TaxTMI 
TaxTMI 
2019 (2) TMI 703
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....out any exception. During the year under consideration, the appellant had continued to operate and function in the same manner and style. Without pointing any distinction and deviation in the working style of the appellant, the Authorities Below have deviated from the past and subsequent history of the case for no reason. Thus the findings so arrived at are factually and legally incorrect and are devoid of merits to be quashed summarily." 2. Briefly stated the facts of the case are that the assessee firm is engaged in the business of potato and onion in Muhana Sabji Mandi and has shown commission receipts of Rs. 32,27,937 and interest income of Rs. 7,20,699 and declared net profit of Rs. 12,16,300. The Assessing officer held that the assessee is a pacca arahtia nor a kachacha arahtia as per CBDT Circular No. 452 dated 17.03.1986 and was obliged to show his income from the business as trader instead of a commission agent. Total turnover of the business was Rs. 5,37,98,950/- during the year under consideration and the assessee was obliged by statue (sec. 44AB) to get its accounts audited. The assessee has shown income of Rs. 32,27,937/- on turnover at Rs. 5,37,98,950/- which gives....
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.... of the appellant firm and the nature of its business operations etc as 'Kachha Arahtia' had been examined and verified by the Department every time but nothing adverse could be noted and pointed out. As such the nature of business operations of the appellant firm had always been taken as 'Kachha Arahtia' as evident from copy of some of the assessment orders of this group submitted herewith for your kind perusal and record. At no stage, their functioning as 'Kachha Arahtia' had ever been questioned by the Revenue. Even after this assessment year i.e. A.Y. 2010-11 also the nature of business operations of firm had been shown and assessed as 'Kachha Arahtia' continuously till date. Thus barring this year, at no stage the nature of the business operations of the appellant had ever been questioned and doubted till now. Thus the appellant had a very clean and settled history on this point. 6. It was submitted that despite such settled and undisputed history of the case, the ld. AO had proceeded to examine this point afresh during this year in the back ground of the applicability of Sec. 44AB of the Act. In the process, he had examined and verified the Books and the 'Bheejaks' issued fo....
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....demnified by his principal as is not the case with pacca arahtia. 7. On reading of the above principles, it is noted that the working of the appellant firm as "Kachha Arahtia' was fully and squarely covered by these conditions. There is no violation of any of the aforesaid conditions/principles in any manner at any stage. While explaining the working style and modus operandi of the firm, this fact was brought to the kind notice of the ld. AO vide letter dated 23.8.2012 and it was brought out specifically that the appellant firm was a 'Kachha Arahtia' only. 8. Despite such undisputed and un-questionable facts of the case, the ld. AO had arbitrarily turned down such explanation and had proceeded to conclude that the appellant firm was a 'Pacca arahtia' as per reasons recorded at page no.6 & 7 of the assessment order stating that the appellant had maintained ledger of each and every party with whom it had transactions during the year, had shown debtors at Rs. 1,08,34,607/-, the amount paid to transporters were debited to the account of supplier, and lastly the appellant had debited Rs. 87,758/- on account of bad debts. 9. While arriving at such conclusion, the ld. AO himself was no....
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....ure of Business' and no adverse view could be taken on the basis of such findings. 11. In appeal, the appellant had vehemently objected to the above apprehensions (not conclusion) of the ld. AO. Briefly, such findings (apprehensions) were assailed on the following counts: (i) From the reading of the above facts, your honor would appreciate that the ld. AO had been in two states of mind. He himself was not sure as to whether the appellant firm was a 'Kachha Arahtia' or not. In the circumstances, he had sought to salvage his 'doubtful findings' by making a feeble attempt of making trading addition of Rs. 1 lac in a very cryptic manner and also by making a 'remedial observation' to tax bad debts of Rs. 87,758/- / in case the firm is taken as 'Kachha Arahtia'. Plain reading of the assessment order clearly suggests that the ld. AO was himself doubtful about his findings which had resulted in such absurd addition of Rs. 1 lac. (ii) As per official records of Krishi Upaj Mandi, Muhana Mandi, Jaipur, the appellant firm was in receipt of 'Commission' receipts @ 6% only. Except such commission receipts, the firm had no other income or profit from the trading of the commodities. etc. Thi....
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....nted out. All the goods were transacted through 'Bheejaks' only. This fact is an admitted and evident fact and had never been questioned by the Revenue at any stage or at any time. (vii) The reasons assigned by the ld. AO to treat the appellant firm as 'Pacca Arahtia' are irrelevant, immaterial having no bearing on the working of 'kachha arahtia' as discussed above. 12. The ld. CIT (A) had summarily dismissed the appeal on this point without addressing the above contentions and objections of the appellant. For the purpose, the ld. CIT (A) had merely repeated the same reasons as mentioned by the ld. AO in the assessment order. The ld. CIT (A) had failed to spell out as to how the appellant firm was not a 'kachca arahtia but a pacca arahtia or a trader as per guidelines of Circular No.452 dated 17.03.1986, without pointing out any infirmity in the working of the appellant firm within the frame-work of above Board's Circular. In absence of any specific violation of any of the condition or principle laid down in the circular, the Authorities below were not justified to treat the appellant as 'Pacca Arahtia' without any basis. Thus to this extent, the appeal order is not a 'well reas....
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....tia'. The Authorities Below have incorrectly observed that payment of freight to the transporters by the appellant shows that the appellant had interest in the goods sold through it. Obviously such findings are illogical, irrational and ridiculous. As the payment of freight is fully accounted for and debited to the sellers and the appellant had not incurred or expended any expenditure on this account in any manner so how it could be imagined that the appellant had interest in such goods sold. The Authorities Below had failed to bring this point home with logical reasoning. Thus such findings are not legally and factually maintainable. (d) As regards bad debts of Rs. 87,758/- as pointed out in the last reason, it is pertinent to point out that in the course of such commission business, goods are sold on credit basis resulting in debtors. As the commission agent is responsible for the collection of the sale proceeds of such commissioned goods so the payment of the entire sale proceeds is made by the appellant to its constituents as per 'Bheejaks' irrespective of the fact that such sale proceeds were collected from the purchasers or not; resulting in bad debts in some of cases of ....
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....sessee and the nature of its business operations as 'Kachha Arahtia' had been examined and accepted by the Department, we therefore donot find a justifiable basis to depart from the settled position. Further, we find that there are no clear findings which have been recorded by the Assessing officer to depart from the settled position to hold that the assessee firm is not a 'Kachha Arahtia' but a 'Pacca Arahtia'. What is relevant to examine is whether the assessee was carrying out the transactions of purchase and sale on its own behalf or on behalf of a third party. The privity of contract and underlying transaction documentation are thus critical for the purposes of present analysis. Once the transaction documents are examined, thereafter, their treatment and reflection in the books of accounts to be examined. However, in absence of transaction documents, merely looking at the nomeclature of certain ledger accounts, it cannot be held conclusively in terms of nature of transaction individually or hold conclusively that the assessee is acting as a 'Pacca Arahtia' and not as 'Kachha Arahtia'. In view of the same, in absence of any clear findings so recorded by the lower authorities, w....