MADHO BIHARI AGRAWAL,BURHANPUR vs. ACIT CIRCLE - 4(1), INDORE

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ITA 845/IND/2024Status: DisposedITAT Indore30 October 2025AY 2016-175 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal accepted the assessee's submission that the amount of Rs. 1,46,13,858/- was reported in Clause 34(a) of Form 3CD as TDS deducted on commission paid to agents of cultivators, not as the assessee's own expenditure. The assessee's business involved procuring goods (bananas) on behalf of constituents/clients through other agents. The entire cost of purchase, including commission paid to these other agents, was debited to the accounts of the constituents/clients and did not form part of the assessee's Profit and Loss account. The assessee deducted TDS under Section 194H for compliance, but this commission was not an expenditure of the assessee. Therefore, there was no 'unexplained/unrecorded expenditure' to be disallowed under Section 69C. The Tribunal directed the AO to delete the addition. The issue regarding the validity of the Section 154 proceedings and whether it constituted a mistake apparent on the face of the record was implicitly decided in favor of the assessee by accepting the substantive ground of appeal.

What were the facts?

The assessee, engaged as a commission agent for banana sales, filed his return for AY 2016-17, which was initially accepted. Subsequently, the Assessing Officer (AO) issued a notice under Section 154 for rectification. The assessee did not respond, and the AO passed a rectification order on 23.12.2022, adding Rs. 1,46,13,858/- under Section 69C as unexplained/unrecorded expense. The Commissioner of Income-Tax (Appeals) - NFAC upheld the AO's order. The assessee is now appealing this decision to the Income Tax Appellate Tribunal (ITAT). The dispute centers on an amount of Rs. 1,46,13,858/-.

What were the issues?

1. Whether the addition of Rs. 1,46,13,858/- as income under Section 69C of the Income Tax Act, 1961, is justified? (Question of law and fact) 2. Whether the non-issuance of a notice and failure to provide an opportunity of being heard, as required by Section 154 of the Income Tax Act, 1961, violates principles of natural justice? (Question of law) 3. Whether the issue of non-linking commission with the profit and loss account constitutes a 'mistake apparent on the face of the record' for rectification under Section 154, or does it require a prolonged reassessment? (Question of law) 4. Whether the AO erred in confirming the addition based solely on the audit report, which did not clarify if commission paid was debited in the books of accounts? (Question of law and fact) Assessee's Contentions: - The addition of Rs. 1,46,13,858/- is incorrect as it was reported in Clause 34(a) of Form 3CD as TDS deducted on commission payments to agents of cultivators, not as the assessee's own expenditure. - The commission was debited to the personal account of the commission agent of the cultivators, not to the assessee's Profit and Loss account. - This accounting system has been followed for years and accepted by the Department. - The rectification under Section 154 is invalid due to non-service of notice and denial of natural justice. - The issue does not constitute a 'mistake apparent on the face of the record'. Revenue's Contentions: - The revenue relied on the orders of the AO but acknowledged the assessee's case and left the matter to the Tribunal's discretion.

Which sections of the Income-tax Act were involved?

Section 154,Section 143(3),Section 69C,Section 194H

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI B.M. BIYANI

For Appellant: Shri S.S. Deshpande, AR
For Respondent: Shri Ashish Porwal, Sr. DR
Hearing: 16.10.2025Pronounced: 30.10.2025

आदेश/ O R D E R

Per B.M. Biyani, A.M.:

1.

Feeling aggrieved by order of first appeal dated 14.11.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of rectification-order dated 23.12.2022 passed by learned ITO-Circle-4(1), Indore [“AO”] u/s 154/143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2016-17, the assessee has filed this appeal on following grounds:

“1.The Ld. CIT(A) NFAC has erred in upholding the addition of Rs. 1,46,13,858/- as income u/s 69C of the Income Tax Act, 1961. 2.The Ld. CIT(A) NFAC failed to appreciate that the issue of notice is a mandatory requirement of law for taking action u/s 154 of the Income Tax Act, 1961 and therefore non service of the same and not giving proper Page 1 of 5 AY 2016-17 opportunity to the assessee of being heard is against the principle of natural justice. 3.The Ld. CIT(A) NFAC failed to appreciate that the present issue regarding non linking of commission with the profit and loss account would not be considered as mistake apparent on the face of record, since it requires to be established by long drawn process of reassessing on the point. 4.The Ld. CIT(A) NFAC has erred in confirming the finding of the Ld. AO that the assessee had incurred expenditure of Rs. 1,46,13,858/- out of books of accounts merely on the basis of audit report, which did not apparently disclose as to whether the commission paid to the commission agents of cultivators was debited in the books of accounts or not.

5. The lower authorities failed to accept the contention of the assessee that in his books of accounts commission had been debited to the personal account of the commission agent of the cultivators. 6.The lower authorities failed to consider that this system of accounting has been followed since past many years and the same has also been accepted by the Department. 7.The addition of Rs. 1,46,13,858/- may please be deleted and the returned income be accepted.”

2.

The background facts leading to present appeal as culled out from orders of lower-authorities are as under:

(i) The assessee-individual is engaged in the business of commission agent for sale of banana. For AY 2016-17, the assessee filed his return of income u/s 139 declaring a total income of Rs. 2,61,83,940/- inclusive of income from commission agent activity. The case of assessee was selected for scrutiny under CASS and the AO issued notices u/s 143(2)/142(1) which were complied by assessee.

Ultimately, after necessary scrutiny, the AO accepted returned income of assessee and closed assessment vide order dated 24.12.2018.

Page 2 of 5 u/s 154 for rectification of assessment-order but the same remained unattended by assessee. Ultimately, the AO passed rectification-order dated 23.12.2022 making an addition of Rs. 1,46,13,858/- u/s 69C on account of ‘unexplained/unrecorded expense’.

(iii) Aggrieved by rectification-order, the assessee went in first-appeal.

However, the CIT(A) upheld AO’s order and dismissed assessee’s appeal without giving any relief.

(iv) Now, the assessee has come in next appeal before us.

3.

We have heard learned Representatives of both sides and carefully perused the case record including the orders of lower authorities and the documents held in Paper-Book to which our attention has been drawn.

4.

The issue involved and underlying facts are very limited and does not require much elaboration. The Ld. AR for assessee successfully demonstrated with reference to various documents held in Paper-Book that the AO has made impugned addition by picking a figure of Rs. 1,46,13,858/- which was reported by tax auditors in ‘Clause 34(a) of Form 3CD’ requiring the reporting of TDS deducted and paid by assessee during the year in a tabular format. In the said table, the auditors made a reporting that the assessee deducted TDS u/s 194H out of ‘Commission or brokerage” payment of Rs. 1,46,13,858/-. The AO examined assessee’s P&L A/c and did not find any figure of expenditure of Rs. 1,46,13,858/- having been debited

Page 3 of 5 the assessee has credited the revenue earned from ‘commission received’ from different constituents/clients for which the assessee worked during the year as commission agent. Ld. AR further showed from P&L A/c that there is no sale/purchase of goods credited/debited therein. Ld. AR explained the nature and manner of business carried on by assessee according to which the assessee has worked on behalf of his ‘constituents/clients’ and procured goods (i.e. banana) through ‘other agents’ for and on behalf of his ‘constituents/clients’. Therefore, the entire cost of purchase inclusive of commission/brokerage charged by ‘other agents’, have been debited to the a/c of ‘constituents/clients’ and same does not form part of assessee’s P&L A/c. However, the assessee, while making payment of commission/ brokerage to other agents, deducted TDS u/s 194H to ensure compliance of section 194H. Hence, the auditors have merely reported the relevant figures of compliance made by assessee in Form No. 3CD but the fact remains that the commission/brokerage of Rs. 1,46,13,858/- paid by assessee to other agents was not at all expenditure of assessee and hence not debited to P&L A/c. Therefore, there is nothing like ‘unexplained/unrecorded expenditure’ as understood by AO and therefore no disallowance was required to be made u/s 69C. The Ld. DR for revenue though dutifully relied upon the order of AO but, however, understood the case of assessee and left the matter to the wisdom of bench. After a careful consideration of the business/facts of assessee as explained by Ld. AR with reference to documents in Paper-Book,

Page 4 of 5 the addition made. The assessee succeeds in this appeal.

5.

Resultantly, this appeal is allowed.

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