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Facts
The assessee, a commission agent for garlic, declared an income of Rs. 6,13,380 from a commission income of Rs. 45,04,539. The Assessing Officer rejected the books of accounts under Section 145, citing unreliable self-made vouchers and a lack of nexus between cash deposits and sales, estimating net commission at 5% of total sales (Rs. 32,17,528). The CIT(A) upheld this decision.
Held
The Tribunal set aside the CIT(A)'s order and remitted the matter back to the Assessing Officer. It held that the assessee, being an APMC licensed agent, deserved an opportunity to explain its case and produce relevant documents to substantiate its transactions and income.
Key Issues
The key legal issues were the rejection of the assessee's books of accounts under Section 145 and the estimation of commission income at 5% of sales due to alleged unreliable documentation and low-profit declaration.
Sections Cited
Section 143, Section 143(3A), Section 143(3B), Section 145
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & DR. DINESH MOHAN SINHA
Appellant by : Shri R. D. Lalchandani, Ld. A.R. Respondent by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR Date of Hearing : 02/12/2025 Date of Pronouncement : 21/01/2026 आदेश / ORDER Per Dr. Dinesh Mohan Sinha, JM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY)-2018-19, is directed against the order passed by the Commissioner of Income Tax [(in short “Ld.CIT(A)”] vide order dated 28.08.2025, which in turn assessment order passed by Income Tax Department/Assessing Officer under section 143 r.w.s. 143(3A) and 143(3B) of the Income Tax Act, 1961 (in short “the Act”), vide order dated 08.04.2021.
Grounds of appeal
raised by the assessee are as follows: “1. The CIT (A) erred in confirming the rejection of the book result. The books of accounts were properly maintained and supported by bills and vouchers. The rejection of the book result is not justified.
2. The CIT (A) erred in confirming that the commission on sales should be estimated.
3. The CIT (A) erred in confirming the estimation of 5 percent of sales as net commission earned. The estimation of rate at 5 percent is not justified”
Parth Garlic 3. Brief facts of the case are that the assessee firm, engaged in the business of commission agent of garlic at APMC market. The AO found that during the year under consideration, the assessee firm has received commission income of Rs.45,04,539/- and after claiming expenses, the assessee has declared income of Rs.6,13,380/-. The assessing officer has called for the details of commission received, expenditure incurred, transportation details, bills and vouchers of the income and expenditure claimed by the assessee, transportation details, et cetera. After considering the facts and circumstances of the case and submission of the assessee, it is concluded by the assessing officer that the bills and vouchers submitted by the assessee where not reliable being self-made vouchers printed from the same computer for the purpose of submission before the assessing officer during the scrutiny. Further, the assessing officer observed that the assessee has deposited cash which does not have nexus with the sales instances recorded by the assessee. Therefore, considering the facts and circumstances of the case, inadequacy of supportive documents to claim income and expenditure, while making the assessment on dated 08.04.2021, the assessing officer rejected the books of accounts of the assessee under section 145 of the IT Act. Therefore, net commission @5% of the total sales transactions which comes to Rs.32,17,528/- being 5% of Rs. 6,43,50,557/- is treated as the income of the assessee.
4. That the assessee filed an appeal against the order of AO dated 08.04.2021 before the Ld.CIT(A) which is dismissed with following observation: “It is noteworthy that during the course of appellate proceedings the assessee has not submitted supportive documents will negate the findings of the fact by the assessing officer during the course of assessment proceedings with respect to the certified copies of the bills Page 2 of 5 Parth Garlic and vouchers which prove the genuineness of the income and expenses, both. Therefore, considering the facts and circumstances of the case, the assessing officer has rightly rejected the books of accounts of the assessee and estimated the income of the assessee being net commission @5% of the total sales transactions which comes to Rs.32,17,528/- being 5% of Rs. 6,43,50,557/- is treated as the income of the assessee. Aggrieved, the instant appeal is filed by the assessee.”
5. That the assessee filed an appeal against the impugned order dated 28.08.2025 passed by the Ld.CIT(A) before this Tribunal. (i) During the course of hearing, the Ld. AR submitted that the assessee submitted paper-book containing all documents which was submitted to the lower authorities before us. The assessee submitted the APMC licence and requested for an opportunity to explain the case before AO.
(ii) On the contrary, the Ld. Sr. DR for the revenue relied on the order of the Ld.CIT(A).
We have heard both the parties carefully and gone through the submission put forth on record. We note that the assessee is partnership firm and filed the return of income of Rs. 6,13,380/-, that the assessee is commission agent (Kachha Adatiya) of Garlic Onion Potato etc, at 107, APMC Market Yard, Vasna (Ahmedabad) and the firm is holding a license under the agricultural produce Market Committee (APMC) Act. The finding of AO that assessee has submitted unverifiable and self-made vouchers to justify its claim. Thus, the verification of documents was in question. The assessee has also shown very low profit from huge commission business. That the assessee furnished the vouchers of the purchase and commission received on it, and furnished Bank statement. The Page 3 of 5 Parth Garlic assessee firm submitted that the firm is doing the business as Kaccha Adatiya, hence no TDS on commission. The assessee has furnished the vouchers in respect of commission received. Thus, the verifiability of the transaction was in question, and as such assessee has shown very low profit from huge commission business. We note that in the absence of response to the notice AO estimated 5% commission on sales. We note that the assessee has submitted the comparative chart of net profit for last 3 years, that is, 2015-16, 2016-17 and 2017-18. We note that the business practice is such that it receives goods from its principal/wholesaler for selling it to customers. The appellant receives commission on sales from its principal/wholesaler after which it is duly shown in seller invoice. Further, at the time of sale of goods, the appellant issues two invoices, one for sale to customers which is sales invoice and second to its principal which is seller invoice. Amount of commission, truck rent, transportation charges are duly mentioned in the seller invoice. It was submitted that the appellant did not provide transportation facility to its customers hence no transportation charges were shown in sales invoices raised for customers. Regarding self-made vouchers, it was submitted that they invoices are firstly not vouchers but are seller invoices and secondly APMC does not allow the vehicle to go out of its premises without the invoice for sale transactions. All original / signed invoices in hard copy Form submitted during assessment proceedings.
We further note that the assessee submitted the detail and statement wherein the transaction has taken such as that is Bhatodiya Traders. We also noted that the AO has issued notice and rejected the Books of Account u/s. 145(3) of the Act, we have noted that the finding of Ld.CIT(A) assessee has neither submitted supporting evidence in respect of transaction during in the course of assessment proceedings not submitted certificate issued by APMC to prove the genuineness of transaction. We further note that the assessee has furnished chart showing cash received from dealers and others, cash deposited in Bank. The assessee has failed Page 4 of 5 to clarify from whom the cash has received. That the assessee has furnished the APMC licence before us whereby it is established that the assessee was working as an agent. We are of the view that the assessee deserves for an opportunity to explain the case before the AO, to produce the relevant documents. Therefore, we set aside the order of the Ld.CIT(A), and remit the matter back to the file of the AO, with the direction to the assessee to submit the required documents that the AO is directed to frame the assessment according to law and after giving due opportunity to the assessee.
In the result, the appeal of the assessee is allowed for statical purpose.
Order is pronounced in the open court on 21/01/2026.