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Facts
The appellant, a commission agent (Kachha Arhatia), declared commission income but faced disallowance of partial TDS credit due to a mismatch between the turnover reported in their Income Tax Return (ITR) and the gross receipts reflected in Form 26AS. The Assessing Officer (AO) and CIT(A) partially allowed TDS credit, citing that the assessee's Mandi license listed them as a 'businessman as trader in joint status' rather than solely a commission agent, leading to questions about their eligibility for certain TDS benefits.
Held
The Income Tax Appellate Tribunal (ITAT) remanded the matter back to the AO. The AO is directed to re-examine the Form 26AS and ITR, verify the assessee's status as a 'Kachha Arhatia' (pure agent) in accordance with CBDT Circular No. 452 of 1986, and allow full TDS credit if the corresponding income has been offered for taxation and the assessee substantiates their claim with documentary evidence. The assessee is to be given an opportunity to reconcile any mismatches by filing an updated TDS statement.
Key Issues
Whether the assessee, claiming to be a Kachha Arhatia (pure agent), is entitled to full TDS credit when there's a mismatch between ITR and Form 26AS, and whether their Mandi license supports their claim of being solely an agent or also a trader.
Sections Cited
143(1), 194Q, 199, 37BA, 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JODHPUR BENCH (Virtual
Before: DR. MITHA LAL MEENA, HONBLE & NARINDER KUMAR, HONBLE
These appeals by the assessees are directed against the separate orders dated 13/06/2024; 10/07/2024 and 08/08/2024 of the Commissioner of Income Tax, Appeals, ADDL/JCIT(A)-1, Vadodara, Aurangabad and Nasik (hereinafter referred to "the JCIT appeals"] for the Assessment Year 2023-24; 2022-23 and 2023- 24 respectively, challenging therein the sole and common issue regarding confirming disallowance of the claim of TDS deduction on transaction as Kaccha Arahtia. The appeal in ITA No. 572/Jodh/2024 for Assessment Year 2023-24 is taken as a lead case for discussion and adjudication of the issue.
Briefly, the facts are that the Appellant had e-filed her return of income for the Assessment Year 2023-24 on July 25, 2023, declaring total income of Rs. 11,08,290/- and paid total tax of Rs. 2,48,444/-. The Appellant is working as a commission agent (Kachha Arhatia) besides his own purchase/ sale of agricultural commodities. The turnover (sales) made on behalf of the arhatia is not included in the turnover of the Appellant (Kachha Arhatia) as per circular no. 452 dated March 17, 1986, but only commission on that amount is included in the total income of the Appellant. The AO/CPC has alleged in intimation under section 143(1) of the Income Tax Act, 1961 ('Act') that TDS proportionate to the turnover not reflected in trading/ profit & loss account filed along with the Income Tax Return of the Appellant for the Assessment Year 2023-24 and accordingly, it has been disallowed (i.e. Rs. 1,61,463/-) at the time of processing of the Income Tax Return and partial credit of only Rs. 24,621/- has been allowed, as against total TDS of Rs. 1,86,084/- claimed by the Appellant.
Being aggrieved by the order under section 143(1) of the Act, the Appellant filed an appeal before the Ld. Addl./ JCIT (A) - 1, Vadodara, who dismissed the appeal of the Appellant by observing as under: "6.2. 2. The appellant in ROI has disclosed commission income amounting to Rs.29,43,671/- and income from other source amounting to Rs. 2,898/-.
Consequently, TDS on this income totaling to Rsv 1,48,646/- warrants consideration. However, the appellant has omitted to report the sales in her ITR, contending that she operates solely as a middleman ("kachha\adatiya"). Consequently, credit for the TDS under Section 194Q for Rs.37,438/- cannot be attributed to the appellant. On verification of Form 26AS, it reveals that the appellant has claimed TDS amounting to Rs. 1 inclusive of TDS under Section 194Q. Given the appellant's assertion of acting solely as an agent and not as a principal, with no declaration of sales proceeds in her ROI, any TDS attributed under Section 194Q cannot be claimed or allowed. 6.2.3 CBDT vide Instruction No. 5/2013 has laid down the procedure to verify the TDS claim of the assessee and allow the same if it is found to be in order.
Looking to the facts and circumstances of the case and respectfully following the instructions issued by the CBDT in this regard, the AO is directed to verify the TDS claim of the appellant & allow the TDS credit excluding the claim u/s 194Q of the Act to the extent of Rs. 37,438/-, after examining the claim as well as availability of TDS credit and corresponding income declaration in the assessment year under consideration in view of clause 3(ii) of rule 37BA of the I.T. Rules. The appellant is also directed to furnish all supporting documentary evidence before the A.O."
The Ld. AR for the assesee, has reiterated the submission made before the 1st appellate authority by stating that the assessee is engaged in the business of sale of agriculture crop produce on behalf of farmers on commission basis, commonly known as Kachhi Arhatiya, or Commission Agent. The nature of business of the kachha arhtiya is to/with providing of services to the farmer in selling his crop in the recognised Mandies, or the factory owners or the traders on the appropriate market rate, and further kachha arhtiya provide advances to the farmers for cultivation of his crop. For providing such type of services the kachha arhtia generally receive 2 percent commission i.e. arhat of value of crop. As per law the said commission receipt is treated as gross turnover of the kachha arthiya. Here it is important to note that sale value of the crop sold by the farmer through arhtiya is not to be treated as turnover of the kachha arhtiya. In the present case the assessee has claimed to be done transaction as kacha arhtiya and trader who has filed his ITR treating income as gross turnover in terms of the CBDT circular no. 452 dated 17.03, 1986.
He further submitted that as per CBDT circular a kachha arahtia acts only as an agent of his constituent i.e. farmer and never acts as a principal. 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 the kachha arahtia, does not have any dominion over the goods. The Board has 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. In the case of agents whose position is similar to that of kachha arahtia, the turnover is only the commission and does not include the sales on behalf of the principals.
The AR contended that while processing the Return of Income u/s 143(1) of the Act, AO/CPC has accepted Returned income, but it has restricted the claim of TDS to Rs. 24,621/- as against Rs. 1,86,084/-. Thus disallowed the claim of TDS on the ground that gross receipts as per form 26AS is more than that of what were shown in the ITR. This appears due to TDS deducted by the buyer under section 194Q of the Income Tax Act. It is contended by the Ld. AR that Buyer has deducted TDS under section 194Q on the purchase value of crop of the farmer purchased through kacha arhtiya, and it is not the sale or turnover of the kacha arthia, and actually it was sale of the farmer. The Ld. AR pleaded that considering the legal and factual position, the assessee is entitled for credit of whole amount of TDS as claimed in the ITR for the assessment year relevant and as such requested to allow credit of the TDS to the assessee being kacha arhtia as a covered matter by Tribunal decisions including ITA No. 82/Jodh/2024 Pravin Kumar Nagpal vs. ITO, decided on 02.09.2024, with respect to the assessment year 2022-23, On the other hand, the Ld. Addl. CIT Sr. DR relied on impugned Order. He contended that matter is covered in favour of Revenue by Coordinate Jodhpur Bench Decision in the case of "Ratnesh Garg Vs. ITO" in ITA No. 589/Jodh/2024 Asst. year 2002-23 and several other judgements including Delhi Bench in ITA No. 278/Del/2024 dated 27/03/2024.
Having heard both the sides and perusal of record, we find that AO/CPC has not allowed the full credit of the TDS due to the mismatch of total receipt in ITR and Form-26AS. In this respect, appellant in his submission before Ld. CIT(A) and before us has submitted that he has acted as "Kaccha Arhatia" registered with Rajasthan Krishi Upaj Mandi and works as a middleman. As per the Circular No. 452(F.No. 201/3/85-/T(A-//)), dated 17.03.1986) the Kaccha Arhatia if verified with documentation certificate issue by Krushi Upaj Mandi Samiti under the relevant act, it is presumed to be an agent of his constituent and never acts as a principal. In the present case, the certificate issued has been for the purpose of doing business as a trader and not as a commission agent (Kachha Adatiya ) of either category. The certificate issue by Krushi Upaj Mandi Samiti under the relevant act, (APB, Pg.33) is reproduced here under: कार्यालय कृषि उपज मण्डी समिति, सादुलशहर प्रपत्र संख्या VIII स्थायी अनुज्ञप्ति (राजस्थान कृषि उपज मण्डी नियम, 1963 के नियम 69/72 के अधीन मन्जूर) स्थायी अनुज्ञप्ति संख्या 2.27 विनांक 4-1-2011 मेसर्स प्रार्थी इन्टर गई जैजानुजशहर (नाम, पता) जो राजस्थान कृषि उपज मण्डी नियम, 1963 के नियम 69/72 के अधीन, इसके नीचे उल्लिखित निबन्धनों और शर्तों पर कृषि उपज का व्यापार करने के लिए व्यापारी 'क' वर्ग वलाल / "ख" वर्ग दलाल / संयुक्त व्यापारी, 'क' वर्ग दलाल/तोलने वाले/मापने वाले / सर्वेक्षक/ भाड़ागार कर्मी / फुटकर विक्रेता और अन्य ऑपरेटर • में कार्य करने के लिए अनुज्ञप्ति मंजूर की जाती है। साऊलशहर के रूप में मण्डी क्षेत्र यह स्थाई अनुज्ञप्ति, अन्तरणीय है। अनुज्ञप्तिधारी की ओर से निम्नलिखित सहायक / प्रतिनिधि कार्य करेंगे :- क्र.स. पिता का नाम पता नाम 1 श्रीमति श्री विशाल लेतिया श्री राजकुमार वार्डन 10 कामुलांशहर 2 3 FESTED FES SY सचिव कृषि उपज मण्डी समिति सादुलशहर स्थायी अनुज्ञप्ति के निबन्धन और शर्ते (1) अनुज्ञप्ति धारी राजस्थान कृषि उपज मण्डी अधिनियम 1961 और नियमों और उसके अधीन विरचित उप विधियो के उपयन्यो और समःः समय पर पर जारी किए गए अनुदेर्शी का अनुपालन करेगा। यह अध्यक्ष या अनुशापत्र प्राधिकारी द्वारा प्राधिकृत किसी अधिकारी द्वारा या अध्यक्ष या उसके द्वारा इस निमिति प्राधिकृत किसी अभ्य अधिकारी द्वारा गांग करने पर इस सम्बंध में अनुज्ञप्तिधारी को दी जाने वाली रसीद के बदले में, स्थायी अनुज्ञप्ति अभ्यर्पित करेगा। (2) अनुज्ञप्तिधारी किसी कृषि उपज में अपमिश्रण नहीं करेगा या करवायेगा. (3) अनुज्ञप्तिधारी अपने सहायकों या अभिकर्ताओं के कार्यों के लिए उत्तरदायी होगा. (4) अनुज्ञप्तिधारी, यदि यह व्यापारी या 'क' वर्ग चलाल है तो विक्रय पर्णीयां जारी करेगा, खरीदी गयी या बेची गई कृषि उपज का अभिलेखा रखेगा और उप विधियों में विनिर्दिष्ट तरीके से प्रत्येक माह स्टॉक, आवक और जावक का विवरण मण्डी समिति को देगा. (5) अनुज्ञप्तिधारी यदि यह व्यापारी या "क" वर्ग दलाल है तो वह, यदि उपज की खरीव या विक्रय उसकी एजेन्सी या उसके द्वारा की गयी हो, कृषि उपज की कीमत विक्रेता को उसी दिन संदन्त करेगा. (6) अनुज्ञप्तिभारी अपनी फर्म की मागीवारी में किसी परिवर्तन के होने पर परिवर्तन के एक सप्ताह के भीतर भीतर मण्डी समिति को सूचित करेगा. (7) अनुज्ञप्तिभारी अपनी स्थाई अनुज्ञप्ति को अपने करोबार परिसर में किसी सहजदृश्य स्थान पर प्रदर्शित करेगा. (8) अनुज्ञप्तिधारी यदि वह "ज" वर्ग दलाल, तोलने वाला, सर्वेक्षक या मापने वाला या अन्य कोई ऑपरेटर है तो किसी व्यापारी या 'क' वर्ग वलाल का सेवक नहीं होगा और विक्रेताओं और क्रेताओं के अधिकाधिक हित में निष्पक्ष रूप से कार्य करेगा. (9) यदि कारण बताओ नोटिस जारी होने के पश्चात नियमों / बाध्यताओं का उल्लंघन / अपाहाँ हाँ है तो मण्डी समिति द्वारा अनुशति का निलम्बन / रदकरण किया जा सकता है। A BESHAMSNG KOULSHAND. 33 of 50 In our view, the appellant assessee is required to substantiate the privilege of being a kachha arahtia engaged in selling crops on behalf of farmers, with support of documentary evidence so that only gross commission may be considered for the purpose of computing its turnover in the light of CBDT Circular 452 of 1986 dated 17.03.1986 while computing tax liability. It is further clarified that the short credit of TDS granted in respect of TDS deducted against his own PAN is dependent upon filing of TDS statement by the assessee as mandated u/s 199 and rule 37BA(1). If there is any mismatch in the TDS claim as per the return vis-a-vis the TDS statement filed by the deductor, the assessee ought to have been allowed due opportunity of being heard and furnish updated reconciled TDS statement by getting appropriate corrections carried out in the TDS statement issued in its name by the deductor, by way of filing the details transactions with the deductor so that appropriate updated TDS statement be issued in the name of the clients. Accordingly, in our view, in the given set of facts, the appellants claim does not stand forthwith at this stage, particularly when the certificate is not conclusive as it stands being issued for joint business activities as trade and kachha adatiya without specific categorisation.
The coordinate Delhi Bench (Supra) observed that the appellant should not get benefit of Tax erroneously deducted by the Payer in as much as the assessee has not shown the same as its income/receipts viz-a-viz the turnover shown in form No.26AS.
The Coordinate Jodhpur Bench in the case of Ratnesh Garg (Supra) has held as under: Having heard both the sides and perusal of record, we find that AO/CPC has not allowed the full claim of the TDS due to the mismatch of total receipt in ITR and Form-26AS. In this respect, appellant in his submission before Ld. CIT(A) and before us has submitted that he is a "Kaccha Arhatia" registered with Rajasthan Krishi Upaj Mandi and works as a middleman. As per the Circular No. 452(F.No. 201/3/85-/T(A-//)], dated 17.03.1986) the aforesaid Kaccha Arhatia acts only as an agent of his constituent and never acts as a principal.
The JCIT(A) has not appreciated the facts of the case in right perspective. Considering the peculiar facts of the present cases, the matter is required to be restored to the AO for limited purpose with the direction to examine the contents of the Form 26AS at the time of giving appeal effect and give credit of TDS mismatch claimed subject to provision of section 199 of the I. T. Act and rule 37BA of the I. T. Rules. Thus, the AO has to verify the total receipts shown in 26AS and ITR and give credit of TDS to the appellant if the corresponding income has been offered either by the assessee, the Kachha Adatiya or its principle by for taxation in his income tax return in the relevant year after due verification.
Without prejudice to above, it is pertinent to mention that appellant is being a kachha arahtia involved in selling crops on behalf of farmers and therefore, only gross commission has to be considered for the purpose of computing the turnover in the light of aforementioned CBDT Circular 452 of 1986 dated 17.03.1986 while computing tax liability. It is clarified that the short credit of TDS granted in respect of TDS deducted against his own PAN is dependent upon the filing of TDS statement by the deductor as mandated u/s 199 and rule 37BA(1). If there is any mismatch in the TDS claim as per the return vis-a-vis the TDS statement filed by the deductor.
The assessee has been allowed due liberty by this Bench that the TDS statement can be rectified by getting appropriate corrected TDS statement issued filed by the deductor. Accordingly, the matter is restored to the file of the AO.
Considering the factual matrix of the case and the CBDT Circular 452 of 1986 dated 17.03.1986, we direct the AO to examine and verify the contents of the Form 26AS at the time of giving appeal effect and give credit of TDS mismatch if any, to the appellant assesses.
In the present case, it is evident from the certificate issued in the appellant's name by the Krishi Upaj Mandi Samiti, Sadulshahar, dated 04/01/2011 (APB, Pg. 33) that the appellant assessee has been acting as a businessman as trader in joint status who is trading in agricultural commodities on regular trading in the Krishi mandi. However, the Ld. AR Counsel argued that it is routine language of the certificate and in fact the assesee has acted as Kachha Adatiya and an appropriate certificate and documentary evidence in support of its claim would be submitted, provided given adequate opportunity by the authorities below.
On perusal of the aforesaid Certificate/ Licence date 01/04/2011, it is revealed that the same pertains to Prachi Enterprises, Sadulsahar. In arguments, Ld. AR for the appellant has submitted, on query by the Bench, that this is the proprietorship concern under the said name is being run by the assessee, where She is engaged in sale/purchase of agriculture produce and also acts as a commission agent. However, from this very document, it cannot be made out that the appellant assesse is a proprietor of the said concern.
Considering the factual matrix of the case and the CBDT Circular 452 of 1986 dated 17.03.1986, we direct the AO to examine and verify the contents of the Form 26AS at the time of examining the claim of the assessee and give credit of TDS mismatch if any, to the appellant assesses after due verification TDS claim of the assessee with reference to the status of the assessee whether it has acted as kachha Adatiya during the assessment year relevant. In view of that matter, we consider it deem appropriate, the assessee may be given one more opportunity before the AO which appears to be denied by the Ld. ADDL. CIT, Appeal while rejecting its appeal.
Thus, the matter is remanded to the AO to examine the veracity of the documentary evidence the reconciled TDS statement and the mandi certificate/Licence, in the name of assessee, issued by the Krishsi Upaj Mandi, Sardulshahar while allowing the claim of the assessee. It is clarified that clarification on the short credit of TDS granted in respect of TDS deducted against his own PAN is dependent upon the filing of TDS statement by the deductor as mandated u/s 199 and rule 37BA(1). If there is any mismatch in the TDS claim as per the return vis-a-vis the TDS statement filed by the deductor, the assessee is given due liberty by this Bench that the TDS statement can be rectified by getting appropriate corrected TDS statement issued filed by the deductor. Accordingly, the matter is restored to the file of the AO.
The facts and issue raised in ITA Nos. 695 and 696/Jodh /2024 are identical to that of ITA No. 572/Jodh /2024. Therefore, our finding and observation given in ITA No. 572/Jodh /2024 shall apply to ITA Nos. 695 and 696/Jodh /2024, in mutatis mutandis, ordered accordingly.
In the backdrop of the aforesaid discussion, the instant three appeal of the assessee are allowed for statistical purposes.
Order pronounced on 07/07/2025 under Rule 34(4) of Income Tax (Appellate Tribunal) Rules, 1963. (NARINDER KUMAR) JUDICIAL MEMBER Dated :..../..../2025 (DR. MITHA LAL MEENA) ACCOUNTANT MEMBER BERA Copies to: (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File (Assessment Year 2022&2023-24)
By Oder