Draft Appeal on High-Pitched Assessment: Chilli Commission Agents (AP)

Format Relating To Ready To File Income Tax Draft Appeal Application On To The High Pitch Assessment W.R.T Commission Agents Especially Chilies Commission Agents In Andhra Pradesh

BEFORE​ ​THE​ ​HONOURABLE​ ​COMMSSIONER​ ​OF​ ​INCOME​ ​TAX​ ​(APPEALS) NATIONAL FACELESS APPEAL CENTRE, DELHI

STATEMENT OF FACTS

I. The Appellant is a Registered Commission Agent, having Registered Office at plot XX/000 in the Market Yard and the said plot has been allotted by Agricultural Market Committee under the license No: CI 0000/0000-23 valid through the Financial Year 2022-23. The Appellant is regular in filing return of income and for the mentioned Asst. Year 2023-24, ROI filed within due date u/s section 44 AB of Income Tax Act, 1961 on 00-00-2023 vide Ack. No. 000000000090023.

II. In the ROI, Appellant clearly mentioned the commission income, usually charged against sales made on behalf of farmers w.r.t the Bye Laws of the Agricultural Market Committee as governed by Rules and Regulations of Andhra Pradesh (Agricultural Produce & Livestock) Markets Act, 1966. By following the CBDT circular 452 of 1986, the Appellant showed commission as Turnover in the return of income and the policy is followed regularly since 20 years.

III. There exists a yearly assessment mechanism prevailing in the Agricultural Market Committee, Guntur and an assessment order will be issued to that extent by the under their seal and signature. As per the AMC order, the sale value entered by the Appellant on behalf of Farmers amounting to Rs.000000000000/-and commission charged at the rate of TWO percent on sale value which comes to 00000000/-. In this regard, in the Audited books under profit and loss account, the same commission was declared as turnover and claimed certain relevant expenditure.

IV.In Para 0.0 of the impugned order of the Ld. FAO, wherein it was mentioned that, he considered all the submissions of the Appellant viz., a) Registered Agency Certificate issued by AMC b) Assessment order passed by the AMC for the relevant period under consideration c) Details of Takkpatti (Farmer produce details) and Sale invoices (Trader & Farmer details) (which are the basic document for every sale) d) Bank statements e) details of traders and other relevant information. Despite producing all the relevant documents before the Ld. FAO, without considering the same he passed the impugned order which is against the Rule of law prevailing.

V. Brief NOTE on chillie commission agency  business:

a) The Commission agents or KACHHA ARHATIYAS with whom, farmers used to keep their produce in order to market the same to prospective buyers. The agents pay the farmers upfront after the sale of the produce and in turn they receive amount from traders within the credit period of 15 days.

b) Guntur Mirchi Yard is the Asia’s largest chille Market with a turnover of more than Rs.5,000 Crores every year. Aspirant agent has to First file an application to the AMC in accordance with Bye laws. After due verification of the application, the Agriculture Market Committee will issue a certificate in FORM 8-C (Rule 49) as per Section 7(1B) of Andhra Pradesh (Agricultural Produce & Livestock) Markets Act, 1966.

c) The Agent has to renew its LICENSE as per the terms and conditions, usually the license is issued for a period of 5 years. The issued license contains the terms and conditions embossed on the face of it serially numbers from 1 to 22. Every agent should follow these terms and conditions, otherwise their license will be cancelled.

d) Every agent has to receive commission @ 2 percent on the sale value from farmers. This percentage is as per the Bye Laws of the AMC and in accordance with section 12 of the Andhra Pradesh (Agricultural Produce & Livestock) Markets Act, 1966.

e) Further, every year, agent will undergo a separate Audit done by the Agriculture Market Committee, according to the Bye Laws and thereafter, passes an Assessment Order to that effect, detailing Number of Bags sold, quantity in quintals, value of chillie sold and the Commission amount.

f) Last but not the least, every agent has to apply for invoice books from AMC only. AMC will issue invoice books embossing the Agents name on every page and every time the agent has to put an indent for new book as and when needed.

VI. Further bring to the kind consideration of Honourable Commissioner of Income Tax (Appeals), there are certain exceptions specifically applicable to the Commission agents :-

i. CBEC circular No: 57/31/2018 dt: 04.09.2018 and through notification No: 12/2017 dt: 28.06.2017, commission agents are exempted from GST registration.

ii. CBDT circular No; 452 of 17.0/3.1986, explained KACHHA and PACCA ARAHTIA. Further defined, what is the turnover in the case of the said KACHHA AGENTS for application of section 44 AB. It is clear from this circular that, in the case of KACHHA ARAHTIA, the commission will be treated as Turnover but not the sales made by them to prospective buyers on behalf of farmers.

iii. CBDT Circular No: 14/2020 dt: 20.07.2020 and w.r.t CBDT Notification No: 70/2019/F. No. 370142/12/2019-TPL (Part-1) dt: 20.09.2019, agents are exempted from TCS w.r.t section 194 N.

iv. Agents are exempted from Section 40A(2) through specific Rule under Income Tax Rules i.e., Rule 6DD exception, where they can make payments in cash to the grower of Agriculture produce.

v. Exempted from Section 194 H (Notification No: S.O 174(E) dt: 03.03.1992)

VII. It is very appropriate to mention here that, with the introduction of new provisions under TDS viz., Section 194Q and Section 260C(1h), buyers receiving goods from commission agents are deducting TDS at 0.1% on the entire value of goods and as a result, the entire sale value has been reflecting in Form 26AS of the agent. Whereas, as an agent we only show the extent of commission we charge in the profit and loss as turnover, by following the CBDT Circular. Due to this ambiguity, all the Assessments under Faceless Mechanism resulting with huge demands on to the agents. The officers are considering the entire transaction value as turnover belongs to the agents as the same is appearing in Form 26AS but, whereas the agents who only report commission as turnover in their books of accounts as per the CBDT circular (452 of 1986).And due to the very reason, the values reflecting in Form 26AS are not in line with declared commission/turnover of the agent, leading to high pitch assessments and mental stress on to the Agent community. The traders and the assessing officers, without considering the exemption as laid down under CBDT circular on to the Commission agents, they started deducting TDS on the entire amount of Sale Value but which ought to have been made on to the commission part only.

Further, on the other side, while processing the ROI under Section 143(1) of Income Tax Act, 1961, CPC Bengaluru considering proportionate TDS amount in proportion to the commission declared by agents, resulting in undue demands despite excess TDS reflected in Form 26AS.

VIII. In the light of the above explanation, it is brought to the kind consideration of Honourable Commissioner of Income Tax (Appeals) that, the Appellant is a Kachha Arhatia and doing commission business since 20 years. For the financial year 2022-23 relevant to the assessment year 2023-24, Appellant received a notice stating that, case was selected for scrutiny under faceless mechanism through CASS for verification of :-

A) variance w.r.t Gross receipts appearing in Form 26AS and receipts shown in profit and loss a/c for the year under consideration and

B) for the verification of heavy withdrawals in the bank account.

During the assessment proceedings, the Appellant explained clearly the nature of business and Modus Operandi in charging commission as per Byes Laws of AMC i.e., 2 percent on the sale value of the produce. Also submitted the Assessment order dated 30.03.2024 for the year under consideration passed by the AMC as per BYE LAWS. Even after explaining the factual thing, the Faceless Assessing Officer, completed the assessment with high demand by making addition abruptly all the credits appearing in Bank account amounting to Rs.18 CRORES and levied huge demand. The petitioner is under mental stress and agony, since the demand amount of Rs.17 CRORE (high pitch demand) had great impact on to the substratum of the firm.

From the impugned Assessment order para XXX, referred herein below for speedy reference:-

The reply of the assessee is considered, from the perusal of reply and bank statements it is found the assessee has received total credits of Rs.18 CRORE in the bank accounts. In order to verify the same, the assessee was asked to provide the party-wise credits received in his statements alongwith PAN, confirmations, ITR and bank statements of the parties. In response to that the assessee has filed reply and only furnished name of the parties but no other details were filed till date. In absence of confirmations, PAN, ITR etc., the identity, genuineness and creditworthiness of the transactions remains unexplained and needs to taxed u/s 68 of the IT Act.

It is very clear from the above para that, the Ld.FAO just jumped into a conclusion that, all the credits in Bank accounts should tally with the Gross of receipts shown in Profit and Loss a/c. The comparison itself is irrelevant, illogical and unlawful as per the explanations made herein above. Further, without rejecting the books of accounts and without considering the line of activity of the Appellant making this high pitch addition on to an Appellant who is in this line of business since 20 years is utterly a infructuous assessment.

Hence, it is humbly prayed the Honourable Commissioner of Income Tax (Appeals) to quash the impugned order passed by the Ld. FAO and do justice accordingly.

Thanking you sir/madam.

Yours Faithfully,
For XXXXXXXXXXXXXXXXXXXXXXXX
-Sd-
AR. CA. JONNALAGADDA SRINIVASA

Guntur,
26.02.2025.
RAO

BEFORE​ ​THE​ ​HONOURABLE​ ​COMMSSIONER​ ​OF​ ​INCOME​ ​TAX​ ​(APPEALS) NATIONAL FACELESS APPEAL CENTRE, DELHI

Sub: GROUNDS OF APPEAL REGARDING:

In the light of the mentioned facts, the Appellant being aggrieved by the impugned order submitting this appeal application based on the following GROUNDS:-

1. Order passed by the Ld. FAO is erroneous both in law and facts of the case.

2. The impugned order passed by the Ld. FAO is biased with tax centric and not a fair assessment, lacking Principles of Natural Justice.

3. The assessing officer erred in passing the order by treating entire Credits as unexplained income without taking into account the line of business activity of the Appellant.

4. The Ld. FAO without rejecting books of accounts which were Audited u/s 44 AB by concluded without having concrete reasoning in making addition of all the credits appearing in the bank.

5. Passing order by making addition u/s 68 is unlawful since, the Appellant in this kind of business since 20 years and the addition u/s 68 is against the Principles of real income concept.

6. The orders passed by the Ld. FAO without considering the CBDT circulars especially on to the line of activity of the Appellant is liable quashed since, the Circulars are binding on the Authorities passing the Orders.

7. Any other ground that may be urged at the time of hearing.

Yours Faithfully,
For ________________
-Sd-

Place:
Date: