IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'I & SMC' BENCH BEFORE SHRI I.C. SUDHIR , JM & SHRI A.N. PAHUJA, AM
Assessment year: 2007-08
Shri Krishan Mohan C/O V/s. Income-tax Officer, Shri Vijay Kumar Gupta, W ard 11 (3), Advocate, CGO Complex, N.H.-IV, Opp. Jain Mandir, Main NIT, Faridabad Bazar, Ballabgarh,
[PAN/GIR : AFJPK 0137 J]
Assessee by Shri Vijay Kumar Gupta, AR
Revenue by Ms. Y. Kakkar, DR
Date of hearing 01-10-2012
Date of pronouncement 16-11-2012
A.N.Pahuja:- This appeal filed on 19.05.2011 by the assessee against an order dated 21st February, 2011 of the ld. CIT(A), Faridabad. raises the following grounds:-
i) "That in spite of the fact that the appellant-assessee being only a commission agent (buying agent) for his outside Palwal Principals and charged commission @1% from those principals for his services, the ld. AO has grossly erred to hold such transactions as principal to principal and further that the appellant-assessee was required to get his books of accounts audited under section 44AB of the Income-tax Act, 1961.
2 ITA no.2597/Del./2011
ii. That the appellant-assessee did not pay any commission on the purchases for his outside Palwal parties to the selling dealers of the local mandi. Whatever was charged by the selling dealers in their sale bills was the cost price 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 `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 `.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 appellant craves leave to add, amend, revise, modify, substitute or delete any or all grounds of appeal or/and prayer made.
vii. In view of the above, it is, therefore, prayed that the impugned assessment order being illegal, arbitrary, beyond jurisdiction and in utter disregards of the true facts and in the circumstances of the case may kindly be quashed In the interest of justice and fair play."
2. At the outset, the ld. AR on behalf of the assessee while inviting our attention to an application for condonation of delay in filing the appeal submitted that the impugned order was received by the assessee on 16.03.2011 and thus, appeal was required to be filed on or before 15th May, 2011. However, appeal was received in the Tribunal only on 19th May, 2011 even though it was 3 ITA no.2597/Del./2011
dispatched by speed post on 13th May, 2011. Since the assessee did not visualize such a long time in delivering the letter from Faridabad to Delhi, it was contended that the delay of 4 days in filing the appeal may be condoned. On the other hand, the ld. DR did not oppose the prayer for condonation of delay.
3. We have heard both the parties and gone through the facts of the case . The issue before us is as to whether or not there was sufficient cause for delay in filing the appeal. In the case of State of West Bengal vs. Administrator, Howrah Municipality AIR 1972 SC 749, the Hon'ble Supreme Court while considering the scope of expression 'sufficient cause' for condonation of delay have held that the said expression should receive a liberal construction so as to advance the substantial justice when no negligence or inaction or want of bona fide is imputable to the party. In the case of Vedabai alias Vaijayantabai Babulao Patil vs. Shantaram Baburao Patil & Ors., it was held by the Hon'ble Apex Court that while exercising discretion under s. 5 of the Limitation Act, 1963, to condone delay for sufficient cause in not filing the appeal within the period prescribed, Courts should adopt a pragmatic approach. It has been consistently held by the Hon'ble Apex court that in the matter of condonation of delay, a liberal and pragmatic view should be taken. In Shankarrao v. Chandrasenkunwar reported in  Supp SCC 338, the Hon'ble Supreme Court took the view that the court should not adopt an injustice-oriented approach in rejecting the application for condonation of delay. In O.P. 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  1 SCC 572, Shakambari and Co. v. Union of India reported in  Suppl 1 SCC 487, Warlu v. Gangotribai reported in  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  118 ITR 507; AIR 1979 SC 1666;  49 Comp Cas 463, 4 ITA no.2597/Del./2011
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 justice, it would be a ground to condone the delay, we are of the opinion that the reasons given by the assessee for the delay in filing the appeal, reflect sufficient cause and, accordingly, the delay is condoned.
4. Adverting now to ground nos. I to v in the appeal, facts, in brief, as per relevant orders are that return declaring income of ``1,58,360/- filed on 19th December, 2007 by the assessee, carrying on the business of trading and commission agent of food grains, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act'), issued on 10th September, 2008. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee reflected commission income of ``1,33,270/- besides gross profit of ``2,37,164/- on sales of `16,17,517.50 in his trading account. To a query by the AO, the assessee replied that he was not required to get his account audited u/s 44AB of the Act, being a kacha arahtia. On verification of commission income, it was observed that the assessee purchased goods from the parties, registered as kacha arahtia and paid commission @2.5% on these purchases. It was also noticed that the assessee did not purchase any food grains directly from the farmers. As per market committee rules, kacha arahtia issue sale bills to the purchasing parties in form (I) and charged commission @2.5% whereas the rate of commission for pakka arahtia was around 1% . The AO further noticed that the assessee sold goods to third parties and charged commission on sales @1% and the gross turnover as per his sales tax return was ``1,46,27,433/-. In these circumstances, the AO asked the assessee as to why he be not treated as pakka arahtia as against claim of kacha arahtia. In reply, the assessee submitted that 5 ITA no.2597/Del./2011
he earned total commission of `133270.10 on the food grains purchased for the different principals/parties for the value of `.1,33,27,010 @ 1 % and merely acted as conduit pipe to receive goods from the seller and supplied them to principals on cost to cost basis and acted as kacha arahtia as contemplated in CBDT Circular no. 452 dated 17.03.1986. While enclosing photocopies of the bills, it was pointed out that the parties for whom purchases were made , deducted tax at source on the commission charged by the assessee .Inter alia, the assessee relied 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 no where mentioned that any third party is involved or name of purchaser is any third party and not the assessee.
ii) These form (I) which is prescribed form for kacha arahtia at the time of sale of goods to the principal are issued by the kacha arhatia only and not by pakka arahtia. It has been specifically written on the form itself that this is a bill of kacha aratia.
iii) Kacha arahiti charges commission @ 2.5% apart from purchaser of goods but do not pay commission to the
6 ITA no.2597/Del./2011
farmers at the time of purchase of goods. Whereas
assessee is paying commission being a pakka arahtia at the time of purchase of goods from kacha arahtia 2.5% and charges commission @ 1 % at the time of sale of goods to the purchaser/principal.
iv) Assessee is entitled to substitute his own goods towards the contract made for the constituent and buy the
constituent's goods on his personal account and thus acts as a principal as regards his constituent because all purchase bills are issued in the name of the assessee and not in the name of constituent.
v) Assessee debits all the goods account in his goods register/Bahi at the time of purchase of goods and credit the same at the time of sale to the constituent. In other words assessee has full control over the goods at the time of purchase and sale.
vi) Assessee is not dealing any direct purchase from the farmers as is applicable in the case of kacha arahtia but purchasing goods from the kacha arahatias which are based on Grain Market, Palwal. Pakka adhatia are not authorized to purchase goods directly from the farmers and not entitled for 2.5% commission at the time of sale of goods but charges commission @ 1 % of sale amount. He has full control over the goods purchased for and on behalf of the Principal as is not in the case of kacha arahtia.
vii) The submissions of the assessee that he acted merely as conduit pipe to receive goods from the seller and supplying them to the principal on cost to cost basis and acted as kacha arahitia is not correct. Assessee is
purchasing goods in his own name from kacha aratia and enters them in the goods account of his books of accounts. After that these are supplied to the purchasers by issuing bills from his own bill book whereas this is not happening in the case of kacha arahitia. So it is incorrect that assessee is only acting 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 7 ITA no.2597/Del./2011
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 Pakka Arhati. ` 3,57,522/- M/s Aman Traders, Alawalpur
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 not deduct tax at source on the amount of commission paid to the parties at the time of purchase of the goods, the AO also showcaused the assessee as to why the amount of commission paid be not disallowed in terms of section 40(a)(ia) of the Act. In reply, the assessee submitted that he was doing business of a proprietary concern and was not required to get his account audited u/s 44AB of the Act. However, the AO did not accept the submissions of the assessee and concluded that the assessee being a pakka arahtia and his turn over having exceeded the limits prescribed u/s 44AB of the Act, he was required to get his account audited and deduct tax at source on commission in terms of provisions of section 194H of the Act. The assessee having failed to do so, the AO disallowed the claim for 8 ITA no.2597/Del./2011
deduction of commission of ``3,04,511/- paid to the parties from whom goods were purchased.
5. On appeal, the assessee submitted an application for admission of additional evidence in terms of Rule 46A of the I.T. Rules, 1962, which were in the nature of agreements with outstation parties, appointing the assessee as their purchasing agent, .After having remand report from the AO on the said additional evidence and written submissions filed by the assessee as also comments of the assessee thereon, the ld. CIT(A) concluded as under:-
"6. I have considered the submissions of learned counsel for the appellant and gone through the documents and evidences placed on record as well as the judicial rulings relied upon by the learned counsel. The basis controversy involved in this appeal is with regard to the status of the appellant whether 'kacha arahtia' or 'pacca arahtia'. This controversy has to be resolved after considering various judicial pronouncements and the CBDT's Circular No.452 dated 17.03.1986 issued in the context of applicability of the provisions of section 44AB of the Act. The relevant contents of the above circular are reproduced below.
"3. The matter was examined in consultation with the Ministry of Law. 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 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 9 ITA no.2597/Del./2011
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 buy the constituent's goods on his personal account and thus he acts as regards his constituent.
(2) A kachha arahtia brings a privity contract between his constituent and the third party so that each becomes liable to the other. The pacca arahtia, on the other hand, makes himself liable upon the contract not only to the third party but also to his constituent. (3) Though the kachha arahtia does not communicate the name of his constituent to the third party, he does communicate the name of the third party to the constituent. In other words, he is an agent for an unnamed principal. The pacca arahtia, on the other hand, does not inform his constituent as to the third party with whom he has entered into a contract on his behalf.
(4) The remuneration of a kachha arahtia consists solely of commission and he is not interested in the profits and losses made by his constituent as is not the case with the pacca arahtia.
(5) The kachha arahtia, unlike the pacca arahtia, does not have any dominion over the goods.
(6) The kachha arahtia has no personal interest of his own when he enters into transaction and his interest is limited to the' commission agent's charges and certain out of pocket expenses whereas a pacca arahtia has a personal interest of his own when he enters into a transaction. (7) In the event of any loss, the kachha arahtia is entitled to be indemnified by his principal as is not the case with pacca arahtia .
5. The above distinction between a kachha arahtia and pacca arahtia may also be relevant for determining the applicability of section 44AB in cases of other types of agents. In the case of agents whose position is similar to that of kacha arahtia, the turnover is only the commission and does not include the sales on behalf of the principals. In the case of agents of the type of pacca arahtia, on the other hand, the total sales/turnover of the business should be taken into consideration for determining the applicability of the provisions of section 44AB.
It is therefore, evident from the above that the CBDT after considering various judicial pronouncements on this issue, has declared that in a case of agent whose position is similar to that of a kachha arahtia, the turnover is only the commission. However, in 10 ITA no.2597/Del./2011
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 purchases and sales as well as payments are duly recorded and routed through the books of accounts of the appellant. The appellant has nowhere been able to demonstrate that the goods sold to outside parties were in fact belonged to or owned by the principals or farmers. Rather, the appellant has sold the goods to outside parties after purchasing them on his own account from the kachha arahtia and the domain over the goods sold was that of appellant. The appellant relied upon the additional evidences filed at page 19 to 25A of the paper book which were objected to by the AO on the ground that such agreements, all dated 01.10.2006, with the outside parties were only an afterthought as nothing prevented the assessee to file such evidences during the assessment proceedings had these been available with the assessee. Although these additional evidences have been admitted by my learned predecessor but the admitted fact remains that the appellant has substituted his own purchased goods towards such contracts made with the outside parties and bought the constituent's goods on his personal account. The mere fact that the appellant has sold goods at a price for which such goods were purchased, is of no relevance. A kachha arahtia charges his commission, market committee fees and VAT while effecting sales of his principals whereas in the case of appellant, the charges have been covered under as many as eight heads like bonus etc. including VAT, cess and commission, which are enough to compensate for his desired profit. This fact alone is also not conclusive when the other parameters lead to establishment of the fact that the appellant is a pacca arahtia by virtue of his registered status and transaction effected on his own account wherein he has 11 ITA no.2597/Del./2011
made himself responsible and liable for receipt of payments from outside parties as also the payments towards suppliers. Keeping in view the rationale laid down by the CBDT as contained in the above cited circular, I find no reason to differ from the decision of the AO in holding the appellant as pacca arahtia. Once the status of appellant is established to be so, the entire receipts including commission are to be considered for the purpose of applicability of section 44AB of the Act. Admittedly, the receipts of the appellant far exceed the limits prescribed u/s 44AB of the Act and the appellant was liable to get his books of accounts 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.l,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 principal and on his behalf. Since, it has been already held that the appellant has sold the goods to outside parties on his own account; the above decision does not help the case of appellant. The rationale laid down in the other decisions relied upon by the appellant has already been considered by the CBDT while issuing Circular No.452 as discussed above. The decision of Hon'ble Gujarat High Court in the case of ITO vs. Sachinam Trust (230 ITR 445) relied upon by the appellant is on the issue of reasonable cause in the context of section 273A of the Act and not applicable to the facts of case. Keeping in ·view the above factual and legal position, the ground No. (i) of the appeal is dismissed.
6.1 In the ground No (ii) to (iv) of the appeal, the appellant has challenged the action of the AO in invoking the provisions of section 194H making him liable for deduction of tax at source from commission payments; and invoking the provisions of section 40 (a)(ia) of the Act. The· provisions of section 194 H are already reproduced in the submissions of the appellant. An assessee, being 12 ITA no.2597/Del./2011
an individual, is not required to deduct tax at source on commission payments, if his turnover during the preceding previous year does not exceeds the limits prescribed u/s 44AB of the act. The appellant has contended that there was no such finding by the AO for the A.Y.2006-07 as regard turnover. However, the case of appellant for A.Y.2006-07 was not scrutinized and accepted in summary processing. The admitted fact remains that when the sales made by the appellant in A.Y. 2007-08 are considered as part of his turnover, the same ratio shall be applied to A.Y.2006-07 in which the turnover was Rs.2,68,26,128/-. Hence, the exemption available under the proviso to section 194H of the Act is not applicable to the appellant. The appellant was liable to deduct tax at source from the commission payments and failure to do so would attract the provisions of section 40 (a)(ia) of the Act. The AO has quantified the commission paid to each party exceeding Rs.2,500/ aggregating to Rs:3,04,511/ - and made disallowance by invoking section 40(a)(ia) of the Act. I find no infirmity in the action of the AO in view of the facts discussed above. The disallowance of Rs.3,04,511/ made by the AO is confirmed and all the ground of appeal on this issue are dismissed."
6. The assessee is now in 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 (2012) 21 Taxmann.com 489 (All),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 not form part of turnover of the assessee. While inviting our attention to 13 ITA no.2597/Del./2011
page 40 and 41 of the paper book, the ld. AR contended that since the assessee dealt with the outside parties on principal to principal basis, he was not required to deduct tax at source. Inter alia, the ld. AR relied upon decisions in V.K. M. Abdulsalam Rowther Vs. State of Kerala (1961) 12 STC 98 (Kerala); Atul Glass Industries, Faridabad Vs. State of Haryana & others (1971) 28 STC 148 (P&H); CIT Vs. Sir Kikabhai Premchand (1953) 24 ITR 506 (SC); Arun Electrics, Bombay Vs. CST, Maharashtra State (1966) 17 STC 576 (SC) and CIT Vs.Jai Drinks Pvt. Ltd.,198 Taxman 271(Del.)
7.. On the other hand, ld. DR supported the findings of the ld. CIT(A) and submitted that on the basis of order of the sales tax authorities, turnover being ``1.46 crore, the assessee was required to have his accounts audited in terms of provisions of sec. 44AB of the Act. While referring to page 43-44 of the paper book, the ld. DR vehemently argued that the assessee was a pakka arahtia as ascertained from market committee authorities. Inter alia, the ld. DR relied upon decision in The Bhopal Sugar Industries Ltd. vs. STO,40 STC 42(SC) while contending that turnover can be different in the context of Sales Tax enactment or the Income tax Act. The ld. DR added that decisions in V.K.M. Abdulsalam Rowther (supra) or Arun Electronics(supra), were not applicable in the facts and circumstances of the case .While referring to para 3.6 and 3.7 of the assessment order, the ld. DR argued that the ld. CIT(A) having recorded categorical findings of the facts in the light of decision of Sales Tax Authorities, determining turnover of the assessee at ``1.46 crores, his findings may be upheld. The ld. DR added that accounting entries are not conclusive in determining the taxability of income as held in Tuticorin Alkali Chemicals & fertilizers Ltd. vs. CIT, 227 ITR 172(SC)
8. In his rejoinder, the ld. AR argued that turnover adopted by Sales Tax authorities cannot be adopted under the I.T. Act. 14 ITA no.2597/Del./2011
9. We have heard both the parties and gone through the facts of the case as also the decisions relied upon by both the sides. Indisputably, the assessee, registered with the Market Committee, Palwal as Pacca Arahtia, firstly made purchases of paddy from Kacha Arhatias in the name of his concern M/s Sita Ram & Sons & thereafter, sold the goods to buyers through 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 ``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, any material has been placed, evidencing that the goods sold to outside parties, in fact, belonged to or owned by the principals or farmers. Rather, the assessee sold the goods to outside parties after purchasing them on his own account from the kachha arahtia and the dominion over the goods sold was that of the assessee alone, as found by the ld. CIT(A). The ld. CIT(A) while referring to additional evidence concluded that admittedly the assessee substituted his own purchased goods towards such contracts made with the outside parties, the assessee having charged as many as under eight heads like bonus etc. including VAT, cess and commission, which were enough to compensate for his desired profit while being registered as a pacca arahtia he made himself responsible and liable for receipt of payments from outside parties 15 ITA no.2597/Del./2011
as also the payments towards suppliers. In the light of aforesaid circular issued by the CBDT and admittedly, the receipts of the assessee having exceeded the limits prescribed u/s 44AB of the Act, he was liable to get his books of accounts audited u/s 44AB of the Act as was in the case of Shri Mahavir Parsad of Palwal, confronted to the assessee The ld. AR did not make even a whisper before us as to how facts in the assessee's case were different from that of Shri Mahavir Parsad. In the case of The Bhopal Sugar Industries Ltd.(supra) relied upon by tile ld. AR, the Hon'ble Supreme Court 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 latter case, the property is sold by the agent not as his own property but as the property of his principal and on his behalf. Since in the instant case, the ld. CIT(A) concluded that the assessee sold the goods to outside parties on his own account; the said decision does not help the case of the assessee. In the absence of any evidence that the assessee is not a pacca arahtia , there appears to be no basis for interference with the findings of the ld. CIT(A) . As regards issue relating to facts relevant for the preceding year, the facts and circumstances in the preceding year are not before us nor the return for the preceding year was scrutinized as pointed out by the ld. CIT(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, 2012-TIOL-515-HC- DEL-IT, 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.
16 ITA no.2597/Del./2011
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-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-Tax in the earlier proceedings, a different and contradictory stand should have been taken."
This Court notices that there cannot be a wide application of the rule of consistency. In Radhasaomi itself, the Supreme Court acknowledged that there is no res judicata, as regards assessment orders, and assessments for one year may not bind the officer for the next year. This is consistent with the view of the Supreme Court that "there is no such thing as res judicata in income-tax matters" (Visheshwara Singh v. Commissioner of Income Tax AIR 1961 SC 1062). Similarly, erroneous or mistaken views cannot fetter the authorities into repeating them, by application of a rule such as estoppel, for the reason that being an equitable principle, it has to yield to the mandate of law. A deeper reflection would show that blind adherence to the rule of consistency would lead to anomalous results, for the reason that it would engender the unequal application of laws, and direct the tax authorities to adopt varied interpretations, to suit individual assesses, subjective to their convenience, - a result at once debilitating and destructive of the rule of law. A previous Division Bench of this Court, in Rohitasava Chand v Commissioner of Income Tax 2008 (306) ITR 242(Del) had held that the rule of consistency cannot be of inflexible application.
9.1 As concluded by the Hon'ble High Court, there is no res judicata, as regards assessment orders, and assessments for one year may not bind the officer for the next year. Since in the preceding year, no such facts ,as have been revealed in the year under consideration, emerge from the records, considering the totality of facts and circumstances of the case, especially when the ld. AR on behalf of the assessee did not place any material before us that the assessee was only a kutcha arahtia even while being registered and acting as pucca arahtia, there is no basis to interfere with the findings of the ld. CIT(A). The ld. AR on behalf of the assessee did not demonstrate before us as to how the decisions referred to by him in V.K. M. Abdulsalam Rowther (supra); Atul Glass Industries(supra)Sir Kikabhai Premchand (supra); Arun Electrics(supra) and Jai Drinks Pvt. Ltd.(supra) are of any help in the instant case. Moreover, the ld. CIT(A) upheld the findings of the AO that the commission exceeding Rs.2,500/- in each case aggregated to ``:3,04,511/ - and the provisions of sec. 194H are applicable in the case . In view of the foregoing, when the ld. AR did not place any cogent material before us, controverting these findings of facts recorded by the ld. 17 ITA no.2597/Del./2011
CIT(A),we have no basis to take a different view. Therefore ,ground nos. i) to v) in the appeal are dismissed.
10. No additional ground having been raised before us in terms of residuary ground no.vi in the appeal while ground no. vii) being mere prayer,does not require any separate adjudication, accordingly, these grounds are dismissed.
11. No other plea or argument was made before us.
12. In the result, appeal is dismissed.
Order pronounced in open Court
Sd/- Sd/- (I.C. SUDHIR ) (A.N. PAHUJA) (Judicial Member) (Accountant Member)
Copy of the Order forwarded to:-
2. Income-tax Officer, W ard 11 (3),CGO Complex, N.H.-IV, NIT, Faridabad
3. CIT concerned.
4. CIT(A)- Faridabad.
5. DR, ITAT, 'I &SMC' Bench, New Delhi
6. Guard File.