AGRAWAL DILSUKHBHAI RAMANAND,PALANPUR vs. THE ACIT,CIRCLE, PALANPUR

This is an appeal filed by the assessee as against the order of National Faceless Appeal Centre (NFAC), Delhi, in proceeding u/s 250 vide order dated 16/08/2023 passed for the Assessment Year 2017-18.

The assessee has raised the following Grounds of appeal: 1.1 The order passed u/s. 250 passed on 16.08.2023 by NFAC(CIT(A) Delhi (for short 'NFAC") for AY 2017-18 upholding the addition of Rs.9,96,03,575/ in respect of the transactions of sale and purchase of caster seeds as belonging to Page No 2. Agrawal Dilsukhbhai Ramanand vs. ACIT

The brief facts of the case are that assessee filed its return of income declaring total income of Rs.36,56,920/-. The assessee is engaged in the business of trading cement, agriculture produce and general merchant and commission agent. During the course of assessment, the assessing officer observed that the assessee had entered into purchase and sale transaction in castor seeds and earned profits from these transactions. Further, the assessing officer observed that such transactions had been entered into by the assessee on behalf of other persons. The assessee had shown purchase of goods of Rs. 97,86,85,195/- on behalf of clients and had sold the goods of Rs.1,07,82,88,770/- to other persons on behalf of clients. Thus the Assessing Officer was of the view that by showing the sale and purchase on behalf of its clients, assessee has transferred the profit of Rs.9,96,03,575/- to other persons and has thereby shown lesser profit then the actual.

In response to, notices issued by the Assessing Officer, the assessee submitted that these transactions i.e. sale as well as purchases are made in the name of clients as their agents and the goods so purchased/sold on behalf of clients have been reduced from the respective head of sale or purchase. The assessee submitted that for such sale and purchase which was entered into by the assessee on behalf of its clients, a specific journey entry was passed in the books of accounts at the end of the month in which this type of transaction was performed. However, the assessing officer disregarded the submissions made by the assessee and observed that the assessee has not submitted delivery challans, copy of invoices, storage notes which reflect the name of assessee’s Page No 4 Agrawal Dilsukhbhai Ramanand vs. ACIT client (i.e. so-called beneficial owner in these transactions) to prove the correctness and genuineness of these transactions. The agreement for sale and purchase on behalf of the client has been prepared on the letter head only and the same is a self-serving document and does not prove the genuineness of the transactions. Further, the A.O. also observed that the assessee has also shown the above sales and purchase in its own VAT Returns. This proves that the assessee has made this arrangement to reduce its profit and thereby reduce its tax liabilities. The assessing officer added a sum of Rs.9,96,03,575/- to the income of the assessee.

In appeal, Ld. CIT(A) confirmed the additions made by the assessing officer with the following observations:

The assessee is in appeal before us against the order passed by Ld. CIT(A). The Ld. Counsel for the assessee submitted that Ld. CIT(A) has passed an ex-parte order without considering the written submission filed by the assessee and without giving due opportunity of hearing to the assessee. The Ld. Counsel for the assessee submitted that assessee had filed submission on 23.02.2023, whereas the Ld. CIT(A)’s order was passed on 16.08.2023, in which the submission filed by the assessee were not considered. Further, the ld. Counsel for the assessee drew our attention to the purchase register at page 143 of the Paper Book and submitted that from the above register, it is evident that the purchases were made by the assessee on behalf of third parties. Thirdly, the ld. Counsel for the assessee drew our attention to written submission dated 23.02.2023 submitted before Ld. CIT(A)

In response, Ld. D.R. placed reliance on the observations made by the assessing officer and Ld. CIT(A) in their respective orders.

We have heard the rival contentions and perused the material on record. We observe that the assessee has filed certain details and submissions which has not been considered by the assessing officer. We further observed that from the assessment order certain arguments of the assessee which were taken before us have not been considered by the assessing officer/Ld. CIT(A) which are to the effect that the assessee has earned commission income on which TDS has been deducted at the appropriate rate by the third parties, that the profits in relation to the aforesaid sales and purchases have been duly reflected by such parties in their respective returns of income that these transactions has been declared as commission earned by the assessee in its VAT Returns (copy of VAT enclosed before Ld. CIT(A) vide submission dated 23.02.2023). Accordingly, looking into the instant facts, in the interest of justice, the matter is being restored to the file of assessing officer for de novo consideration. Assessee would be at liberty to file additional documents/evidences in support of the fact that such purchases and sales and profits thereto have been duly reflected by such third parties in their respective returns of income and any other documents/evidence to support that these transactions have been entered by the assessee on behalf of third party clients and the assessee has only earned commission income with regard to such transactions which has been offered to tax by the assessee in its return of income.

In the result, the appeal of the assessee is restored to the file of the assessing officer, with the aforesaid direction.

In the result, the appeal filed by the assessee is allowed for statistical purposes.