M/s G.A.Road Carriers, Nizamabad v. ITO, Nizamabad

ITA 185/HYD/2010 | 2005-2006
Pronouncement Date: 26-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 18522514 RSA 2010
Assessee PAN SINCE1986M
Bench Hyderabad
Appeal Number ITA 185/HYD/2010
Duration Of Justice 3 month(s) 22 day(s)
Appellant M/s G.A.Road Carriers, Nizamabad
Respondent ITO, Nizamabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 26-05-2010
Date Of Final Hearing 29-04-2010
Next Hearing Date 29-04-2010
Assessment Year 2005-2006
Appeal Filed On 04-02-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI AKBER BASHA ACCOUNTANT MEMBER ITA NO.185/HYD/10 : ASSTT. YEAR: 2005- 06 M/S. G.A.ROAD CARRIERS - VS- NIZAMABAD. PAN:AACFG 0936 R (APPELLANT) ITA NOS. 1019 &1020/HYD/07 INCOME-TAX OFFICER WARD-I - VS- NIZAMABAD. VS INCOME-TAX OFFICER WARD-I NIZAMABAD. (RESPONDENT) ASST. YEARS: 2003-04 & 2004- 05 M/S. G.A.ROAD CARRIERS NIZAMABAD. PAN:AACFG 0936 R (APPELLANT) (RESPONDENT) ASSESSEE BY : SRI K.C. DEVDAS DEPARTMENT BY : SRI E.S. NAGENDRA PRASAD O R D E R PER AKBER BASHA ACCOUNTANT MEMBER: THESE CROSS APPEALS ONE BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER OF THE CIT (A) TIRUPATI DATED 30-11-20 09 FOR ASSESSMENT YEAR 2005-06 AND TWO BY THE DEPARTMENT ARE DIRECTED AGA INST THE COMMON ORDER OF THE CIT(A) HYDERABAD DATED 27-7-2007 PERTAININ G TO THE ASSESSMENT YEARS 2003-04 AND 2004-05. SINCE COMMON ISSUES AR E INVOLVED IN THESE APPEALS THESE ARE TAKEN UP HEARD TOGETHER AND DIS POSED OFF BY THE COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. GROUNDS RAISED BY THE ASSESSEE READ AS FOLLOWS:- 2 '1. THE ORDER OF THE CIT (A) TIRUPATI IN CONFIRMING THE DISALLOWANCE OF A SUM OF RS.68 04 832 U/S 40A(3) OF THE ACT 196 1 IS WHOLLY UNSUSTAINABLE BOTH ON FACTS AND IN LAW. 2. THE LEARNED CIT (A) TIRUPATI ERRED IN CONFI RMING THE DISALLOWANCE OF TELEPHONE EXPENSES AT RS.25 840. 3. THE LEARNED CIT (A) TIRUPATI FAILED TO NOTE TH AT THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE WAS A CCEPTED BY THE DEPARTMENT FOR OVER TWO DECADES WITHOUT ANY DEV IATION AND THEREFORE OUGHT TO HAVE DIRECTED THE ITO TO ACCEPT THE INCOME RETURNED ON THE PRINCIPLES OF CONSISTENCY. 3. COMMON GROUNDS RAISED BY THE REVENUE READ AS FOL LOWS. I. THE CIT (A)'S ORDER IS ERRONEOUS ON BOTH FACTS AND LAW. II. THE LEARNED CIT (A) ERRONEOUSLY REGARDED THE AS SESSEE AS A COMMISSION AGENT EVEN THOUGH THE ASSESSEE RECEIVED THE FREIGHT CHARGES IN ITS OWN NAME AND IS A TRANSPORT CONTRACTOR. III. THE LEARNED CIT(A) ERRONEOUSLY HELD THAT ASSES SEE WOULD NOT BE LIABLE FOR DISALLOWANCE UNDER SECTION 40A(3) IN VIE W OF RULE 6DD(I) AND 6DD(K).' 4. BRIEF FACTS OF THE CASE TAKEN FROM THE ASSESSMEN T RECORD OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 ARE THAT THE ASSESSEE FIRM IS ENGAGED IN ARRANGING TRANSPORT VEHICLES TO BEEDI MA NUFACTURERS AT NIZAMABAD AND OTHER PLACES AND IS OFFERING COMMISSI ON INCOME AFTER SET OFF OF EXPENDITURE DECLARED NET INCOME AT RS.2 12 990 FOR THE ASSESSMENT YEAR 2005-06. IT WAS NOTICED BY THE ASSESSING OFFICER T HAT THE ASSESSEE HAS FAILED TO FURNISH DETAILS IN RESPECT OF COMMISSION RECEIVE D AND DETAILS THEREOF SUCH AS COMMISSION RECEIVED FROM EACH LORRY OWNER MODE OF RECEIPT DATE OF RECEIPT ETC. EXCEPT PRODUCING CASH BOOK LEDGER AN D A FEW LORRY RECEIPTS (LRS IN SHORT). THE ASSESSING OFFICER HAD NOTICED FROM THE LRS THAT EACH PAYMENT HAS MADE IS MORE THAN RS.20 000 IN CASH IN VIOLATION OF PROVISIONS 3 OF SECTION 40A(3) OF THE ACT. IT IS ALSO NOTICED B Y THE ASSESSING OFFICER THAT THE MATERIAL DISCREPANCIES IN THE DOCUMENTS FURNISH ED AND THE ARGUMENTS PUT FORTH BEFORE HIS PREDECESSOR WERE ALSO CONTINUING I N THIS ASSESSMENT YEAR ALSO. ACCORDINGLY THE ASSESSING OFFICER HAS DISAL LOWED 20% OF THE TOTAL FREIGHT AMOUNT PAID AT RS.3 40 24 164 WHICH WORKS O UT TO RS.68 04 832 AND BROUGHT THE SAME TO TAX. BESIDES THE ASSESSING OF FICER HAS ALSO DISALLOWED 10% OF THE TELEPHONE EXPENDITURE WORKING OUT TO RS. 25 840 TOWARDS PERSONAL USAGE. THE ASSESSING OFFICER HELD THAT THE ASSESSEE FAILED TO FURNISH ANY INFORMATION/ DETAILS WITH REGARD TO COMMISSION DECLARED EXCEPT PRODUCING CASH BOOK LEDGER AND FEW LRS. IT WAS OB SERVED BY THE ASSESSING OFFICER THAT THE LRS THAT EACH PAYMENT WAS MADE IS MORE THAN RS.20 000 IN CASH WHICH IS AGAINST THE PROVISION UNDER SECTION 4 0A(3) OF THE ACT. AFTER TAKING INTO ACCOUNT THE SUBMISSIONS OF THE ASSESSEE AND INFORMATION AVAILABLE ON RECORD HE COMPUTED THE TOTAL INCOME O F THE ASSESSEE AT RS.70 43 663 INCLUDING THE PERSONAL USAGE OF TELEPH ONE CHARGES. AGAINST THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT I N APPEAL BEFORE THE CIT (A) TIRUPATI. ON APPEAL THE CIT (A) AFTER CONSI DERING THE FACTS AND THE CIRCUMSTANCES OF THE CASE CONFIRMED THE ORDER OF T HE ASSESSING OFFICER AND DISMISSED APPEAL BY THE ASSESSEE. AGAINST THE ORDER OF THE CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE IS IN THIS LINE OF BUSINESS SINCE 1986 MORE THAN TWO DECA DES. THE ASSESSEE FIRM HAD DIRECT CONTRACT WITH THE BEEDI MANUFACTURERS FO R ENGAGING THE VEHICLES FROM THE MARKET OR FROM ITS PARTNERS. THE ASSESSEE FIRM COLLECTS 3% COMMISSION ON FREIGHT AND MOST OF THE VEHICLES USED BY THE ASSESSEE FIRM ARE FROM THE PARTNERS AND THEIR RELATIVES. SINCE IN CEPTION THE ASSESSEE IS MAINTAINING PROPER BOOKS OF ACCOUNT AND FOLLOWED AC COUNTING PRINCIPLES CONSISTENTLY. THE ASSESSEE FIRM'S ASSESSMENTS WERE COMPLETED UNDER S.143 (3) OF THE ACT ACCEPTING THE BOOKS OF ACCOUNTS AND THE ACCOUNTING SYSTEM FROM 1995 TO 2002. BOOKS OF ACCOUNTS NEVER REJECTE D BY THE DEPARTMENT OR THE TRANSACTIONS WERE DOUBTED UNDER SCRUTINY ASSESS MENT. IT IS AN ADMITTED 4 FACT THAT THE TRUCKS AND OTHER VEHICLES WERE ARRANG ED BY THE ASSESSEE FIRM FOR CARRYING OUT THE LORRY TRANSPORT BUSINESS AND I N LIEU OF THE SERVICES THE ASSESSEE FIRM WAS CHARGING NOMINAL COMMISSION FROM SUCH TRUCK OWNERS. SUCH COMMISSION EARNED BY THE ASSESSEE HAS BEEN SHO WN IN THE PROFIT AND LOSS ACCOUNT. IT IS NOT THE CASE OF THE REVENUE THA T THE ASSESSEE WAS DOING THE TRANSPORT BUSINESS OR HAVING ITS OWN COMMERCIAL VEHICLES. HENCE THE ASSESSEE FIRM IS ONLY A TRANSPORT BOOKING AGENT AND ITS TURNOVER IS ONLY THE COMMISSION RECEIVED FROM THE OWNERS. AT THE ASSESSM ENT STAGE NUMBER OF CONSIGNORS OF GOODS WHO HAD USED THE SERVICES OF T HE ASSESSEE FIRM TESTIFIED ON OATH UNDER SECTION 131 OF THE ACT AND THEY CONFIRMED THAT THE ASSESSEE FIRM IS ACTING AS AGENT ONLY. IT IS FURT HER SUBMITTED THAT ADDITIONS MADE UNDER SECTION 40A (3) FOR ASSESSMENT YEARS 200 3-04 AND 2004-05 WERE DELETED BY THE FIRST APPELLATE AUTHORITY. HE P LACED RELIANCE ON THE VARIOUS DOCUMENTS VIZ. CONFIRMATION LETTERS FROM B EEDI MANUFACTURERS COPIES OF L/RS AND COMMISSION RECEIPTS PLACED IN H IS PAPER BOOK. HE SUBMITTED THAT THE ASSESSEE FIRM HAS MAINTAINED DAY TO DAY RECORDS IN RESPECT OF THE ABOVE TRANSACTIONS WHICH CONTAINED E XACT DETAILS OF LORRY NUMBER FREIGHT SOURCE AND DESTINATION ETC. THE A CCOUNTING OF THE TRANSACTION BETWEEN THE ASSESSEE FIRM AND THE LORRY OWNERS ON ONE HAND AND ON THE OTHER HAND BETWEEN THE ASSESSEE FIRM AND THE MANUFACTURING COMPANY ARE CARRIED OUT CONTEMPORANEOUSLY ON DAY TO DAY BASIS. ALL THE DETAILS ARE SUPPORTED BY DOCUMENTS AND THE SAME ARE FULLY VERIFIABLE. HENCE THE PAYMENTS MADE BY THE ASSESSEE FIRM TO THE LORRY OWNERS COULD NOT BE TREATED AS EXPENDITURE AND NO DISALLOWANCE UNDER SE CTION 40A (3) IS ATTRACTED SINCE THE RELATIONSHIP BETWEEN THE MANUFA CTURER AND THE ASSESSEE FIRM IS THAT OF A PRINCIPAL TO AN AGENT. THE ADDL. CIT OF INCOME-TAX UNDER SECTION 144A OF THE ACT DIRECTED THE ASSESSING OFFI CER TO INVOKE THE PROVISIONS OF SECTION 40A (3) IN RESPECT OF THE PAYMENTS MADE TO THE LORRY OWNERS AND DISALLOW 20% OF THE SAME. THE PARTICULARS OF PAYME NT MADE TO A PERSON SPECIFIED UNDER SECTION 40A(2)(B) OF THE ACT WERE F URNISHED IN FORM 3CD FOR ALL EARLIER ASSESSMENT AS WELL AS FOR THE PRESENT ASSESSMENT YEARS UNDER CONSIDERATION. HE RELIED ON CATENA OF DECISIONS IN R ESPECT OF THE METHOD OF 5 ACCOUNTING FOLLOWED AND PRINCIPLES OF CONSISTENCY. THE COPIES OF THE DECISIONS WERE PLACED IN THE PAPER BOOK FILED BEFOR E US. THE LEARNED COUNSEL FOR THE ASSESSEE FINALLY SUBMITTED THAT THE PAYMENT S MADE BY THE ASSESSEE FIRM TO THE LORRY OWNERS CAN NOT BE TREATED AS EXPE NDITURE IN HIS BOOKS OF ACCOUNT AND THE SAME IS NOT ATTRACTED FOR ANY DISAL LOWANCE UNDER SECTION 40A(3) OF THE ACT. 6. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROC EEDINGS THE ADDL. CIT CALLED FOR AND EXAMINED THE RECORDS OF THE ASSESSEE FIRM FOR THE ASSESSMENT YEAR 2003-04 UNDER THE PROVISIONS OF SECTION 144A O F THE ACT. HE PROPOSED THAT THE PAYMENT MADE BY THE ASSESSEE FIRM TO THE L ORRY OWNERS WOULD BE TREATED AS ITS EXPENDITURE AND DISALLOWANCE NEEDS T O BE MADE UNDER SECTION 40A(3) AND DIRECTED THE ASSESSING OFFICER TO INVOKE THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ASSESSMENT WAS COMPLETED ACC ORDINGLY. IT IS SUBMITTED THAT THE LORRY OWNERS WHO HAVE RECEIVED THE PAYMENTS FROM THE ASSESSEE FIRM EITHER PARTNERS OF THE FIRM OR THEIR SPOUSES AND THEY HAVE DISCLOSED THE INCOME IN THEIR HANDS FROM THE TRANSP ORTATION BUSINESS UNDER SECTION 44AE OF THE ACT. EVEN THOUGH IN THE REPLIES GIVEN BY THE VARIOUS PARTIES THE PARTIES HAVE STATED THAT THE ASSESSEE FIRM ACTED AS AN AGENT FOR TRANSPORTATION THE SAME WAS STATED IN GENERAL TERM AND IS NOT PROVED. HENCE THE PAYMENTS MADE TO THE TRUCK OWNERS BY THE ASSESSEE FIRM REPRESENT TRUCK HIRE CHARGES AND ARE IN THE NATURE OF REVENUE EXPENDITURE DEBITABLE TO PROFIT AND LOSS ACCOUNT. THERE WAS NO ELEMENT OF AGENCY BETWEEN THE BEEDI MANUFACTURERS ASSESSEE FIRM AND TRUCK OWNERS. THE ASSESSEE FIRM ACTED IN INDEPENDENT CAPACITY WITH TH E BEEDI MANUFACTURERS AND THE RECEIPTS FROM BEEDI MANUFACTURES WHICH ARE SUBJECT TO TDS CONSTITUTE GROSS RECEIPTS IN THE HANDS OF THE ASSES SEE FIRM. THE ASSESSING OFFICER NEVER EXAMINED THIS ISSUE IN ANY OF THE EAR LIER ASSESSMENT YEARS OF ISSUE RELATING TO AGENT PRINCIPAL RELATIONSHIP. HE NCE THE PRINCIPLES OF RESI JUDICATA ARE NOT APPLICABLE TO THE INCOME-TAX PROCE EDINGS. IN SUPPORT OF THE SAME HE PLACED CATENA OF DECISIONS TO HOLD THAT TH E DOCTRINE OF RESI JUDICATA 6 DO NOT APPLY TO THE INCOME-TAX PROCEEDINGS. THE RA TES FOR TRANSPORTATION WERE FINALIZED BETWEEN BEEDI MANUFACTURERS AND THE ASSESSEE FIRM. HE FURTHER SUBMITTED THAT THE CIT (A) TIRUPATI NOTICE D DURING THE APPELLATE PROCEEDINGS THAT THE ALLEGED COMMISSION SLIP PURPOR TEDLY USED FOR DEDUCTION OF COMMISSION FROM THE FREIGHT CHARGES PAID TO THE DRIVERS IS FOUND NOT TO BE SIGNED BY THE LORRY DRIVERS. IN THE ABSENCE OF SIG NATURES OF THE LORRY DRIVERS ON THE COMMISSION SLIP IS A VITAL LAPSE TO PROVE TH E FALLACY OF THE ENTIRE CLAIM AND EXISTENCE OF PRINCIPAL AGENT RELATIONSHIP. HENCE THE LOWER AUTHORITIES ARE RIGHT IN INVOKING THE PROVISIONS OF SECTION 40A (3) FOR DISALLOWANCE PAYMENTS TO LORRY OWNERS AT 20%. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE ASSESSEE FIRM CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING FOR MORE THAN TWO DECADES. THE ASSESSEE FIRM ACCOUNTED THE FIXED PERCENTAGE OF COMMISSION OUT OF THE FREIGHT INCOME EARNED BY THE VEHICLE OWNERS INDICAT ES THAT NEITHER THE FREIGHT PAYMENTS MADE TO THE LORRY DRIVERS NOR THE REIMBURS EMENT OF THE FREIGHT CHARGES FROM THE CUSTOMERS CONSTITUTES ANY BUSINESS EXPENSES OR TURNOVER IN THE ASSESSEE'S BOOKS OF ACCOUNT. IT APPEARS THAT TH E ASSESSEE FIRM DID NOT CARRY ON ANY KIND OF BUSINESS OF TRANSPORT OPERATOR BUT ITS BUSINESS IS PRIMARILY OF A COMMISSION AGENT OR BROKER. IT ACTU ALLY FACILITATED THE PAYMENT OF TRANSPORT HIRE CHARGES BY USERS OF THE T RANSPORT VEHICLES BEING THE BEEDI MANUFACTURERS AND OTHER CUSTOMERS TO THE ACTUAL OWNERS OF THE VEHICLE. IN ACCORDANCE WITH THE PROVISIONS OF INDI AN CONTRACT ACT OR IN ACCORDANCE WITH THE IMPLICATIONS OF THE TERM AGENT AND PRINCIPAL AS UNDERSTOOD IN COMMERCIAL PARLANCE WOULD NOT OBLITER ATE THE FACTUAL CIRCUMSTANCES OF THE ASSESSEE'S COMMERCIAL CONDUCT OVER THE LAST 17 YEARS THE MANNER OF TREATMENT OF THE FREIGHT CHARGES RECE IVED AND PAID REGULARLY AND CONSISTENTLY IN ITS BOOKS OF ACCOUNT NOT TO BE CONSTITUTING ITS BUSINESS TRANSACTION. EVEN IN THE ABSENCE OF ANY WRITTEN D OCUMENT UNDER THE CONTRACT ACT STIPULATING SPECIFIC TERMS AND CONDIT ION OF FUNCTIONING OF THE ASSESSEE FIRM AS AN AGENT ON BEHALF OF THE VEHICLE OWNERS OR THE CONSIGNORS 7 OF THE VARIOUS GOODS THE ACTUAL DAY TO DAY FUNCTION ING OF THE FIRM OVER THE YEARS HAVE TO BE TAKEN INTO CONSIDERATION AS DETERM INING FACTORS SO AS TO FIND OUT WHETHER THE ASSESSEE FIRM WAS IN THE TRUE SENSE IS AN AGENT OR A BROKER. AS SUCH THE DEPARTMENT CANNOT IGNORE THE MANNER OF DAY TO DAY FUNCTIONING OF THE ASSESSEE FIRM IN A REAL MARKET PLACE. THE DE PARTMENT CAN NOT SIMPLY TREAT IT CARRYING ON ANY INDEPENDENT BUSINESS OF TR ANSPORT OPERATIONS. SUCH PERCEPTIONS ARE CONSIDERED NOT MAINTAINABLE UNDER F ACTS. FREIGHT CHARGES RECEIVED FROM THE BEEDI MANUFACTURERS OR FROM THE O THER CUSTOMERS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE DID NOT OBVIOUS LY CONSTITUTE ANY CONSIDERATION FOR SALE OF ANY GOODS OR SERVICES BY THE ASSESSEE FIRM TO THE CONSIGNER OF THE GOODS. NOR SUCH INFLOW OF CASH FR OM THE CONSIGNORS HAD ARISEN IN THE COURSE OF ANY ORDINARY BUSINESS ACTIV ITIES CARRIED ON BY THE ASSESSEE FIRM. 8. ON THE CONTRARY THE ENTIRE PAYMENTS RECEIVED FR OM THE CONSIGNORS ACTUALLY COMPRISES OF TRANSPORT CHARGES PAID TO THE LORRY OWNERS THOUGH THEIR DRIVERS FROM WHICH THE ASSESSEE AS AN AGENT OR BROK ER ONLY EARNED A MARGIN OF 3% TOWARDS ITS SERVICE CHARGES OR COMMISSION OR BROKERAGE. AS SUCH IN THE NORMAL METHOD OF ACCOUNTING THE FREIGHT CHARGES RECEIVED FROM THE CONSIGNOR OR THE FREIGHT CHARGES PAID TO THE VEHICL E OWNERS COULD NOT CONSTITUTE THE ASSESSEE'S BUSINESS RECEIPTS OR BUSI NESS EXPENSES. 9. SINCE WE HELD THAT THE ASSESSEE FIRM WAS NOT WR ONG IN EXCLUDING THE TRANSACTION RELATING TO FREIGHT CHARGES RECEIVED FR OM THE CONSIGNORS AND PAID TO THE VEHICLE OWNERS FROM ITS PROFIT AND LOSS ACCO UNT THE ONLY OTHER ISSUE THAT REMAINS TO BE ADJUDICATED UPON IS WHETHER THE AMOUNT MENTIONED IN THE TDS CERTIFICATES THE DEDUCTION OF TDS BY CONSIGNOR FROM THE GROSS FREIGHT CHARGES PAID TO THE ASSESSEE FIRM WOULD BECOME ASS ESSEE'S GROSS BUSINESS RECEIPTS OR NOT. SIMILAR ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN THE CASE OF PARAS TRANSPORT COMPANY LTD. VS. ITO IN ITA NO.198/AGRA/2001. IN THAT CASE IT WAS HELD THAT WHERE THE RECEIPTS CONS ISTED ON TWO ACCOUNTS ON ACCOUNT OF ASSESSEE'S OWN TRUCKS AS WELL AS ON ACCO UNT OF TRUCKS OWNED BY 8 OTHERS BUT HIRED BY THE ASSESSEE THE WHOLE OF THE RECEIPTS COMPUTED ON THE BASIS OF TDS CERTIFICATES COULD NOT BE ATTRIBUTED A S RECEIPT ON ACCOUNT OF PLYING OF TRUCKS ON ASSESSEE'S OWN ACCOUNT AND THE TOTAL RECEIPTS COMPUTED ON THE BASIS OF TDS CERTIFICATES COULD NOT BE CONSI DERED AS ASSESSEE'S OWN RECEIPTS FOR THE PURPOSE OF SECTION 44AB OF THE INC OME-TAX ACT. THE RATIO LAID DOWN IN THIS CASE SUPPORTS THE CONTENTIONS OF THE A SSESSEE. WHEREAS NO CASE RELIED ON BY THE LEARNED DEPARTMENTAL REPRESENTATIV E IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE. WE FIND THAT EVEN AT THE A SSESSMENT STAGE A NUMBER OF CONSIGNOR OF GOODS WHO HAD USED THE SERVICES OF THE ASSESSEE FIRM HAD TESTIFIED ON OATH IN PROCEEDING INITIATED UNDER S.1 31 OF THE ACT THAT THE ASSESSEE FIRM DID FUNCTION AS AGENT/BROKER AND NOT FUNCTIONED AS AN INDEPENDENT TRANSPORT OPERATOR. SUCH DEPOSITION/ST ATEMENT GIVEN BY THE CONSIGNORS DURING ASSESSMENT PROCEEDINGS HAVE NOT B EEN CONSIDERED PROPERLY WITHOUT ASSIGNING ANY SPECIFIC REASON FOR NON-ACCEPTING SUCH STATEMENT. 9. IN THE EARLIER YEARS' SCRUTINY ASSESSMENTS THE BUSINESS OF THE ASSESSEE FIRM WAS SHOWN AS A COMMISSION AGENT IN IT S BOOKS OF ACCOUNT. THE DEPARTMENT DID NOT RAISE ANY QUESTION OR ANY ADVERS E FINDING RECORDED IN THE SCRUTINY ASSESSMENT ORDER WITH REGARD TO THE BUSINE SS OF THE ASSESSEE. HENCE IT IS NOT CORRECT TO SAY THAT WHETHER THE BUS INESS OF THE ASSESSEE FIRM IS A TRANSPORT AGENT OR TRANSPORT OPERATOR WAS NOT AT ALL EXAMINED BY DEPARTMENT IN ANY ASSESSMENT PROCEEDINGS FOR 17 YEA RS FROM ASSESSMENT YEAR 1986-87 TO ASSESSMENT YEAR 2002-03. IN ALL TH E ABOVE MENTIONED PERIOD THE PAYMENTS OF FREIGHT CHARGES TO VEHICLE OWNERS AND THE RECEIPTS OF FREIGHT AMOUNTS FROM THE CONSIGNORS HAVE ALL ALONG BEEN ROUTED THROUGH ASSESSEE'S FIRM'S BANK ACCOUNT. THE CONSIGNORS IN TURN HAVE ALSO MADE TDS FROM PAYMENTS MADE TO THE ASSESSEE FIRM. EVEN FOR T HE ASSESSMENT YEAR 2003-04 ONWARDS THE MATERIAL FACTS REMAIN ABSOLUTE LY IDENTICAL AND UNCHANGED AS IT EXISTED FOR THE LAST 17 YEARS. ACC ORDINGLY THE DEPARTMENT WOULD NOT NORMALLY BE ENTITLED TO TREAT THE ASSESSE E IN A DIFFERENT WAY OF CONSIDERING THE FREIGHT RECEIPTS AND FREIGHT PAYMEN T AS ASSESSEE'S OWN 9 BUSINESS TRANSACTION AND THEREAFTER RECONSTRUCT THE PROFIT AND LOSS ACCOUNT AND APPLY THE PROVISION OF SECTION 40A(3) OF THE AC T TO THE FREIGHT PAYMENT PORTIONS. WE AGREE THAT PRINCIPLE OF RES-JUDICATA W OULD NOT APPLY IN FISCAL MATTERS BUT THE SAME TIME CERTAIN DEGREE OF CONSI STENCY IN FINDINGS OF THE REVENUE AUTHORITIES ARE EQUALLY RELEVANT IN TAX PRO CEEDINGS. IN VIEW OF THE ABOVE IN OUR CONSIDERED OPINION THE NATURE OF BUS INESS ACTIVITIES CARRIED ON BY THE ASSESSEE FIRM FOR ASSESSMENT YEAR UNDER CONS IDERATION WAS PRIMARILY THAT OF AN AGENT. THE GROSS FREIGHT CHARGES PAID B Y THE CONSIGNOR TO THE ASSESSEE FIRM WERE A KIND OF REIMBURSEMENT OF SIMIL AR PAYMENTS MADE BY THE ASSESSEE FIRM TO THE OWNERS OF THE TRANSPORT VE HICLES ENGAGED. THE DEDUCTION OF TAX AT SOURCE BY THE CONSIGNORS FROM T HE FREIGHT CHARGES PAID TO THE ASSESSEE FIRM BY IT CANNOT LEAD TO THE CONCLUSI ON THAT THE FREIGHT CHARGES CONSTITUTED THE ASSESSEE FIRM'S GROSS BUSINESS REC EIPTS OR TRADING TURNOVER. SIMILARLY THE ROUTING OF FREIGHT CHARGES PAID BY T HE CONSIGNORS AND PAYMENTS MADE BY THE ASSESSEE FIRM TO THE VEHICLE OWNERS THR OUGH ITS BANK ACCOUNT WOULD NOT CONSTITUTE THE RECEIPTS AND EXPENSES AS P ART OF ANY TRADING TRANSACTION OF THE ASSESSEE FIRM. THE PAYMENTS MAD E TO THE VEHICLE OWNERS THEREFORE WOULD NOT CONSTITUTE ASSESSEE'S BUSINESS EXPENDITURE FOR THE PURPOSE OF COMPUTATION OF PROFIT AND GAINS OF ANY B USINESS CARRIED ON BY THE ASSESSEE FIRM IN ACCORDANCE WITH THE PROVISION OF I NCOME TAX ACT. THE CIT (A) IS WRONG IN OBSERVING THAT THE ASSESSING OFFICE R FOUND THAT THE STATUTORY AUDIT REPORT IS NOT DISCLOSING THE FULL FACTS SPECI ALLY ON 40A (2) (B) AND SECTION 40A(3) WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFORE US THAT THE AUDIT REPORT UNDER SECTION 44AB THE AUDITOR DISCLOSED THE DETAILS WITH REGARD TO SECTION 40A(2) (B) OF THE ACT. IT IS PERTINENT TO NOTE THAT FIXING OF RATE BETWEEN THE BEEDI MANUFACTURERS AND THE ASSESSEE FIRM HAS NOTHING TO DO WITH THE NATURE OF RELATIONSHIP. IT MAY BE POSSIBLE THAT AS A MATTER OF CONVENIENCE THE RAT ES MIGHT HAVE FIXED BY BOTH THESE PERSONS. THE ABSENCE OF SIGNATURES OF THE LORRY DRIVERS ON THE COMMISSION SLIPS CANNOT BE TAKEN AS A VALID REASON OR EVIDENCE TO PROVE THE FALSITY OF THE CLAIM AND EXISTENCE OF PRINCIPAL AND AGENT RELATIONSHIP. IN OUR CONSIDERED VIEW SINCE THE ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE IN 10 RESPECT OF PAYMENT TO LORRY OWNERS EITHER AS LORRY HIRE CHARGES OR UNDER ANY OTHER HEAD OF ACCOUNT THE PROVISIONS OF SECTION 4 0A(3) CANNOT BE MADE APPLICABLE BY ARTIFICIALLY HOLDING THAT THE SAID PA YMENTS ARE DUBITABLE TO PROFIT AND LOSS A/C. IN VIEW OF THE ABOVE AFTER CONSIDE RING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE MAD E UNDER SECTION 40A(3) OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION CANNOT BE SUSTAINED. HENCE THE ADDITION MADE ON THIS ACCOUNT IS TO BE DEL ETED. THEREFORE THIS GROUND OF THE ASSESSEE IS ALLOWED. THE DEPARTMENT A LSO FILED ABOVE- MENTIONED TWO APPEALS ON THE SAME ISSUE FOR ASSESSM ENT YEARS 2003-04 AND 2004-05. IN VIEW OF OUR FINDING ABOVE WE DISMISS B OTH THESE APPEALS OF THE REVENUE. 10. THE OTHER ISSUE RAISED IN THIS APPEAL IS WITH R EGARD TO DISALLOWANCE OF TELEPHONE EXPENSES OF RS.25 840. WE FIND THAT THIS ISSUE WAS NOT CONSIDERED BY THE CIT (A) IN HIS ORDER. THEREFORE WE FEEL IT PROPER TO REMIT THIS ISSUE TO THE FILE OF THE CIT (A) FOR CONSIDERATION. HENCE THI S GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IN IT A NO.185/HYD/10 IS PARTLY ALLOWED AS INDICATED ABOVE AND REVENUE'S APP EALS IN ITA NOS. 1019 AND 1020/HYD/2007 ARE DISMISSED. ORDER WAS PRONOUNCED IN THE COURT ON 26 -5-2 010. SD/-/- G.C.GUPTA SD/-/- AKBER BASHA VICE PRESIDENT ACCOUNTANT MEMBER. DT/- 26TH MAY 2010 11 COPY FORWARDED TO: 1. M/S. SEKHAR & COMPANY CAS 133/4 R.P. ROAD SE CUNDERABAD. 2 THE ITO WARD-I NIZAMABAD. 3. 4. THE CIT AP HYDERABAD/VIJAYAWADA. CIT(A) TIRUPATHI . DR ITAT HYDERABAD. JMR *