The Raipur Bench of Income Tax Appellate Tribunal (ITAT) upheld the determination of income under Section 44D of the Income Tax Act 1961 holding that the sale and purchase transaction in its own account would not meet the facilitation as the commission agent. The assessee, Naresh Kumar & Sons HUF had e-filed its return of income for A.Y 2015-16 on 20.11.2015, declaring an income of Rs.2,60,160/.

The case of the assessee was thereafter selected for scrutiny assessment .  During the course of the assessment proceedings, it was observed by the A.O that though the assessee had ostensibly made a turnover from sale of fruits and vegetables, but had claimed that he had rendered his service as commission agent and was not engaged in any trading activity on its own. However, the aforesaid explanation of the assessee did not find favour with the A.O for two-fold reasons, viz. (i) that the assessee had sold fruits/vegetables directly to parties and had received cash which was deposited in its own bank account; and (ii) that the assessee had paid the purchase consideration to the parties from its own account. The A.O was of the view that in case the assessee would have rendered its services as a commission agent, then, he would have merely acted as a facilitator and would not have carried out purchase/sale transactions on its own.

Accordingly, the A.O on the basis of his aforesaid observations concluded that the assessee was engaged in the business of trading of vegetables and fruits and determined its income under Section 44AD at 8% of the turnover. The Commissioner of Income Tax Appeal CIT(A) observed that the appellant in this case was claimed to be engaged in the business as commission agent. However, from the assessment order, it appeared that sales and purchase of fruits and vegetables were made in the name of the appellant. If the appellant was to be commission agent, the sales and purchase invoice should have been made in the name of the owner of the shop, not in the name of the appellant.

Therefore, it was clear that the appellant is himself engaged in such business. Piyush Tripathi, appeared on behalf of the revenue. A single Bench of Ravish Sood, (Judicial Member) observed that the assessee would have rendered services as a commission agent then it would have merely acted as a facilitator and not carried out purchase/sale transactions on its own account. Be that as it may, as the assessee had failed to substantiate its aforesaid claim of having rendered services merely in the capacity as that of a commission agent. The appeal of the assessee was dismissed.