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TMI Blog2016 (10) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Rs. 1,37,04,773/-. 3. Because the action for invoking the provision of Section 40(a)(ia) r/w section 194C(3)(i) before amendment and Section 194C(6) w.e.f. 1.4.2009 is being challenged on facts and law particularly looking into the facts and circumstances and nature of business." 3. Briefly stated, the facts giving rise to this appeal, as emanating from the assessment order are that on a perusal of assessment records, the ld. CIT Hissar noticed that the assessee has claimed credit of TDS of Rs. 9,66,267/- on gross receipts of Rs. 4,22,44,740/- as per Form(s) No.16A whereas gross receipts of Rs. 2,90,04,667/- only have been shown in the Profit & Loss Account [PLA for short]. In this way, less receipts of Rs. 1,32,40,073/- were shown in the PLA by the assessee. The ld. CIT issued notice u/s 263 of the Act by observing that the A.O. failed to (i) notice the issue, (ii) make necessary investigation and (iii) consequently make suitable additions in respect of the difference of Rs. 1,32,40,073/-. After receiving the reply from the assessee, the ld. CIT, Hissar passed impugned order u/s 263 of the Act by setting aside the assessment order dated 19.10.2010 passed u/s 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orately submitted that as per modus operandi of the assessee, goods are booked by them for transportation, for which vehicles are engaged by us. In this case, the freight is settled with the consignor / consignee, and received by them. The ld. AR further submitted that vehicle owners were paid the amount of freight as per the verbal agreement with them. This act, according to the ld. AR is a "Pucca Arhatiya". The ld. AR submitted that many a times they make available vehicles for transportation of goods on commission basis. In that case the freight was directly paid to the vehicle owners by the consignor to the consignee and they charged fixed amount of commission for their services which act is a "Kachcha Arhatiya" on commission basis. The ld. AR further contended that the amount directly received by them from consignor or consignee (as Pacca Arhatiya) has been declared as 'Gross Receipts' in Profit & Loss Account whereas the amount received as commission on booking of vehicles (as kachcha Arhatiya) has been shown under the head 'Commission' in profit & loss account. Copy of Profit & Loss A/c & Balance Sheet audited by the Chartered Accountant has been placed on record. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. AR has placed reliance on the decision of the Hon'ble High Court in the case of CIT Vs. Sunbeam Auto Ltd reported at [2011] 332 ITR 167 [DHC] and the decision of the Hon'ble Punjab and Haryana High Court in the case of United Role Land Ltd reported at [2010] 322 ITR 594 [P&H]. The ld. AR also drew our attention towards the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Max India Ltd [2007] 295 ITR 282 [SC] and submitted that the CIT passed impugned order u/s 263 of the Act and it was held by the Hon'ble High Court that where two view are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as erroneous or prejudicial to the interest of the Revenue and the CIT could not exercise powers u/s 263 of the Act. The ld. AR also drew our attention towards the order of the ITAT Chandigarh Bench dated 22.9.2011 in the case of Jagron Truck Operators Union Vs. ITO in ITA No. 560/chd/2011 for A.Y 2006-07 and submitted that the provisions of section 194C are not attracted in respect of payments made by the assessee union to its truck operators/owners and consequently deduction claimed on account of such freight char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have been made to the assessee by M/s Kalika Steel Alloys Pvt. Ltd under a contract and the AO has not examined the issue in a proper perspective. The ld. DR also pointed out that the AO did not call for the required details, hence he did not make adequate enquiry in regard to the freight receipts and, therefore, it is clear case of inadequate enquiry which establishes the fact that the order of the AO is not only erroneous but also prejudicial to the interest of the Revenue. Therefore, the ld. CIT was just and correct in revising the assessment order. The ld. DR lastly pointed out that there is no regular entry of TDS in the commission account and the assessee made all entries on the last date of F.Y. i.e. 31.3.2008 and TDS shown from various consigners and consignees is of different percentage which creates a doubt in the mind on the TDS certificates issued by respective consigners and consignees in favour of the assessee especially when the amount pertaining to TDS has not been shown as freight receipt by the assessee in its PLA. 8. In rejoinder, the ld. AR contended that the letter of M/s Kalika Steel Alloys Pvt. Ltd pointed out by the CIT-DR at page 47 of the APB-II, is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment account cum PLA and Balance Sheet obtained from the assessee during the course of assessment proceedings. Written explanation filed from time to time was examined with reference to the details given in return and also verified from the books of account which were produced and test checked. The AO noticed that the details of information asked for have been furnished and placed on record making it an integral part of the assessment record and after analysing the information and discussions made with the counsel of the assessee, assessment has been framed. In second para, the AO noted that the assessee has paid freight of Rs. 2.79 crores and salary and wages at Rs. 6.94 lakhs and the assessee was asked to furnish the complete details in respect of these expenses. The AO further noted that on an examination of the books of account and the details so filed, it was found that some of the freight expenses were supported with internal vouchers. The position with regard to salary was more alarming in as much as all the expenses with regard to the salary were supported through internal vouchers and that too paid in cash. Accordingly, the AO, after discussing the matter with the counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we observe that the assessee submitted that the entire details regarding receipt for commission from 1.4.2007 to 31.3.2008 and we also observe that the assessee also credited amount of TDS receivable from various parties, being amount of TDS certificates received from various clients which was also transferred to commission account. The CIT has not raised any doubt regarding amount of commission shown by the assessee and the modus operandi of business of the assessee wherein it undertook two kinds of activities for earning commission viz. Pucca arahtia wherein the assessee received freight from consigner/consignee and after deducting its commission remaining amount is further paid to the truck owners/drivers ad in this segment, the amount of freight received is shown on the right side of the PLA and freight paid to the truck owner/drivers is shown on the left side of the PLA and the amount of surplus become the profit of the earned as commission on the second segment when the assessee works as kaccha arhatia, it makes available the vehicles to the consigners for transportation of goods from the consigner doorstep to the consignee doorstep and only charging commission in the form o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not alleged that it was the first year of business of the assessee and that the accounting practice adopted by the assessee for the F.Y. under consideration was consistently being adopted by the assessee during the earlier and subsequent A.Y also without any change or deviation. So far as modus operandi of the business of the assessee is concerned, we are convinced that there were two types of transactions viz; first, where the assessee receives freight amount from consigners/consignees and after deducting its commission, balance is paid to the truck owners/drivers who provided transportation services from the destination of the consignor to the destination of the consignee. Second type of modus operandi of the assessee firm, as noted by us and could not be demolished by the CIT or ld. DR, is that the assessee makes available trucks/vehicles for transportation of goods by fixing freight and thereafter, freight is directly paid by the consignor/consignee to the truck owners/drivers and the assessee, in the capacity of transportation commission agent only receives commission in cash and in the form of TDS certificates issued by respective payers which was also accounted for in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so many words, however, for invoking the provisions of section 263 of ht Act, it has to be established that the conclusion drawn by the AO was not in accordance with the provisions of the Act and was not sustainable. Therefore, the order is erroneous and prejudicial to the interest of the Revenue on account of inadequate enquiry on a particular issue which caused prejudice to the Revenue. In the present case, when the assessee is showing its modus operandi of business on two segments and making accounting entries accordingly, then, we are unable to see any reason to hold that the conclusion drawn by the AO or in accordance with the provisions of the Act or was unsustainable as per relevant provisions of the Act. In the present case, since the assessee firm is not owning any trucks or vehicles of its own and merely working as transportation commission agent, and it is running services without any oral or written agreement, then the provisions of section 194C of the Act do not apply to the transactions undertaken by the assessee. So far as difference between commission earned from pucca and kaccha arhatia is concerned, we are satisfied that for undertaking pucca arhatia services, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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