9911796707
TMI Blog2012 (12) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods purchased. On these facts and in the circumstances of the case the view of the Ld. AO that the appellant-assessee was required to deduct TDS on the amount of Rs.3,04,511=00 u/s. 194H of the Income Tax Act, 1961 is bad in law. iii. That the appellant-assessee being an individual and was not required to get his books of accounts audited u/s. 44AB of the Income Tax Act, 1961, he was not required to deduct any TDS on the amount of commission, even if paid by the appellant-assessee. iv. That on the facts and in the circumstances of the present case the Ld. AO has grossly erred to add back the amount of Rs.3,04,511=00 in the total income of the appellant-assessee in the present case u/s. 40 (a) (ia) of the Income Tax Act, 1961. v That in the preceding financial year 2005-06 to the present period the monetary limit as prescribed under clause (a) or (b) of section 44AB of the Income Tax Act, 1961 was not exceeded, as such, the appellant assessee was not required to deduct TDS under section 194H of the Income Tax Act, 1961 in the present period i.e. AY - 2007-08 (FY - 2006-07). vi. That the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kathpalia v. Lakhmir Singh reported in AIR 1984 SC 1744, the Hon'ble Supreme Court held that if the refusal to condone the delay results in grave miscarriage of justice, it would be a ground to condone the delay. In State of Haryana v. Chandra Mani reported in AIR 1996 SC 1623, Hon'ble Supreme Court considered a large number of its earlier judgments including Binod Bihari Singh v. Union of India reported in [1993] 1 SCC 572, Shakambari and Co. v. Union of India reported in [1993] Suppl 1 SCC 487, Warlu v. Gangotribai reported in [1995] Suppl 1 SCC 37, Ramlal v. Rewa Coalfields Ltd., reported in AIR 1962 SC 361, Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi [1979] 118 ITR 507; AIR 1979 SC 1666; [1979] 49 Comp Cas 463, Mata Din v. A. Narayanan, AIR 1970 SC 1953, and held that expression "each day's delay must be explained", does not mean that a pedantic approach should be made and it must be applied in a rational commonsense pragmatic manner. In view of the foregoing and especially in the light of observations of the Hon'ble Apex Court in O.P. Kathpalia v. Lakhmir Singh reported in AIR 1984 SC 1744, that if the refusal to condone the delay results in grave miscarriage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon decisions in ITO vs Shanti Lal Chunni Lal & Co (1993) 46 TTJ 650 & ACIT vs Hasmukh Shah (2003) 85 ITD 99. However, the AO did not agree with the submissions of the assessee and while referring to aforesaid Circular no.452 dated 17.03.1986 of the CBDT, laying down distinction between kacha and pakka arahtia and after making necessary enquiries from the Market Committee, Palwal, about the nature of license issued to the assessee, confronted the reply received from the Market Committee that the assessee was issued license of pakka arahtia. In response, the assessee replied while referring to aforesaid circular that the assessee worked as kacha arahtia and not a pakka arahtia and therefore, the provisions of section 44AB are not applicable. However, the AO did not accept this reply & concluded that the assessee was licensed as a pakka arahtia and his turn over exceeded the limits prescribed u/s 44AB of the Act due to the following reasons given in para 3.6 of the assessment order :- " i) In the coloum of name of purchaser, name of the assessee was written in all of the purchase bills issued on form (I). It is nowhere mentioned that any third party is invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a agent between the purchaser and seller. viii) Verification from the Market Committee, Palwal conducted by the under singed also confirmed that license issued to the assessee is of pakka arahitia which was also confronted to the assessee during the assessment proceedings and agreed to this. ix) There are other assessees at the same grain Market Palwal who are regd. as Pakka Arahatia with Market Committee Palwal who are dealing in the same line of business and having same facts and circumstances have audited their accounts u/s 44AB being pakka arahatia and turnover being more than 40 lacs of commission sale. One example of the same is given below:- Sr.No. Name of the assessee Nature of business Commission. 1 Sh. Mahavir Parsad Prop M/s Aman Traders, Alawalpur Road, Palwal. Pakka Arhati. Rs. 3,57,522/- 4.1 Accordingly, the AO concluded that assessee was doing the business of commission agent as pakka arahtia and keeping in view of his commission sale/turnover, he was required to get his accounts audited in terms of provisions of section 44AB of the Act as clarified vide circular no.452 date 17.03.1986. 4.2 Since the assessee did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertain with precision what are the express terms of the particular contracts under consideration. Each transaction, therefore, requires to be examined with reference to its terms and conditions and no hard and fast rule can be laid down as to whether the agent is acting only as an agent or also as a principal. 4. The Board are advised that so far as kachha arahtias are concerned, the turnover does not include the sales effected on behalf of the principals and only the gross commission has to be considered for the purpose of section 44AB. But the position is different with regard to pacca arahtias. A pacca arahtia is not, in the proper sense of the word, an agent or even del credere agent. The relation between him and his constituent is substantially that between the two principals. On the basis of various Court pronouncements, following principals of distinction can be laid down between a kachha arahtia and a pacca arahtia: (1) 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 the constituent and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 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 of the Act. Now the status of the appellant has to be considered in the light of parameter considered in the above Circular. There is no dispute to the fact that the appellant is registered as pacca arahtia with the market committee, Palwal. Hence, the registered status of the appellant is that of a pacca arahtia. There is also no dispute of the fact that the state Govt. has prescribed rate of commission a 2.5% for kachha arahtia and rate of 1% (variable) for pacca arahtia. The facts of the appellant's case reveal that the appellant has never shown commission charged at 2.5%. This is not permissible in terms of his registered status. The appellant has charged commission at the rate of 1% only on the sales. There is also no dispute to the fact that 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 pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts audited u/s 44AB of the Act. The AO has also compared the case of Shri Mahavir Parsad of Palwal wherein the books of accounts were audited in the status of pacca arahtia when the commission receipts were only Rs.3,57,522/-. The appellant has not brought any material on record to show as to how his case was different from that of Shri Mahavir Parsad. Keeping in view the above factual and legal position, I hold that the appellant is a pacca arahtia and the provisions of section 44AB of the Act are applicable. 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. In the case of The Bhopal Sugar Industries Ltd. vs. STO (40 STC 42). relied upon by tile appellant, the Hon'ble Supreme Court has held that the payment of commission by itself is not conclusive to show that the agreement was one for agency. The essential distinction between an agreement of sale and an agreement of agency is that, in the former case, the property is sold by the seller as his own property and, in the later case, the property is sold by the agent not as his own property but as the property of his prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal before us against the aforesaid findings of the ld. CIT(A).The ld. AR on behalf of the assesses while carrying us through the impugned order contended that the findings of the AO were different in para 4.1 of the assessment order and the ld. CIT(A) were not justified in considering the sales made by the assessee on behalf of the other parties, as sales of the assessee.. In this connection, the ld. AR relied upon the decision dated 31th July, 2012 of the ITAT in I.T.A. no.477 to 479/Kol./2012 in the case of Ramakrishna Vedanta Math Vs. Income-tax Office, following the decision of Hon'ble Allahabad High Court in Jagran Prakashan Ltd. Vs. DCIT, holding that payer is deemed in default for failure to deduct tax at source only if payee fails to pay tax directly. The ld. AR further pointed out that proviso to section 201 of the Act inserted. w.e.f. 01.07.2012 is clarificatory as held in Allied Motors Pvt. Ltd. vs. CIT,224 ITR 677(SC) in the context of provisions of sec. 43B of the Act. Referring to page 19 to 25A of the paper book, the ld. AR argued that the assessee did not have dominion over the goods purchased on behalf of others, the sale consideration of these goods could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bills issued by his own concern while charging the commission from the buyers. As per the sales tax order for the FY. 2006-07, the gross turnover of the assessee is worked out to be Rs.1,46,27,433/- (including commission sales).Thus, even when the assessee is registered as Pacca Arahtia & charging commission @ 1 %, his simultaneous claim as Kachha Arahtia is not borne out from any material on records. As is evident from the aforesaid facts found by the ld. CIT(A), in the case of pacca arahtia, the commission as well as other turnover has to be taken into account for applicability of provisions of section 44AB of the Act, especially when the assessee never charged commission @ 2.5%,prescribed for kutcha arahtias. There is no dispute that the assessee sold goods to the constituents after purchasing these from kachha arahtias and paid commission @ 2.5%.The ld. CIT(A) found that the assessee made payments to the kachha arahtias on his own account and received payment from the buyers on his own account as evident from the transactions of purchases and sales as well as payments recorded in the books of accounts of the assessee. Neither before the lower authorities nor even before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A). In this connection, we may refer to the following observations of the Hon'ble Delhi High Court in KRISHAK BHARATI COOPERATIVE LTD Vs DCIT, wherein it was held as under: "15. It is now necessary to take up the submission that the Tribunal erred in departing from the "consistency" rule. This is based on the fact that for the period of about 15 years, the income tax authorities had accepted the assesse's submissions and permitted annual amortization of the initial lease consideration, as advance rent. The assessee here relied on the "consistency" rule enunciated in Radhasaomi Satsang (supra). The Supreme Court observed, in that case that: "...where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 19. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter-and if there was not change it was in support of the assesses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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