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TMI Blog2013 (1) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt of ₹ 6,28,61,151/- and this fact of the assessee itself is contradictory. How can assessee claim TDS without showing gross receipt in his computation of income/return of income? 3. On the facts of the case, Ld. CIT (A) ought to have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of the Ld. CIT (A) may be set aside and that of the Assessing Officer be restored. 3. In ITA No.25/Rjt/2012 the Department has taken the following grounds of appeal:- 1. The Ld. CIT (A)-Gandhinagar has erred in law and on fact of the case in deleting the addition of ₹ 11,18,440/- made by the AO after estimating the net income as 8% of gross receipts of ₹ 1,39,80,505/- by rejecting books of accounts u/s.145 (3) of the IT Act considering the assessee as a commission agent not as contractor for transport of goods. 2. The assessee firm has not shown gross receipt, whereas it has claimed TDS on the whole receipt of ₹ 1,39,80,505/- and this fact of the assessee itself is contradictory. How can assessee claim TDS without showing gross receipt in his computation of income/return of income? 3. On the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006-07. The assessee is in appeal before the CIT (A) against the order passed consequent to the directions of the Addl. CIT. Since the matter is before the CIT (A) and the order of the AO was pursuant to the direction u/s.144A, no interference at this stage is called for. The AO is directed to produce with the assessment as per the directions of the Addl. CIT issued u/s.144A for A.Y.2006-07. 4.4 As discussed above, the assessee has not shown gross receipt and only shown the commission income, while claimed TDS on whole receipt. This does not give clear picture of the business profit. Therefore, book result cannot be accepted. 4.5 The assessee is following mercantile system of accountancy. As per the accountancy system, whatever received or receivable is not be credited in the P L A/c. Under the mercantile system, income and expenditure are recorded at the time of their occurrence during the previous year. For instance, income accrued during the previous year is recorded whether it is received during the previous year or during a year preceding or following the previous year. Similarly, expenditure is recorded if it becomes due during the previous year, irrespecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t deductible. In such case, ITO had justified in rejecting the book results and making necessary addition to the declared profit. 4.6 In view of above discussion, it is also pertinent to mention here that the assessee has never shown gross receipt and claimed gross expenditure in its return of income and the same is not giving the clear picture of assessee s true income and also the submission so made by the assessee will not survive under the provision of law. I therefore, estimate the net profit at 8% of gross receipt by rejecting the book result u/s 145(3) of the I.T. Act. 4.7 Prima facie, it is seen that assessee has manipulated the accounting in the form of not showing gross receipt and gross expenditures and showing only commission income, as seen and verified from the TDS certificates. I am primary satisfied that the assessee has not shown its true income with the sole motto to evade the legitimate tax liability for which penalty proceedings u/s.271(1)(c) is initiated. 6. It is in the aforesaid background that the AO treated the assessee as contractor and accordingly estimated net profit @ 8% of gross receipts as income after rejecting the book results. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious judicial pronouncements which highlight the fact that, what has to be taxed is the real income. One cannot be asked to pay tax on income not earned by it. From the face of the events, it clearly transpires that the appellant had passed on the freight to the truck owners who were hired through him. It is also not the case of the Revenue that the reimbursement of freight to the truck owners by the assessee is in doubt. The only point of contention is the nature of appellant s receipts. Further it is also found that Hon ble ITAT has verified the identical facts in the cases of Shri Venkateshwara Transports (supra) and Shri Sharadkuma P. Majithia (supra) and allowed the appeal of the appellant. 3.3 I also find that, the appellant is not owner of any trucks and does not derive transportation receipts. He only derives commission income. By rejecting the book results and estimating the income at 8% by the AO, is not judicious because, he is estimating the income which the appellant never earned. Therefore, the AO is not justified in rejecting the books results and estimating the income at 8% of the gross receipts. Thus respectfully following the ratios laid down by the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion also. But real income is commission income. In the books, the appellant did not take credit of the receipts, vis- vis the payments made by him. Even if, for a moment it is presumed that the appellant ought to have taken credit of the receipts and shown it as its gross receipts, then corresponding payments made to truck owners should be allowed to be debited. Hence, ultimate result would be the same, since what has to be taxed is the real income. Thus, there is no reason for rejecting the appellant s books results. As there is nothing illegal or abnormal in above practice. One cannot be asked to pay tax on income not earned by it. It is clearly transpires that assessee had passed on freight to the truck owner who were hired through him. It is also found that Hon ble ITAT has verified the identical facts in the cases of Shri Venkateshwara Transports and Shri Sharadkumar P. Majithiya and allowed the appeal of appellant. [5] In this connection, the respondent reiterates that it s only source income was commission from booking of transportation and nothing to do with the gross receipts from the consignor and/or consignee. It was only arranging f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived represents his income. The assessee was neither a contractor executing contracts on behalf of the persons from whom it used to hire trucks nor a contractor executing the works on behalf of the persons to whom it used to give trucks on hire. The assessee cannot therefore be called a contractor. In our view, it was his business to take the trucks on hire and give them on hire. The assessee was also not an agent on behalf of the parties from whom it used to hire trucks nor was an agent of the parties to whom it used to give trucks on hire as he had no capacity to bind either of them as principals for the activities undertaken by the assessee as agent. The relationship of principal and agent is completely absent between the parties from whom trucks have been hired or to whom they have been given on hire and the assessee. In this view of the matter, the assessee can neither be said to be a transport contractor nor an agent of the parties. In essence, it is the business of the assessee to take the trucks on hire and give them on hire. On the facts of the case, we hold that the assessee was independently engaged in transportation business. 11. Next issue for consideration is whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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