This comprehensive analysis explores ITA No. 1713/DEL/2019, where Mohd. Gulzar contested the income tax assessments made by the ITO, Ward-63(5), New Delhi for the assessment year 2013-14, particularly focusing on the discrepancies in reported turnover and profit from his meat trading operations.
Mohd. Gulzar is engaged in the business of dealing in fresh meat, procuring animals directly from shepherds and selling processed carcasses to a major client, the Allana Group. The core of the dispute lies in the turnover reported by the assessee, Rs. 367 Crore, which he claims should have been his commission of Rs. 61.64 Lakh instead.
The tax authorities challenged the authenticity of cash transactions and the books of accounts, prompting an estimation of profits at 2% of the total turnover, significantly higher than the declared 0.03%. The case escalated to the CIT(A), who upheld the Assessing Officer’s decision, leading to further appeal in the ITAT.
Mohd. Gulzar argued that he operates not as a principal trader but as a ‘kachha arahtias’—a type of commission agent—which would mean his turnover should only reflect his commission income, not the full value of the meat traded. This distinction is critical as it affects the computation of turnover and subsequent tax liability.
The ITAT found the need to clarify the nature of the appellant’s business operations—whether he acted as a ‘kachha’ or ‘pacca arahtias’. The tribunal remanded the matter to the AO with instructions to determine the correct nature of turnover, taking into account the various aspects of the business relationship with the Allana Group.
This case highlights the complexities of tax assessments involving agency transactions and the critical need for clear documentation and transparency in business operations. The outcome of the remanded assessment will be crucial for setting precedents in similar cases involving commission agents in the trading sector.
The ongoing proceedings in ITA No. 1713/DEL/2019 will serve as an important case for tax practitioners and businesses alike, illustrating the challenges in defining turnover for tax purposes and the impact of business structure on fiscal liabilities.
ITA 1713/DEL/2019: Mohd. Gulzar vs. ITO – Detailed Case Study and Analysis
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