Senthil Velavan Transport Vs ITO (ITAT Pune)
Pune ITAT Holds Only Profit Element Taxable for Transport Booking Agent; Estimated Income Restricted to 3% of Bank Credits
The assessee appealed against the order of the CIT(A)/NFAC arising from reassessment under Sections 147 and 250 of the Income Tax Act, challenging the estimated addition sustained by the CIT(A). The grounds relating to the validity of the notice under Section 148 and approvals under Section 151A were not pressed and were dismissed as withdrawn. The Tribunal condoned a delay of 54 days in filing the appeal. The Assessing Officer had reopened the assessment based on information regarding transactions subjected to TDS under Section 194C and non-filing of the return, estimated income at 10% of contract receipts, and made an addition under Section 68. The CIT(A) deleted the addition under Section 68 and reduced the estimated income to 4% of bank credits. Before the Tribunal, the assessee contended that it acted only as a transport booking agent earning nominal commission and that only the profit element was taxable. The Tribunal observed that the bank credits and corresponding payments were not disputed, accepted that only the profit element required estimation, and, considering the nature of the transport agency business and the facts of the case, directed the Assessing Officer to restrict the estimated income to 3% of the bank credit transactions instead of 4%. The appeal was partly allowed.
The Pune ITAT granted substantial relief to a transport booking agent by holding that only the profit element embedded in the bank credits could be brought to tax, since the assessee merely acted as an intermediary arranging lorries and passing the freight collected to truck owners. The Tribunal reduced the estimated income from 4% to 3% of the bank credits.
The Assessing Officer had reopened the assessment after noticing substantial contract receipts reflected through TDS under section 194C while no return had originally been filed. Rejecting the assessee’s explanation that it functioned only as a commission agent, the AO estimated income at 10% of the contract receipts and also made an addition under section 68 towards capital contribution, resulting in an addition exceeding ₹1.13 crore.
In appeal, the CIT(A) deleted the addition under section 68 and reduced the estimated profit rate from 10% to 4% of the bank credits. Before the Tribunal, the assessee contended that it earned only a nominal commission for arranging transport, while the freight amounts collected were passed on to the truck owners and therefore the gross bank credits could not be treated as its income.
Accepting the nature of the assessee’s business and noting that the Revenue had not disputed either the bank credits or the corresponding payments to transport contractors, the Tribunal held that only a reasonable profit margin should be taxed. Considering the realities of the unorganised transport sector, it directed the Assessing Officer to estimate income at 3% of the bank credits instead of 4%, thereby partly allowing the assessee’s appeal.
Cases Discussed
