Prem Prakash Gupta, Jaipur vs Assessee

Prem Prakash Gupta, cuke The I.T.O., 977B, Kishan Marg, Barkat Nagar, Vs. Ward-6(2), Jaipur. Tonk Road, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABOPG 3665 J vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rajendra Kr. Gupta (CA) jktLo dh vksjr ls@ Revenue by: Mrs. Neena Jeph (JCIT)

lquokbZ dh rkjh[k@ Date of Hearing : 28/01/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 29/01/2015

vkns'k@ ORDER

PER: R.P. TOLANI, J.M.

This is an appeal filed by the assessee against the order dated

17/12/2013 by the learned CIT(A)-II, Jaipur for A.Y. 2008-09. The sole

ground of appeal raised is as under:-

"1. That the learned Commissioner of Income Tax (Appeal-II), Jaipur has erred in law as well as on the facts and 2 ITA 287/JP/2014_ Prem Prakash Gupta Vs. ITO

circumstances of the case by sustaining imposition of penalty U/s 271B of Rs. 1,00,000/- for non conducting of tax audit U/s 44AB without considering the fact that the assessee is a licensed stamp vendor who is selling stamp received from treasury after deducting commission and therefore amount received against stamp is not a part of his sales and thus the said penalty imposed U/s 271B should be deleted."

2. Learned counsel for the assessee contends that the assessee is a

government appointed licensed vendor for sale of stamps. As per the

Stamp Act, the assessee is eligible only to commission on the rates

specified by the I.G. Stamps, which are mentioned in the written

submissions. The relationship between the assessee and the

government is not of seller and purchaser, which is evident from the

provisions of Indian Stamp Act. Since the assessee's commission did not

exceed the prescribed limit provided by Section 44AB, the assessee did

not get the accounts audited. The assessment also is framed U/s 143(3)

merely making an addition of Rs. 27,000/-. The Assessing Officer,

however, was of the view that total value of the stamps was assessee's

turnover and was liable for audit u/s 44AB, consequently issued notice

for penalty U/s 271B. The assessee replied that it was eligible only to

commission, the value of stamps was not his turnover, consequently the 3 ITA 287/JP/2014_ Prem Prakash Gupta Vs. ITO

case was not covered by the provisions of Section 44AB as per Stamp

Act as well as the CBDT circular No. 452 dated 17/03/1986. The

Assessing Officer, however, held that the assessee is not a commission

agent and was liable for audit u/s 44AB, penalty was imposed.

3. Aggrieved, the assessee preferred first appeal where penalty was

confirmed by the learned CIT(A) by holding as under:-

"I have considered the facts of the case; penalty order and appellant's written submission. Assessing Officer levied penalty under section 271B on the ground that appellant had turnover exceeding Rs. 40 lakhs but did not get accounts audited. Appellant submitted that he was working as stamp vendor on commission. He submitted that commission on stamp sale is fixed and has interest only to the extent of commission. He also referred CBDT circular on this issue which was also referred by Assessing Officer. As per the circular, if assessee is acting as Kachha arahtia, then his turnover will be restricted to commission income only but if he is acting as Pacca arahtia then the gross sale will be is his turnover. The appellant submitted that he was not taking any risk and selling stamp papers as per rate fixed by government therefore he was acting as Kachha arahtia only. As against this, A.O. mentioned that appellant was purchasing stamp papers and selling the same by realizing the full value. In case of spoilage of stamp papers, the money is not reimbursed by the government

4 ITA 287/JP/2014_ Prem Prakash Gupta Vs. ITO

department and the loss on account of this is borne by the appellant. Considering this, appellant was acting as Pacca arahtia. I find substance in A.O's argument. Although appellant was mainly earning commission income but he was also taking risk in the business and he was not holding stamp papers on behalf of government. Therefore, nature of his business appears to be of Pacca arahtia. Accordingly, he was supposed to get accounts audited under section 44AB. Violation of the same results in levy of penalty. Accordingly, Assessing Officer is justified in levy of penalty and the same is confirmed."

4. Aggrieved, the assessee is in appeal before me.

5. The learned counsel for the assessee contends that never in the

past or subsequent assessments sec. 44AB has been held to be

applicable, it is further pleaded that:-

(i) The stamp and stamp papers are sold at all the treasuries in the state as per rule 14A & 14H of Stamp Act and by licensed vendors. In case where stamps are return by the licensee on his application for leave to restore any other stamps the value of stamps return shall be paid; if treasury officer is satisfied that the stamps returned are not spoiled or damaged and are in a fit condition for being reused.

(ii) The CBDT by circular No. 452 dated 17/03/1986 has clarified that the above distinction between a kachha arahtia and a pacca arahtia may also be relevant for the 5 ITA 287/JP/2014_ Prem Prakash Gupta Vs. ITO

determination the applicability of section 44AB in the case of other type of agents. In the case of agents whose position is similar to that of kachha arahtia, the turnover is only the commission and does not include sale value on behalf of the principal.

(iii) The guidance note on Tax audit by ICAI is as under:

"The question may also arise as to whether the sales by a commission agent or by a person on consignment basis forms part of turnover of the commission agent and/or consignee as the case may be, in such a case it will be necessary to find out whether the property in the goods or all significant risks, reward of ownership of goods belongs to the commission agent or the consignee immediately before the transfer by him to third person. If the property in the goods or all significant risks and reward or ownership of goods continue to be belong to the principal, the relevant sale price shall not form part of sales/turnover of the commission agent and/or the consignee as the case may be. If, however, the property in the goods, significant risk and rewards of ownership belongs to the commission agent and/or the consignee as the case may be, the sale price received/receivable by him shall form part of his sales/turnover."

The guidance note on tax audit by ICAI also clarifies that from the legal

status of the assessee, it never retains profits over the goods as the 6 ITA 287/JP/2014_ Prem Prakash Gupta Vs. ITO

sale of stamps is a treasury function and merely a license is given to the

assessee to facilitate to the sale of stamps on behalf of the government

at agreed commission. Therefore, the assessee's case is not covered u/s

44AB alternatively he was under bonafide belief that audit u/s 44AB was

not required; the penalty may e deleted.

6. The learned Sr.D.R. supported the order of the lower authorities

and contends that in case of stamp papers being damaged or spoiled,

the corresponding amount is not reimbursed by the government, which

is to be borne out by the assessee. This indicates that the property in

goods i.e. stamps stood transferred to the assessee as contemplated by

the Sale of Goods Act. The learned CIT(A) has rightly held that the

assessee acting as a Pucca Arahtia.

7. I have heard the rival submissions of both the parties and

perused the material available on the record. The sale of stamp papers

by licensed vendors is a government assigned function to facilitate the

stamp sales at various locations. The government appoints licensed

agents which are remunerated at a prescribed fee scale/commission,

which is mentioned in the written submissions and the stamp rules. The

stamps are sold by the assessee on behalf of the government, which is

further reflected by the fact that if the license is cancelled for any 7 ITA 287/JP/2014_ Prem Prakash Gupta Vs. ITO

reason, all the unsold stamp, stamp papers, seals etc. are to be

returned to the treasury which are reimbursed, thus the government

retains over all control over the stamps. The CBDT circular and ICAI

guidelines further corroborate the stand taken by the assessee. In any

case, it cannot be denied that the assessee was any bona fide belief

that his case is not liable to audit of the books as the value of stamp is

not his turnover and has a role of commission agent. Under these facts

and circumstances, I hold that the assessee was under a bona fide

belief of being not liable for audit of accounts u/s 44AB; therefore, the

penalty imposed u/s 271B is deleted.

8. In the result, the assessee's appeal is allowed.

Order pronounced in the open court on 29/01/2015.

Sd/-

¼vkj-ih-rksykuh½ (R.P.Tolani) U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 29th January, 2015 *Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Prem Prakash Gupta, Jaipur.

2. izR;FkhZ@ The Respondent- The I.T.O., Ward-6(2), Jaipur.

8 ITA 287/JP/2014_ Prem Prakash Gupta Vs. ITO

3. vk;dj vk;qDr@ CIT(A)-II, Jaipur

4. vk;dj vk;qDr@ CIT, Jaipur

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 287/JP/2014)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar