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Income Tax Appellate Tribunal, DELHI BENCH: “SMC-1” NEW DELHI
Before: SMT DIVA SINGH
Date of Hearing 23.08.2016 Date of Pronouncement 07.11.2016 ORDER
The present appeal has been filed by the assessee assailing the correctness of the order dated. 12.09.2014 of CIT(A), Ghaziabad pertaining to 2009-10 AY on various grounds. However, the parties were heard only in respect of Ground No.4 which reads as under:- 4. “That in any case and any view of the matter, action of Ld.CIT(A) in confirming the action of Ld.AO in making the impugned addition and framing the impugned assessment order is contrary to law and facts, void ab initio, beyond jurisdiction, and without giving adequate opportunity of hearing, by recording incorrect facts and findings and the same is not sustainable on various legal and factual grounds.”
The relevant facts of the case are that the assessee returned an income of Rs.1,64,560/- on 17.04.2009. The said return was selected for scrutiny through CASS on the basis of AIR information that the assessee had deposited cash of Rs.14,89,500/-, Rs.34,31,000/- in his SB A/c with Axis Bank Limited, Nehru Nagar & Indirapuram and Rs.23,49,825/- in ICICI Bank SB A/c. Accordingly after issuance of notice under section 143(2) etc and show cause and questionnaire etc. u/s 142(1) the assessee was required to explain the same. Not convinced with the explanation offered the assessment was concluded at an income of Rs.20,63,240/-. These additions were challenged in appeal before the CIT(A). A perusal of the same shows that the Ld. CIT(A) after extracting the assessment order from page 2 to 4 has proceeded to reproduce the written submissions of the assessee upto page 11 of his order and proceeded to uphold the addition made.
Inviting attention to the following submissions extracted at page 6 of the impugned order “that the Assessee is carrying the business as retailers as well as commission agent of Fruits & Vegetables in the name and style of M/s Imran Tomato Company at SA-38, Subzi Mandi, Sahibabad. Ghaziabad. He is also the License Holder of Uttar Pradesh Krishi Uttpadan Mandi Samiti governed by Uttar Pradesh Uttapdan Mandi Samiti Adhiniyam. 1964.” It was submitted that the CIT(A) has also not considered the following claim namely the “assessee was entitled to opt the presumtive profit U/s 44AF of the Income Tax Act, 1961 and he did so. It was according to the law and no violation of either act nor assessee declared less profit against the presumtive profit i.e. 5%.” It was submitted the argument is recorded by the CIT(A) that “the Assessee he is also doing work as Commission Agent for which he is holding the license from UP Krishi Uttpadan Mandi Samiti. Ghaziabad.” The definition of agricultural produce Kachha Arhatiya or Commission Agent in Uttar Pradesh Kirshi Uttpadan Mandi Adhiniyam, 1964 had been referred to and reference was made to Section 39(2) of the Uttar Pradesh Kirshi Utpadan Mandi Samiti Adhiniyam, 1964 where the rate of commission is fixed for Arhatiya or commission agent. Copy of order of Rajya Krishi Utapdan Mandi Parishad, Uttar Pradesh in which the rates of commission are mentioned was submitted as under:- a. 1.50% in the case other than Crops, Fruits & Vegetables; b. 2.50% in the case of crops; c. 3.00% in the case of Fruits and Vegetables.
These arguments it was stated were before the AO and the CIT(A), it had been argued that the “AO neither considered these definition nor considered the version of assessee. He did not accept the request of assessee to summon the record of Krishi Utpadan Mandi Samiti. In this regard, Learned AO views was that the case is going to be time barred, therefore it is not possible to call the Krishi Utpadan Mandi Samiti for I.T.A .No.-6849/Del/2014 IMRAN vs ITO verifying there records.” It was also submitted that since the assessee admittedly was a “Kachha Arhatiya, therefore, sale and purchase made by him does not covered under sale. As per circular 452 dated 17/03/1986, the Board is advised that so far as Kachha Arhatiyas 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 arliatiyas. A pacca arhatiya is not in the proper sense of the word, an agent or even del credere agent. The relation between him and his constituent is substantially that between the two principals.”
The following settled legal position, it was submitted was relied upon to address the distinction between a Kachha arhatiya and a pacca arhatiya:-
(1) “A kachha arhatiya acts only as an agent of his constituent and never acts as a principal. A pacca arhatiya, 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 arhatiya brings a privity contract between his constituent and the third party so that each becomes liable to the other. The pacca arhatiya, 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 arhatiya 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 arhatiya, 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 arhatiya 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 arhatiya. . (5) The kachha arhatiya, unlike the pacca arhatiya, does not have any dominion over the goods. (6) The kachha arhatiya 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 arhatiya has a personal interest of his own when he enters into a transaction. (7) In the event of any loss, the kachha arhatiya is entitled to be indemnified by his principal as is not the case with pacca arhatiya.”
Accordingly, it was his submission that the CIT(A) may be directed to pass an order considering the facts and the legal position as canvassed as the conclusion arrived at without addressing the arguments may not be upheld.
I.T.A .No.-6849/Del/2014 IMRAN vs ITO
The Ld.Sr.DR considering the above mentioned arguments recorded in the impugned order itself was unable to show where they have been considered by the First Appellate Authority. Accordingly, it was his submission that he has no objection if the issue is restored.
I have heard the rival submissions and perused the material available on record. On a consideration of the same, I am of the view that the conclusion arrived at without considering the factual and legal submission on record cannot be upheld. Accordingly the impugned order is set aside and the issue is restored back to the file of the CIT(A) with a direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. 7. In the result, the appeal of the assessee is allowed for statistical purposes. The order is pronounced in the open court on 07th of November, 2016.