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TMI Blog2010 (8) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Hence, subsequent evidences produced which were hidden from the purview of assessment cannot be taken on face value and needs to be discouraged. 3) In the assessment proceedings relevant to the assessment year 2002- 03, the assessee in his letter dated 18.3.2005 has stated "we in the process do not know whether the farmer is a owner or leaseholder or is really a farmer or not or his creditworthiness or whether he is an agent of other farmers etc." When the position of the assessee is that he is not able to distinguish a farmer or an agent has not undergone any change, the CIT(A) having considered all suppliers as farmers is incorrect. 4) The CIT(A) ought to have appreciated the finding of the ITAT in its order for the assessment year 2002-03 in the same assessee's case with regard to the supporting evidences submitted subsequently i.e. "the documentation so meticulously made was apparently aimed at avoiding the clutches of 40A(3) of the Income-tax Act" Hence it is clear from the assessment records of A.Y. 2002-03 and the year under consideration that the documentation provided by the assessee before the CIT(A) should not be accepted. 5) Any other ground that may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracts from the said circular are as under:- "There are various trade practices prevalent in the country in regard to agency business and no uniform pattern is followed by the commission agents, consignment agents, brokers, kachha arahtias and pacca arahtias dealing in different commodities in different parts of the country. The primary necessity in each instance is to ascertain with precision what are the express terms of the particular contract under consideration. Each transaction, therefo4re, 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" The CBDT then proceed to explain the difference between a kachha arahtia and a pacca arahtia in the following terms:- a) 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…..and thus he (pacca arahtia) acts as a principal as regards his constituent. b) A kachha arahtia brings a privity contract between his constituent and the third party so that each becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant did not know who was the grower or producer and how much amount was really paid to them (pages 10-11). The Ld. Departmental Representative in his argument has referred to the assessee company's Managing Director's statement reproduced in page 3 of Ld. CIT(A)'s order where in he has stated that the commission agents are the representatives of the farmers. One of the commission agents named Araga Yella Reddy from whom a statement was taken has stated as under:- (a) Q.No.3: Since how long you are a broker and for how many companies you are supplying paddy? I am doing brokerage since 2000. I am supplying paddy to Venkatadri Bran Oil Mill…… (b) Q.No.5 : What is the modus operandi of your business:- I am arranging the paddy to the mill for its procurement of paddy. The mill in turn pay the amount to me for the paddy purchased. I am deducting my commission and I am paying the balance amount to the farmers. Q.No.8: What is the mode of payment of the company to you? I receive cash from the company on behalf of the farmers. The assessing officer appear to have accepted these commission agents as "broker" which is evident from the question No.3 put to Araga Yel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t further classify the "Arhatiya" into Kachha Arhatiya and Pucca Arhatiya. In its subsequent Circular No.452 dated 5.3.70, supra, such classification was made and the difference between them were explained as stated earlier. On analyzing the differences between the Kachha Arhatiya and Pucca Arhatia, it is clear that the "Arhatiyas" referred to in Circular No.34 are only "Pucca Arhatiyas". On a conspectus of the matter, we come to the following conclusions on the facts and circumstances of the case (a) The impugned commission agents are akin to the Kachha arhatiyas and hence the Circular no.34 of the CBDT relied upon by the tax authorities does not apply to the present case. (b) The impugned commission agents are the agents/representatives of the farmers. (c) As per the legal definition of the term "Agent", there need not be a written agreement and it may be inferred by the conduct. The fact that the impugned commission agents are the agents of the farmers is not in dispute. Then in the eyes of law, whatever an agent does is deemed to be an act of his principal because, the agent enters into the shoes of the principal. (d) In the present case under consideration, the assessee c ..... 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