from beedi manufactures which are subject to TDS constitute gross receipts in the hands of the assessee-firm. The Assessing Officer never examined this issue in any of the earlier assessment years of issue relating to agent principal relationship. Hence, the principles of res judicata are not applicable to the income-tax proceedings. In support of the same, he placed catena of decisions to hold that the doctrine of res ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to find out whether the assessee-firm was in the true sense is an agent or a broker. As such the department cannot ignore the manner of day-to-day functioning of the assessee-firm in a real market place. The department cannot simply treat it carrying on any independent business of transport operations. Such perceptions are considered not maintainable under facts. Freight charges received from the Beedi manufacturers or from the other customers credited in the bank account of the assessee did not obviously constitute any consideration for sale of any goods or services by the assessee-firm to the consignor of the goods. Nor such inflow of cash from the consignors had arisen in the course of any ordinary business activities carried on by the assessee-firm. 8. On the contrary the entire payments received from the consignors actually comprises of transport charges paid to the lorry owners though their drivers from which the assessee as an agent or broker only earned a margin of 3 per cent towards its service charges or commission or brokerage. As such in the normal method of accounting the freight charges received from the consignor or the freight charges paid to the vehicle owners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessment year 2002-03. In all the abovementioned period, the payments of freight charges to vehicle owners and the receipts of freight amounts from the consignors have all along been routed through assessee's firm's bank account. The consignors in turn have also made TDS from payments made to the assessee-firm. Even for the assessment year 2003-04 onwards, the material facts remain absolutely identical and unchanged as it existed for the last 17 years. Accordingly, the department would not normally be entitled to treat the assessee in a different way of considering the freight receipts and freight payment as assessee's own business transaction and thereafter reconstruct the profit and loss account and apply the provision of section 40A(3) of the Act to the freight payment portions. We agree that principle of res judicata would not apply in fiscal matters, but the same time, certain degree of consistency in findings of the revenue authorities are equally relevant in tax proceedings. In view of the above, in our considered opinion, the nature of business activities carried on by the assessee-firm for assessment year under consideration was primarily that of an agent. The gross f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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