M/S ROOPCHAND KODANDAS (ALUWALA), JAIPUR V. INCOME TAX OFFICER, WARD-7-2, JAIPUR

ITA 826/JPR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3846 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 19-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K L MOOLCHANDANIADV
• Keywords: Bad and doubtful debts
• Section: 143(3); 15

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 826/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2010-11 M/S ROOPCHAND KODANDAS (ALUWALA), A-2, TERMINAL MARKET, MOHANA MANDI, SANGANER, JAIPUR CUKE VS. INCOME-TAX OFFICER, WARD-7(2), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABFR2436C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI K. L. MOOLCHANDANI(ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJENDRA JHA (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 06/11/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 04/02/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-3, JAIPUR DATED 14.05.2018 FOR A.Y. 2010-11 WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL. 1(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE AUTHORITIES BELOW HAVE FACTUALLY AND LEGALLY ERRED IN TREATING THE APPELLANT AS PACCA ARTHATIA INSTEAD OF KACHHA AR AHTIA AS SHOWN AND CLAIMED BY THE APPELLANT, WITHOUT APPRECIATING THE FACTS OF THE CASE IN RIGHT PERSPECTIVE AND ALSO BY IGNORING THE SPECIFIC AND CLEAR INSTRUCTIONS OF THE BOARD ON THE SUBJECT. 1(B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE AUTHORITIES BELOW HAVE ERRED IN IGNORING THE PAST AND SUBSEQUENT ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 2 HISTORY OF THE CASE WHEREIN THE APPELLANT HAD BEEN REGULARLY AND CONTINUOUSLY ASSESSED AS KACHHA ARAHTIA WITHOUT A NY EXCEPTION. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD CONTINUED TO OPERATE AND FUNCTION IN THE SAME MANNER AND STYL E. WITHOUT POINTING ANY DISTINCTION AND DEVIATION IN THE WORKI NG STYLE OF THE APPELLANT, THE AUTHORITIES BELOW HAVE DEVIATED FROM THE PAST AND SUBSEQUENT HISTORY OF THE CASE FOR NO REASON. THUS THE FINDINGS SO ARRIVED AT ARE FACTUALLY AND LEGALLY INCORRECT A ND ARE DEVOID OF MERITS TO BE QUASHED SUMMARILY. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF POTATO AND ONION IN MUHA NA SABJI MANDI AND HAS SHOWN COMMISSION RECEIPTS OF RS 32,27,937 AND I NTEREST INCOME OF RS 7,20,699 AND DECLARED NET PROFIT OF RS 12,16,300 . THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS A PACCA ARAHTIA N OR A KACHACHA ARAHTIA AS PER CBDT CIRCULAR NO. 452 DATED 17.03.1986 AND W AS OBLIGED TO SHOW HIS INCOME FROM THE BUSINESS AS TRADER INSTEAD OF A COMMISSION AGENT. TOTAL TURNOVER OF THE BUSINESS WAS RS. 5,37, 98,950/- DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE WAS OBLIG ED BY STATUE (SEC. 44AB) TO GET ITS ACCOUNTS AUDITED. THE ASSESSEE HAS SHOWN INCOME OF RS. 32,27,937/- ON TURNOVER AT RS. 5,37,98,950/- WH ICH GIVES G.P. @ 6%. IN ABSENCE OF ANY AUDIT OR OTHER AUTHENTICATED RECORDS, BOOK RESULTS CANNOT BE RELIED UPON FULLY AND A LUMPSUM A DDITION OF RS. 1,00,000/- WAS MADE TO THE TRADING ACCOUNT TO PLUG ALL POSSIBLE LEAKAGES OF REVENUE. THE REASONING ADOPTED BY THE A SSESSING OFFICER WHILE HOLDING THE ASSESSEE AS PAKKA ARAHTIA IS AS U NDER: (I) IN A BUSINESS OF KACHACHA ARAHTIA, THE ASSESSEE IS NOT CONCERNED ABOUT THE PAYMENT AND RECEIPT TO & FOR THE SUPPLIER / BUYER. IN THE INSTANT CASE, THE ASSESSEE HAS MAINTAINED LEDGER OR EACH AND EVERY PART ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 3 WITH WHOM IT HAD TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION. IT SHOWS THAT IT HAD ITS INTERESTS LIKE A TRADER HAS. (II) THE ASSESSEE HAS SHOWN DEBTORS AT RS. 74,28,541/- W HICH IS NOT A PHENOMENA IN CASE OF COMMISSION AGENT OR A KACHCH A ARAHTIA. IT IS A COMMON FEATURE IN A BUSINESS OF A TRADER OR PACCA A RAHTIA. (III) THE ASSESSEE HAS PAID TRANSPORTERS AND DEBITED THE AMOUNT TO THE ACCOUNT OF THE SUPPLIER. THIS AGAIN SHOWS THAT THE ASSESSEE HAD AN INTEREST IN THE GOODS BEYOND A MERE COMMISSION AGEN T SHOULD HAVE. (IV) FURTHER, THE ASSESSEE HAS CLAIMED BAD DEBTS OF RS. 87,758/- DURING THE YEAR WHICH PROVES IT BEYOND DOUBT THAT I T HAD THE OWNERSHIP OF GOODS SOLD BY IT. 3. ON APPEAL, THE LD CIT(A) CONFIRMED THE FINDING O F THE ASSESSING OFFICER THAT THE ASSESSEE FIRM IS A PACCA ARAHTIA O R A TRADER. HOWEVER, HE DELETED THE LUMPSUM TRADING ADDITION OF RS. 1,00 ,000/- MADE BY THE ASSESSING OFFICER HOLDING THAT HE HAS NOT GIVEN ANY REASON WHILE MAKING SUCH AN ADDITION AND EVEN THE BOOKS OF ACCOUNTS WER E NOT REJECTED WHICH IS NECESSARY TO MAKE TRADING ADDITION. 4. WE FIND THAT THE ONLY ADDITION MADE BY THE ASSE SSING OFFICER HAS SINCE BEEN DELETED BY THE LD CIT(A) AND THE REVENUE IS NOT IN APPEAL AGAINST THE SAID FINDINGS OF THE LD CIT(A). THEREF ORE, THE LIMITED ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE ASSESS EE FIRM THROUGH ITS CONDUCT OF ITS BUSINESS TRANSACTIONS BE REFERRED AN D CLASSIFIED AS KACHCHA ARAHTIA OR A PACCA ARAHTIA. 5. IN THIS REGARD, THE LD AR HAS SUBMITTED THAT TH E ASSESSEE FIRM IS A KACHHA ARAHTIA DOING THE BUSINESS OF POTATO/ONION IN MUHANA SABJI ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 4 MANDI, JAIPUR. THE FIRM HAD BEEN FUNCTIONING AS KA CHHA ARAHTIA SINCE INCEPTION FOR LAST FORTY YEARS AND DURING THIS PE RIOD, THE CASES OF THE APPELLANT FIRM AND ITS GROUP HAD BEEN SCRUTINIZED U /S 143(3) OF THE ACT FOR NUMBER OF TIMES AND THE MODUS OPERANDI OF THE A PPELLANT FIRM AND THE NATURE OF ITS BUSINESS OPERATIONS ETC AS KACH HA ARAHTIA HAD BEEN EXAMINED AND VERIFIED BY THE DEPARTMENT EVERY TIME BUT NOTHING ADVERSE COULD BE NOTED AND POINTED OUT. AS SUCH THE NATURE OF BUSINESS OPERATIONS OF THE APPELLANT FIRM HAD ALWAYS BEEN TA KEN AS KACHHA ARAHTIA AS EVIDENT FROM COPY OF SOME OF THE ASSESS MENT ORDERS OF THIS GROUP SUBMITTED HEREWITH FOR YOUR KIND PERUSAL AND RECORD. AT NO STAGE, THEIR FUNCTIONING AS KACHHA ARAHTIA HAD EV ER BEEN QUESTIONED BY THE REVENUE. EVEN AFTER THIS ASSESSMENT YEAR I. E. A.Y. 2010-11 ALSO THE NATURE OF BUSINESS OPERATIONS OF FIRM HAD BEE N SHOWN AND ASSESSED AS KACHHA ARAHTIA CONTINUOUSLY TILL DA TE. THUS BARRING THIS YEAR, AT NO STAGE THE NATURE OF THE BUSINESS OPERAT IONS OF THE APPELLANT HAD EVER BEEN QUESTIONED AND DOUBTED TILL NOW. THUS THE APPELLANT HAD A VERY CLEAN AND SETTLED HISTORY ON THIS POINT. 6. IT WAS SUBMITTED THAT DESPITE SUCH SETTLED AND U NDISPUTED HISTORY OF THE CASE, THE LD. AO HAD PROCEEDED TO EXAMINE TH IS POINT AFRESH DURING THIS YEAR IN THE BACK GROUND OF THE APPLICAB ILITY OF SEC. 44AB OF THE ACT. IN THE PROCESS, HE HAD EXAMINED AND VERIFI ED THE BOOKS AND THE BHEEJAKS ISSUED FOR EARNING THE COMMISSION IN COME BY THE APPELLANT. DESPITE HIS BEST EFFORTS AND DETAILED VE RIFICATION, THE LD. AO COULD NOT FIND A SINGLE INSTANCE OF THE PURCHASE OR SALE OR ANY TRADING ACTIVITY UNDERTAKEN BY THE APPELLANT FIRM IN ITS NAME. THIS FACT HAS NOT BEEN DENIED BY THE LD. AO AS EVIDENT FROM T HE BODY OF THE ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 5 ASSESSMENT ORDER. THE APPELLANT FIRM HAD BEEN STRI CTLY FUNCTIONING AS KACHHA ARAHTIA AS PER CONDITIONS LAID DOWN IN T HE BOARDS CIRCULAR NO. 452 (NO.201/3/85/IT/(A-H) DATED 17.3.1986. THE LD. AO COULD NOT POINT OUT A SINGLE INFIRMITY OR VIOLATION OF THE PRINCI PLES AS LAID DOWN IN THE AFORESAID CIRCULAR AND SUBSCRIBED BY THE JUDICIA L AUTHORITIES IN NUMBER OF PRONOUNCEMENTS. BRIEFLY, THE PRINCIPLES SO LAID DOWN ARE SUMMED UP AS UNDER FOR THE SAKE OF READY REFERENCE: (I) A KACHHA ARAHTIA ACTS ONLY AS AN AGENT OF HIS C ONSTITUENT AND NEVER ACTS AS A PRINCIPAL. A PACCA ARAHTIA, ON THE OTHER HAND, IS ENTITLED TO SUBSTITUTE HIS OWN GOODS TOWARDS THE CONTRACT MA DE FOR CONSTITUENT AND BUY THE CONSTITUENTS GOODS ON HIS PERSONAL ACC OUNT AND THUS HE ACTS AS REGARDS HIS CONSTITUENT. (II) A KACHHA ARAHTIA BRINGS A PRIVITY CONTRACT BET WEEN HIS CONSTITUENT AND THE THIRD PARTY SO THAT EACH BECOMES LIABLE TO THE OTHER. THE PACCA ARAHTIA, ON THE OTHER HAND, MAKES HIMSELF LIABLE UP ON THE CONTRACT NOT ONLY TO THE THIRD PARTY BUT ALSO TO HIS CONSTITUENT . (III) THOUGH THE KACHHA ARAHTIA DOES NOT COMMUNICAT E THE NAME OF HIS CONSTITUENT TO THE THIRD PARTY, HE DOES COMMUNI CATE THE NAME OF THE THIRD PARTY TO THE CONSTITUENT. IN OTHER WORDS, HE IS AN AGENT FOR AN UNNAMED PRINCIPAL. THE PACCA ARAHTIA, ON THE OTHER HAND, DOES NOT INFORM HIS CONSTITUENT AS TO THE THIRD PARTY WITH W HOM HE HAS ENTERED INTO A CONTRACT ON HIS BEHALF. (IV) THE REMUNERATION OF A KACHHA ARAHTIA 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 A RAHTIA. (V) THE KACHHA ARAHTIA, UNLIKE THE PACCA ARAHTIA, D OES NOT HAVE ANY DOMINION OVER THE GOODS. ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 6 (VI) THE KACHHA ARAHTIA HAS NO PERSONAL INTEREST OF HIS OWN WHEN HE ENTERS INTO TRANSACTION AND HIS INTEREST IS LIMITED TO THE COMMISSION AGENTS CHARGES AND CERTAIN OUT OF POCKET EXPENSES WHEREAS A PACCA ARAHTIA HAS A PERSONAL INTEREST OF HIS OWN WHEN HE ENTERS INTO A TRANSACTION. (VII) IN THE EVENT OF ANY LOSS, THE KACHHA ARAHTIA IS ENTITLED TO BE INDEMNIFIED BY HIS PRINCIPAL AS IS NOT THE CASE WIT H PACCA ARAHTIA. 7. ON READING OF THE ABOVE PRINCIPLES, IT IS NOTED THAT THE WORKING OF THE APPELLANT FIRM AS KACHHA ARAHTIA WAS FULLY AN D SQUARELY COVERED BY THESE CONDITIONS. THERE IS NO VIOLATION OF ANY OF T HE AFORESAID CONDITIONS/PRINCIPLES IN ANY MANNER AT ANY STAGE. WHILE EXPLAINING THE WORKING STYLE AND MODUS OPERANDI OF THE FIRM, THIS FACT WAS BROUGHT TO THE KIND NOTICE OF THE LD. AO VIDE LETTER DATED 23. 8.2012 AND IT WAS BROUGHT OUT SPECIFICALLY THAT THE APPELLANT FIRM WA S A KACHHA ARAHTIA ONLY. 8. DESPITE SUCH UNDISPUTED AND UN-QUESTIONABLE FAC TS OF THE CASE, THE LD. AO HAD ARBITRARILY TURNED DOWN SUCH EXPLANA TION AND HAD PROCEEDED TO CONCLUDE THAT THE APPELLANT FIRM WAS A PACCA ARAHTIA AS PER REASONS RECORDED AT PAGE NO.6 & 7 OF THE ASSE SSMENT ORDER STATING THAT THE APPELLANT HAD MAINTAINED LEDGER OF EACH A ND EVERY PARTY WITH WHOM IT HAD TRANSACTIONS DURING THE YEAR, HAD SHOW N DEBTORS AT RS.1,08,34,607/-, THE AMOUNT PAID TO TRANSPORTERS W ERE DEBITED TO THE ACCOUNT OF SUPPLIER, AND LASTLY THE APPELLANT HAD D EBITED RS.87,758/- ON ACCOUNT OF BAD DEBTS. 9. WHILE ARRIVING AT SUCH CONCLUSION, THE LD. AO HI MSELF WAS NOT SURE ABOUT SUCH FINDINGS AND HAD LEFT THE MATTER FOR THE KIND CONSIDERATION OF ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 7 THE APPELLATE AUTHORITIES TO DECIDE FINALLY AS TO W HETHER THE APPELLANT FIRM IS A KACHHA ARAHTIA OR PACCA ARAHTIA. THE LD. AO HAD MERELY EXPRESSED HIS APPREHENSIONS ONLY AND DID NOT GIVE A NY DEFINITE FINDING WHICH ARE NOT LEGALLY MAINTAINABLE AND THE SAME DES ERVES TO BE QUASHED SUMMARILY. 10. AS POINTED OUT ABOVE, THE REASONS AS ASSIGNED B Y THE LD. AO ARE TOTALLY UNCALLED FOR AND IRRELEVANT HAVING ANY BEAR ING ON THE NATURE OF THE BUSINESS OPERATIONS OF THE APPELLANT. NONE OF THE ABOVE CONDITIONS IS MENTIONED IN THE BOARDS CIRCULAR TO DEFINE TH E NATURE OF BUSINESS AS KACHHA ARAHTIA OR PACCA ARAHTIA. IN CASE OF KACHH A ARAHTIA IT IS RATHER ESSENTIAL TO MAINTAIN LEDGER OF EACH AND EVERY PART Y TO MONITOR THE SMOOTH AND EFFECTIVE COLLECTION OF THE SALE PROCEED S OF THE COMMISSIONED GOODS. SIMILARLY, RECORDS OF THE DEBT ORS ARE ALSO ESSENTIAL TO PURSUE THE COLLECTIONS OF THE SALE PRO CEEDS OF THE COMMISSIONED GOODS. THE FREIGHT TO THE TRANSPORTERS IS PAID BY THE APPELLANT ON BEHALF OF ITS CONSTITUENTS AND IS DULY DEBITED AND ACCOUNTED FOR IN THE BHEEJAKS OF THE GOODS SOLD ON COMMISSION AS PER ACCOUNTING PRINCIPLES OF KACHHA ARAHTIA. SIMILAR LY IN THE COURSE OF SUCH COMMISSION BUSINESS, GOODS ARE SOLD ON CREDIT BASIS RESULTING IN DEBTORS. AS THE COMMISSION AGENT IS RESPONSIBLE FOR THE COLLECTION OF THE SALE PROCEEDS OF SUCH COMMISSIONED GOODS SO THE PAY MENT OF ENTIRE SALE PROCEEDS IS MADE BY THE APPELLANT TO ITS CONST ITUENTS AS PER BHEEJAKS IRRESPECTIVE OF THE FACT THAT SUCH SALE PROCEEDS WERE COLLECTED FROM THE PURCHASERS OR NOT; RESULTING IN BAD DEBTS IN SOME OF THE CASES OF SALES OF THE COMMISSIONED GOODS. THE LD. AO HAD HOWEVER FAILED TO APPRECIATE SUCH EVENTUALITY IN THE COMMI SSION BUSINESS AND HAD INCORRECTLY OPINED THAT BAD DEBTS OF RS.87,758/- DURING THE YEAR ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 8 PROVED OWNERSHIP OF THE GOODS BY THE APPELLANT FIRM . OBVIOUSLY SUCH FINDINGS ARE MISPLACED AND CONTRARY TO THE PRINCIPL ES OF ACCOUNTANCY. IT IS A MATTER OF COMMON KNOWLEDGE OF ACCOUNTANCY THAT BAD DEBTS MAY OCCUR DUE TO NON-COLLECTION OF THE SALE PROCEEDS OF THE COMMISSIONED GOODS ALSO. THE LD. AO HAD HOWEVER FAILED TO APPREC IATE SUCH EVENTUALITY AND HAD INCORRECTLY ARRIVED AT ILLOGIC AL FINDINGS. THUS NONE OF THE REASONS AS ENUMERATED BY THE LD. AO IN HIS F INDINGS IS HAVING ANY BEARING ON THE FATE OF THE NATURE OF BUSINESS AND NO ADVERSE VIEW COULD BE TAKEN ON THE BASIS OF SUCH FINDINGS. 11. IN APPEAL, THE APPELLANT HAD VEHEMENTLY OBJECTE D TO THE ABOVE APPREHENSIONS (NOT CONCLUSION) OF THE LD. AO. BRIEF LY, SUCH FINDINGS (APPREHENSIONS) WERE ASSAILED ON THE FOLLOWING COUN TS: (I) FROM THE READING OF THE ABOVE FACTS, YOUR HONOR WOU LD APPRECIATE THAT THE LD. AO HAD BEEN IN TWO STATES OF MIND. HE HIMSELF WAS NOT SURE AS TO WHETHER THE APPELLANT FIRM WAS A KACHHA ARAH TIA OR NOT. IN THE CIRCUMSTANCES, HE HAD SOUGHT TO SALVAGE HIS DOUBTF UL FINDINGS BY MAKING A FEEBLE ATTEMPT OF MAKING TRADING ADDITIO N OF RS.1 LAC IN A VERY CRYPTIC MANNER AND ALSO BY MAKING A REMEDIAL OBSERVATION TO TAX BAD DEBTS OF RS.87,758/- / IN CASE THE FIRM IS TAKE N AS KACHHA ARAHTIA. PLAIN READING OF THE ASSESSMENT ORDER CLEARLY SUGGE STS THAT THE LD. AO WAS HIMSELF DOUBTFUL ABOUT HIS FINDINGS WHICH HAD R ESULTED IN SUCH ABSURD ADDITION OF RS.1 LAC. (II) AS PER OFFICIAL RECORDS OF KRISHI UPAJ MANDI, MUHAN A MANDI, JAIPUR, THE APPELLANT FIRM WAS IN RECEIPT OF COMMI SSION RECEIPTS @ 6% ONLY. EXCEPT SUCH COMMISSION RECEIPTS, THE FIRM HAD NO OTHER INCOME OR PROFIT FROM THE TRADING OF THE COMMODITIES. ETC. THIS FACT IS EVIDENT FROM THE BOOKS OF THE FIRM AND FROM THE OFFICIAL RE CORDS OF THE KRISHI ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 9 UPAJ MANDI. THESE BEING DOCUMENTED EVIDENCES COULD NOT BE NEGATED AND IGNORED IN ABSENCE OF ANY MATERIAL BROUGHT ON R ECORD IN THE FORM OF INSTANCES OF SALE AND PURCHASE IN THE NAME OF THE A PPELLANT FIRM. THUS IT IS AN UNDISPUTED FACT THAT THE APPELLANT FIRM DI D NOT UNDERTAKE ANY TRADING ACTIVITY AND DID NOT BOOK ANY PROFIT OR LOS S OF ANY SORT. (III) IN THE ASSESSMENT ORDER ITSELF, THE LD. AO HA D COMPUTED INCOME OF THE APPELLANT FROM COMMISSION RECEIPTS ONLY @ 6% AS PER OFFICIAL RECORDS OF THE KRISHI UPAJ MANDI, JAIPUR AND THE BO OKS OF THE FIRM. EXCEPT THE COMMISSION INCOME, NO OTHER RECEIPT OR T RADING PROFIT ETC. WAS ASSESSED. THUS EXCEPT COMMISSION INCOME, NO OTH ER INCOME WAS NOTED AND ASSESSED BY THE LD. AO AS EVIDENT FROM TH E ASSESSMENT ORDER. (IV) IN THE PAST AND IN SUBSEQUENT YEARS, THE NATURE OF BUSINESS OF THE APPELLANT FIRM HAD BEEN CONTINUOUSLY AND REGULA RLY TAKEN AS KACHHA ARAHTIA ONLY (BARRING THIS ASSESSMENT YEAR ). EVEN IN SCRUTINY ASSESSMENTS PASSED AFTER THOROUGH SCRUTINY U/S 143( 3) OF THE ACT, THE NATURE OF BUSINESS AS KACHHA ARAHTIA ONLY. IN SUP PORT OF SUCH CONTENTION, COPY OF SOME ASSESSMENT ORDERS PASSED U /S 143(3) OF THE ACT BY THE DEPARTMENT WERE ALSO SUBMITTED BEFORE THE LD. CIT (A). IT IS ALSO AN ADMITTED FACT THAT THE APPELLANT FIRM HA D CONTINUED TO OPERATE ITS BUSINESS OPERATIONS IN THE SAME MANNER AND STYL E DURING THIS YEAR ALSO. THE LD. CIT (A) DID NEITHER DISPUTE THIS FAC T NOR BRING ANY MATERIAL ON RECORD TO DEMONSTRATE ANY DEVIATION IN THE WORKI NG STYLE OF THE APPELLANT FIRM. DESPITE OF SUCH ADMITTED FACT, THE LD. CIT (A) HAD OPTED TO IGNORE THIS VITAL FACT FOR NO REASON AND HAD DE VIATED FROM THE PAST HISTORY OF THE CASE WITHOUT ASSIGNING ANY REASON OR BRINGING ANY ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 10 MATERIAL ON RECORD. THE AGE OLD PAST HISTORY OF TH E CASE CANNOT BE DISRUPTED FOR NO REASON OR MATERIAL BROUGHT ON RECO RD. (V) ALL THE TRADERS IN THIS LINE ARE GOVERNED BY THE RULES AND REGULATION OF KRISHI UPAJ MANDI SAMITI AND ARE FUN CTIONING IN THE SAME MANNER AND STYLE AS KACHHA ARAHTIA AND ARE BEING ASSESSED AS SUCH BY THE DEPARTMENT WITHOUT ANY EXCEPTION. THE CASE OF THE APPELLANT IS NOT DIFFERENT IN ANY MANNER. (VI) AS PER BOOKS OF ACCOUNT PRODUCED AND EXAMINED BY TH E LD. AO, NOT A SINGLE INSTANCE OF THE SALE OR PURCHASE OF TH E GOODS COULD BE NOTED OR POINTED OUT. ALL THE GOODS WERE TRANSACTED THROUGH BHEEJAKS ONLY. THIS FACT IS AN ADMITTED AND EVIDENT FACT AND HAD NEVER BEEN QUESTIONED BY THE REVENUE AT ANY STAGE OR AT ANY TI ME. (VII) THE REASONS ASSIGNED BY THE LD. AO TO TREAT THE APP ELLANT FIRM AS PACCA ARAHTIA ARE IRRELEVANT, IMMATERIAL HAVING N O BEARING ON THE WORKING OF KACHHA ARAHTIA AS DISCUSSED ABOVE. 12. THE LD. CIT (A) HAD SUMMARILY DISMISSED THE APP EAL ON THIS POINT WITHOUT ADDRESSING THE ABOVE CONTENTIONS AND OBJECT IONS OF THE APPELLANT. FOR THE PURPOSE, THE LD. CIT (A) HAD ME RELY REPEATED THE SAME REASONS AS MENTIONED BY THE LD. AO IN THE ASSE SSMENT ORDER. THE LD. CIT (A) HAD FAILED TO SPELL OUT AS TO HOW THE A PPELLANT FIRM WAS NOT A KACHCA ARAHTIA BUT A PACCA ARAHTIA OR A TRADER AS PER GUIDELINES OF CIRCULAR NO.452 DATED 17.03.1986, WITHOUT POINTING OUT ANY INFIRMITY IN THE WORKING OF THE APPELLANT FIRM WITHIN THE FRAME- WORK OF ABOVE BOARDS CIRCULAR. IN ABSENCE OF ANY SPECIFIC VIOLAT ION OF ANY OF THE CONDITION OR PRINCIPLE LAID DOWN IN THE CIRCULAR, T HE AUTHORITIES BELOW WERE NOT JUSTIFIED TO TREAT THE APPELLANT AS PACCA ARAHTIA WITHOUT ANY BASIS. THUS TO THIS EXTENT, THE APPEAL ORDER IS NO T A WELL REASONED ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 11 ORDER AND SAME DESERVED TO BE QUASHED SUMMARILY. TH E ABOVE FINDINGS ARE FURTHER ASSAILED ON THE FOLLOWING COUNTS: (A) THE AUTHORITIES BELOW HAVE INCORRECTLY OBSERVED T HAT THE APPELLANT FIRM WAS NOT CONCERNED ABOUT THE PAYMENT AND RECEIPTS OF THE SALE PROCEEDS OF COMMISSIONED GOODS. AS PER ACC OUNTING PRINCIPLES OF THE COMMISSION AGENT THE KACHHA ARAHTIA, IT I S SOLELY RESPONSIBLE TO ENSURE PROPER AND EFFECTIVE COLLECTION OF THE SA LE PROCEEDS OF THE COMMISSIONED GOODS SOLD THROUGH THEM. FOR SUCH EFFE CTIVE AND SMOOTH COLLECTION OF THE SALE PROCEEDS, IT IS RATHER ESSEN TIAL TO MAINTAIN PROPER AND ACCURATE ACCOUNT OF THE SALE PROCEEDS THROUGH L EDGERS ONLY. THUS THE AUTHORITIES BELOW HAVE MISCONSTRUED THE WORKING OF THE KACHHA ARAHTIA. (B) AGAIN THE AUTHORITIES BELOW HAVE MISUNDERSTOOD TH E MEANING OF THE DEBTORS OF RS. 74,28,541/- SHOWN IN THE BOOKS O F THE APPELLANT FIRM. IN FACT SUCH DEBTS REPRESENTED THE SALE PROCEEDS OF THE COMMISSIONED GOODS AFFECTED THROUGH THE APPELLANT TO VARIOUS BUY ERS ON COMMISSION BASIS ONLY. THESE WERE NOT THE GOODS OWNED BY THE A PPELLANT FIRM. THIS FACT IS QUITE CLEAR FROM THE BHEEJAKS (NOT SALE B ILLS) ISSUED FOR THE PURPOSE. HOWEVER THE AUTHORITIES BELOW HAD FAILED T O APPRECIATE THE NATURE OF THE BHEEJAKS AND THE SALE BILLS. B HEEJAKS ARE ISSUED IN RESPECT OF THE COMMISSIONED GOODS WHEREAS THE SA LE BILLS ARE ISSUED IN RESPECT OF THE SELF OWNED GOODS. IN THIS CASE, T HE DEBTORS OF RS.74,28,541/- AS SHOWN WERE ON ACCOUNT OF THE SALE PROCEEDS OF THE COMMISSIONED GOODS MADE THROUGH SUCH BHEEJAKS ONLY. THE AUTHORITIES BELOW HAD HOWEVER MISCONSTRUED THIS FACT AND HAD TR EATED SUCH DEBTORS AS A RESULT OF THE SALE OF THE GOODS OWNED BY THE A PPELLANT. OBVIOUSLY ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 12 SUCH FINDINGS BEING FACTUALLY INCORRECT DESERVE TO BE QUASHED SUMMARILY. IT IS ALSO WORTH MENTIONING THAT DURING THE YEAR, NOT A SINGLE SALE BILL WAS ISSUED AS EVIDENT FROM THE MAN DI RECORDS AND THE BOOKS OF THE APPELLANT, SO THE QUESTION OF SALE OF OWN GOODS DID NOT ARISE. (C) AGAIN THE AUTHORITIES BELOW HAD FAILED TO APPRECIAT E THE MODUS OPERANDI OF THE APPELLANT FIRM AND THE ACCOUNTING PATTERN OF THE KACHHA ARAHTIA. THE FREIGHT TO THE TRANSPORTERS I S PAID BY THE APPELLANT ON BEHALF OF ITS CONSTITUENTS AND IS DULY DEBITED A ND ACCOUNTED FOR IN THEIR ACCOUNT THROUGH BHEEJAKS OF THE GOODS SOL D ON COMMISSION AS PER ACCOUNTING PRINCIPLES OF KACHHA ARAHTIA. THE AUTHORITIES BELOW HAVE INCORRECTLY OBSERVED THAT PAYMENT OF FREIGHT T O THE TRANSPORTERS BY THE APPELLANT SHOWS THAT THE APPELLANT HAD INTEREST IN THE GOODS SOLD THROUGH IT. OBVIOUSLY SUCH FINDINGS ARE ILLOGICAL, IRRATIONAL AND RIDICULOUS. AS THE PAYMENT OF FREIGHT IS FULLY ACCOUNTED FOR AN D DEBITED TO THE SELLERS AND THE APPELLANT HAD NOT INCURRED OR EXPEN DED ANY EXPENDITURE ON THIS ACCOUNT IN ANY MANNER SO HOW IT COULD BE IM AGINED THAT THE APPELLANT HAD INTEREST IN SUCH GOODS SOLD. THE AUTH ORITIES BELOW HAD FAILED TO BRING THIS POINT HOME WITH LOGICAL REASON ING. THUS SUCH FINDINGS ARE NOT LEGALLY AND FACTUALLY MAINTAINABLE . (D) AS REGARDS BAD DEBTS OF RS.87,758/- AS POINTED OUT IN THE LAST REASON, IT IS PERTINENT TO POINT OUT THAT IN THE COURSE OF SUCH COMMISSION BUSINESS, GOODS ARE SOLD ON CREDIT BASIS RESULTING IN DEBTORS. AS THE COMMISSION AGENT IS RESPONSIBLE FOR THE COLLECTION OF THE SALE PROCEEDS OF SUCH COMMISSIONED GOODS SO THE PAY MENT OF THE ENTIRE SALE PROCEEDS IS MADE BY THE APPELLANT TO ITS CONST ITUENTS AS PER BHEEJAKS IRRESPECTIVE OF THE FACT THAT SUCH SALE PROCEEDS WERE COLLECTED FROM THE PURCHASERS OR NOT; RESULTING IN BAD DEBTS IN SOME OF CASES OF ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 13 SALES OF THE COMMISSIONED GOODS. THE LD. AO HAD HO WEVER FAILED TO APPRECIATE SUCH EVENTUALITY IN THE COMMISSION BUSI NESS AND HAD INCORRECTLY OPINED THAT BAD DEBTS OF RS.87,758/- D URING THE YEAR PROVED OWNERSHIP OF THE GOODS BY THE APPELLANT FIRM 13. IN VIEW OF THE ABOVE DISCUSSIONS, IT WAS SUBMIT TED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING TH E APPELLANT FIRM AS PACCA ARAHTIA. THE APPELLANT FIRM HAD BEEN KACHHA ARAHTIA THROUGHOUT ITS EXISTENCE I.E. PRIOR AND SUBSEQUENT TO THIS ASS ESSMENT YEAR . DURING THIS YEAR, THERE IS NO DEVIATION OF ANY SORT IN ITS WORKING, NOR COULD THE DEPARTMENT HAD BROUGHT ANY MATERIAL ON RECORD TO DE MONSTRATE ANY DEVIATION IN THE WORKING MANNER AND STYLE OF THE A PPELLANT SO THE REVENUE HAS NO VALID REASON TO DEVIATE FROM SUCH SE TTLED PAST HISTORY TO TREAT THE APPELLANT FIRM AS PACCA ARAHTIA. THE APPELLANT FIRM IS A KACHHA ARAHTIA AND MAY KINDLY BE TREATED AS SUCH. 14. THE LD. DR IS HEARD WHO HAS TAKEN US THROUGH TH E FINDINGS OF THE LOWER AUTHORITIES AND RELIED ON THEIR FINDINGS WHIC H WE HAVE NOTED ABOVE. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE PRIMARY CONTENTION OF THE LD AR IS THAT THE FIRM HAD BEEN FUNCTIONING AS KACHHA ARAHTIA SINCE INCE PTION FOR LAST FORTY YEARS AND DURING THIS PERIOD, THE MODUS OPERANDI O F THE APPELLANT FIRM AND THE NATURE OF ITS BUSINESS OPERATIONS AS KACHH A ARAHTIA HAD BEEN EXAMINED AND ACCEPTED BY THE DEPARTMENT. IT WAS FU RTHER SUBMITTED THAT EVEN AFTER THE IMPUNGED ASSESSMENT YEAR, THE N ATURE OF BUSINESS OPERATIONS OF FIRM HAD BEEN SHOWN AND ASSESSED A S KACHHA ARAHTIA. ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 14 IT WAS ACCORDINGLY SUBMITTED THAT THERE ARE NO CHAN GES IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE RULE OF CONSISTEN CY SHOULD APPLY AND THERE IS NO BASIS TO DEPART FROM THE SETTLED POSITI ON FOR THE IMPUNGED ASSESSMENT YEAR. IT IS TRUE THAT THE DOCTRINE OF RES JUDICATA DOES NOT APPLY TO THE INCOME TAX PROCEEDINGS SINCE EACH ASSE SSMENT YEAR IS INDEPENDENT OF THE OTHER, BUT WHERE ISSUE HAS BEEN DECIDED CONSISTENCY IN A BROAD MANNER FOR EARLIER ASSESSMEN T YEARS, FOR THE SAKE OF CONSISTENCY, THE SAME VIEW SHOULD CONTINUE IN THE SUBSEQUENT YEARS UNLESS THERE IS MATERIAL CHANGES IN THE FAC TS. IN THE INSTANT CASE, WE FIND THAT THE ASSESSEE HAS BEEN FUNCTIONIN G AS KACHHA ARAHTIA FOR LAST NUMBER OF YEARS AND DURING THIS P ERIOD, THE MODUS OPERANDI OF THE ASSESSEE AND THE NATURE OF ITS BUSI NESS OPERATIONS AS KACHHA ARAHTIA HAD BEEN EXAMINED AND ACCEPTED BY THE DEPARTMENT, WE THEREFORE DONOT FIND A JUSTIFIABLE BASIS TO DEPA RT FROM THE SETTLED POSITION. FURTHER, WE FIND THAT THERE ARE NO CLEAR FINDINGS WHICH HAVE BEEN RECORDED BY THE ASSESSING OFFICER TO DEPART FR OM THE SETTLED POSITION TO HOLD THAT THE ASSESSEE FIRM IS NOT A K ACHHA ARAHTIA BUT A PACCA ARAHTIA. WHAT IS RELEVANT TO EXAMINE IS WHE THER THE ASSESSEE WAS CARRYING OUT THE TRANSACTIONS OF PURCHASE AND S ALE ON ITS OWN BEHALF OR ON BEHALF OF A THIRD PARTY. THE PRIVITY O F CONTRACT AND UNDERLYING TRANSACTION DOCUMENTATION ARE THUS CRITI CAL FOR THE PURPOSES OF PRESENT ANALYSIS. ONCE THE TRANSACTION DOCUMENT S ARE EXAMINED, THEREAFTER, THEIR TREATMENT AND REFLECTION IN THE B OOKS OF ACCOUNTS TO BE EXAMINED. HOWEVER, IN ABSENCE OF TRANSACTION DOCUM ENTS, MERELY LOOKING AT THE NOMECLATURE OF CERTAIN LEDGER ACCOUN TS, IT CANNOT BE HELD CONCLUSIVELY IN TERMS OF NATURE OF TRANSACTION INDI VIDUALLY OR HOLD CONCLUSIVELY THAT THE ASSESSEE IS ACTING AS A PACC A ARAHTIA AND NOT AS KACHHA ARAHTIA. IN VIEW OF THE SAME, IN ABSENCE OF ANY CLEAR FINDINGS ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 15 SO RECORDED BY THE LOWER AUTHORITIES, WE ARE UNABLE TO ACCEDE TO THE POSITION SO ADOPTED BY THE REVENUE WHERE IT PROCEED ED TO DEPART FROM THE PAST SETTLED POSITION WHEREIN THE ASSESSEE HAS BEEN HELD AS KACHHA ARAHTIA. IN THIS REGARD, WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF GODREJ & BOYCE MAN UFACTURING COMPANY LTD. (394 ITR 449) WHEREIN IT WAS HELD AS U NDER: 38. ..WHILE IT IS TRUE THAT THE PRINCIPLE OF RES JUDICATA WOULD NOT APPLY TO ASSESSMENT PROCEEDINGS UNDER THE ACT, THE NEED FOR CONSISTENCY AND CERTAINTY AND EXISTENCE OF STRONG A ND COMPELLING REASONS FOR A DEPARTURE FROM A SETTLED POSITION HAS TO BE SPELT OUT WHICH CONSPICUOUSLY IS ABSENT IN THE PRESENT CASE. IN THIS REGARD WE MAY REMIND OURSELVES OF WHAT HAS BEEN OBSERVED B Y THIS COURT IN RADHASOAMI SATSANG V. CIT [1992] 193 ITR 3 21/60 TAXMAN 248 (SC). 'WE ARE AWARE OF THE FACT THAT STRICTLY SPEAKING RE S JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. AGAIN, EACH AS SESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT P ERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOU ND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NO T BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR.' IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO. 826/JP/2018 M/S ROOPCHAND KODANDAS, JAIPUR VS. ITO, JAIPUR 16 PRONOUNCED IN THE OPEN COURT ON 04/02/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04/02/2019. * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S ROOPCHAND KODANDAS (ALUWALA), JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-7(2), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 826/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR