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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI P.K. BANSAL & SHRI AMARJIT SINGH
PER AMARJIT SINGH, J.M.
The appeal filed by the Revenue and Cross Objection by the
assessee are directed against the order dated 15th October 2013,
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passed by the learned Commissioner (Appeals)–II, Nagpur, for the
assessment year 2009–10.
The Revenue has raised the following grounds of appeal:-
“1. Whether on facts and in the circumstances of the case, the CIT (Appeals) has erred in deleting the addition made by AO on a/c of disallowance u/s 40A(3) by holding that the relationship between BSNL and the assessee was principal and agent?
Whether on the facts and in the circumstances of the case, the CIT (Appeals) has erred in holding that the relationship between BSNL and the assessee was principal and agent and hence there was no sale and purchase between the two?
Brief facts of the case are that the assessee filed return of income for the assessment year 2009-10 on 29th September 2010,
declaring total income to the tune of ` 10,66,770. the return of income
was processed under section 143(1) of the Income Tax Act, 1961 (for
short “the Act”). Thereafter, the case was selected for scrutiny under
CASS. Notice under section 143(2) dated 20h August 2010, was issued
and served upon the assessee. Subsequently, the notice under section
142(1) fo the Act was also issued and served upon the assessee. The
assessee was deriving his income from wholesale trading of Country
Liquor, Petrol Pump (Indian Oil Corp.), BSNL Franchise, retail liquor
shop. The books of account were maintained and were audited as
required under section 44AB of the Act. A copy of audit report along
with Balance Sheet, Profit & Loss account and other details were also
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filed. The assessment was completed after making various
disallowances and assessing the income to the tune of ` 1,39,05,095.
The assessee was not satisfied, therefore, the assessee filed an appeal
before the learned Commissioner (Appeals) who deleted the addition
made by the Assessing Officer on account of disallowance under
section 40A(3) of the Act. Therefore, the Revenue has filed the present
appeal before us.
ISSUE NO.1 AND 2
Under these issues, the Revenue has raised the sole point in
connection with the deletion of the addition made by the Assessing
Officer on account of disallowance under section 40A(3) of the Act. The
learned Commissioner (Appeals) has held the relationship between the
assessee and BSNL as “principal and agent”, therefore, he was of the
view that the provisions of section 40A(3) of the Act was not applicable
to the case of the assessee. Before going further, we deem it
necessary to advert the finding of the learned Commissioner (Appeals)
on record on these issues.
“6. I have carefully considered the facts of the case and written submission of the appellant. The issue of disallowance u/s 40A(3) in respect of purchases made from BSNL have been the subject matter of appeal in the immediately preceding year in the case of the appellant. The appellant has submitted a copy of order passed by the CIT(A)-II, Nagpur vide order No. CIT(A)-11/564/10-11 dated 12-03-2012 wherein the disallowance u/s 40A(3) on identical facts was dealt by my predecessor. The relevant portion of the order of CIT(A) is reproduced as under:-
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"However, appellant has claimed that there is relationship of principal and agents and between appellant and BSNL and hence appellant can give cash collected on behalf of principal and section u/s.40A(3) is not attracted. Appellant has placed reliance on the judgment of Kerala High Court in case of Vodafone Essar Cellular Ltd. vs. Asstt. CIT in IT A No. 1742, 1759, 1761 to 1764, 1773 & 1780 of 2009 dt. 17.08.2010 and ITAT, Cochin Bench 127 ITD 440 (2011). I find that relationship of principal / agent is there and appellant is getting only commission out of it. Hence, there is no sale purchase and section 40A(3) is not attracted. Hence, addition on this account is deleted.”
On appraisal of the above mentioned findings, we observe that
the learned Commissioner (Appeals) deleted the addition raised in
view of the provisions under section 40A(3) of the Act on the basis of
finding of the learned Commissioner (Appeals)-II, Nagpur, in which on
the basis of identical facts the addition deleted by the said appellate
authority raised in view of section 40A(3). The addition was deleted on
the basis of the judgment passed in the case of Vodafone Essar
Cellular Ltd. vs. Asstt. CIT in ITA no.1742, 1759, 1761 to 1764, 1773 & 1780 of 2009 dated 17th August 2014 and also relied upon the
findings of the Co-ordinate Bench of the ITAT, Cochin Bench, in the
case of S. Rahumathulla v/s ACIT,[2010] 127 ITD 440 (Cochin). The
Hon’ble High Court of Kerala and the Tribunal, Cochin Bench, have
held that the relationship between the assessee and the BSNL is
“principal and agent” in nature, therefore, the provisions under section
40A(3) has not been attracted and accordingly the learned
Commissioner (Appeals) also deleted the addition made by the
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Assessing Officer to the tune of ` 7,62,692. No distinguishable material
has been produced before us to deviate from the findings of the
learned Commissioner (Appeals) in question. The matter of
controversy has been adjudicated earlier in the above mentioned case
and the case of the assessee has duly been covered with the case
relied upon by the learned Counsel for the assessee mentioned above.
Finding no tangible material or any other law contrary to the law relied
upon by the learned Counsel for the assessee, we are of the view that
the learned Commissioner (Appeals) has passed the order in question
judiciously and correctly which is not required to be interfered with at
this appellate stage. Accordingly, these issues are decided against the
Revenue and in favour of the assessee. Thus, the grounds raised by
the Revenue are dismissed.
In the result, Revenue’s appeal is ordered to be dismissed.
C.O. NO.3/Nag./2014
The assessee has filed the cross objection in connection with the
controversy which has been raised by the Revenue in its appeal in ITA
no.11/Nag./2014. Since the matter of controversy has been
adjudicated in favour of the assessee while deciding the issues no.1
and 2 in Revenue’s appeal being ITA no.11/Nag./2014, therefore, the
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cross objection filed by the assesee is hereby dismissed in view of the
above stated terms.
In the result, Revenue’s appeal is dismissed and assessee’s cross
objection is hereby dismissed being infructuous.
Order pronounced in the open Court on 29.06.2017
Sd/- Sd/- P.K. BANSAL AMARJIT SINGH VICE PRESIDENT JUDICIAL MEMBER
NAGPUR, DATED: 29.06.2017
Copy of the order forwarded to:
(1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
(Dy./Asstt.Registrar) ITAT, Nagpur