MR. RAJINDER PAL SINGH,LUDHIANA vs. ITO, KHANNA

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against

the order dated 25.10.2012 of the Commissioner of Income

Tax(Appeals)-II, Ludhiana [hereinafter referred to as ‘CIT(A)’].

estimation of GP rate @ 20% and further disallowance made by the

Assessing officer u/s 40(a)(ia) of the Income-tax Act, 1961 (in short

'the Act').

that the assessee is involved in the business of transportation of

ITA No.1346/Chd/2017- R. Rajinder Pal Singh, Khanna 2

goods. However, the assessee does not possess any truck / vehicle.

The assessee, in fact, is a commission agent as the customers /

consignees / consignors book the trucks through assessee which

work is further outsourced to the truck owners. The consignee /

consigners while making payment deduct TDS in the name of the

assessee because the trucks are hired in the name / through the

assessee. The assessee returned his income for the year under

consideration at Rs. 1,85,300/- under the head ‘business or

profession’. The Assessing officer, however, from the TDS

certificates noted that the turnover of the assessee for the year under

consideration was at about Rs. 75 lacs. He, therefore, estimated the

income of the assessee from the aforesaid turn over @ 20% of the

gross receipts. The Assessing officer further noted that though, the

customers while making payments to the assessee had deducted TDS

for which the assessee had availed refund, however, since the

assessee had sub-contracted the work to the truck owners, hence, the

assessee was required to deduct TDS on the payments made to the

truck owners. He, therefore, made a disallowance of Rs. 8,47,618/-

and Rs. 23,97,226/- (total Rs. 32,44,844/- ) u/s 40(a)(ia) of the Act.

Assessing officer before the CIT(A), however, remained

unsuccessful.

though the trucks were booked through the assessee, however, the

assessee acted just as a commission agent. On the submissions of the

ITA No.1346/Chd/2017- R. Rajinder Pal Singh, Khanna 3

assessee, this Tribunal vide order dated 12.07.2016 directed the

Assessing officer to give report in respect of the above submissions

of the assessee after going through the accounts of the assessee. The

Ld. Assessing officer in her report dated 27.7.2016 has reported as

under:-

“F.No. ITO/w-3/Khanna/2016-17/684 dated 27.07.2016

The Addl. Commissioner of Income Tax (DR), O/o Commissioner of Income Tax (DR)(ITAT,) Aayakar Bhawan, Sector 17-E, Chandigarh Sir, Sub:- Appeal in the case of Sh. Rajidner Pal Singh, Khanna – PAN No. AYVPS09985P in ITA No. 136/Chd/2012 – assessment year 2009-10 – Regarding

Kindly refer to your letter F.No. CIT (DR)/ITAT/Chd/2016-17/297 dated 16.6.2016 vide which you have directed to appeal before the Hon'ble Bench on 12.7.2016.

2.1 The books of account alongwith relevant documents have been produced by the Shri Hukminder Sahi, CA counsel for the assessee and have been test-checked. The assessee’s counsel has also furnmished copies of the ledger accounts of ‘Freight & Octroi Patel (Modern Steel Ltd), “freight & Octroi Payable (Others), 26AS statement and ‘TDS account’ which were eto produced at the time of assessment.

2.2 On perusal of these accounts, it is found that the assessee is doing business of transport booking agent. The assessee had booked trucks and issued bills / GRs showing truck number in the name of M/s Modern Steel Ltd and other parties mentioned in 26AS Statement. These parties had deducted TDS of the assessee at the time of

ITA No.1346/Chd/2017- R. Rajinder Pal Singh, Khanna 4

payment on the basis of bills / GRs issued. After receiving the payment of freight from the dedicators, the assessee had made payments in cash to the truck owners as per the amounts mentioned against the said bills / GRs issued to the assessee. The assessee has not maintained any ledger accounts of these truck owners in his books of account. He had only maintained ‘Freight & Octroi payable’ account and ‘Commission Account’ in his books of account and booked commission @ 200/- per truck. However, on receipt of these payments from the deductors through cheques, the assessee had returned this freight amount to the truck owners as per bills / GRs and claimed TDS in his ITR for assessment year 2009-10. It is pertinent to mention here that all the payments of freight made to truck owners was below Rs. 20,000/- each and in cash mode only.

2.3 It is further submitted that the assessee has not entered any receipts of freight payments on which tax deducted made by the deductor and also not claimed any expenditure out of these receipts. Submitted of kind perusal, Sir, Yours faithfully, Sd/- (Kiran Bala) ITO, Ward-3, Khanna”

of the Assessing officer has submitted that the assessee was not

operating as an independent contractor but just as a booking agent.

Whatever the amount of freight was received, the assessee got just a

commission of Rs. 200 per truck. The Ld. counsel, therefore, has

submitted that the Assessing officer has erred in estimating the GP

rate on the basis of TDS certificates and further to invoke the

provisions of section 194C of the Act and holding the assessee as an

independent contractor and thereby making disallowance u/s

40(a)(ia) of the Act that too on assumption basis.

ITA No.1346/Chd/2017- R. Rajinder Pal Singh, Khanna 5

lower authorities.

circumstances of this case, in our view, the assessee would not be

termed as an ‘independent contractor’ though the payments were

made by the respective consignee / consigner in the name of the

assessee which were further paid by the assessee to the respective

truck owners. However, the element of profit making by operating

individually as a contractor was missing in these transactions. The

assessee was getting only commission at fixed rate. The operation of

the assessee was in such a manner that neither the assessee had got

chance to earn more / variable profits out of Contract or the freight

received except the fixed commission income of Rs. 200/- per truck,

nor the assessee bore any risk of loss out of the transactions

booked. In the circumstances, the assessee acted just as a commission

agent. In view of the report of the Assessing officer, the assessee

used to Rs. 200/- per truck as commission per booking. Considering

the peculiar facts and circumstances of the case and also in view of

the report of the Assessing officer, we do not find any justification

on the part of the lower authorities in estimating the gross profits of

the assessee on the basis of TDS certificates and further making

disallowance u/s 40(a)(ia) of the Act, Since, the Assessing officer in

her report has stated that the assessee only received commission of

Rs. 200 per truck, hence, there was no justification for estimating the

profit of the assessee on basis of gross receipts which, in fact, were

further paid by the assessee to the truck owners.

ITA No.1346/Chd/2017- R. Rajinder Pal Singh, Khanna 6

(B.R.R.KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 09.05.2018 Rkk

Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR