New Page 1
11 Assessment — Evidence — Out of the ten summons issued five
parties appeared and gave evidence in favour of the assessee, but other five did
not appear as the summons could not be served upon them — No adverse inference
can be drawn against the assessee.
[Anis Ahmad and Sons v. CIT(A), (2008) 297 ITR 441
(SC)]
The appellant-assessee was carrying on business as commission
agent in raw hides and skins. The raw hides and skins comprised of buffalo
hides, cow hides, katta and katai or goat and sheep skins. The goods are brought
in the mandi (market) by vyaparis (traders) through trucks. These vyaparis go to
different arhatdaars (commission agents) of their choice where they get the
goods counted.
The amount is first entered in the bilti register, after that
bundles are prepared and each vyapari is given his lot number. Sometimes, the
vyaparis request the arhatdaar to pay the freight chargers of the trucks. The
arhatdaar opens an account of each vyapari in his ledger book where the numbers
of different types of each vyapari and the numbers of different types of pieces
of raw hides are entered without entering the money value thereof. The vyaparis
sometimes stay in the mandi for 4 or 5 days to study the market themselves and
then they give instructions to arhatdaars for selling their goods.
When goods are sold, the sale price minus commission and
other charges are credited to the account of the vyaparis and commission charges
or other charges receivable are credited to the relevant accounts and the full
sale price of the goods is debited to the account of the purchaser. The
arhatdaars maintains full details, such as weight rate, the names of vyaparis
whose goods are sold and names of the purchasers in taul/shumar bahi. This book
contains original entry. Thereafter, entries are passed through jakar and posted
in the relevant accounts of the ledger. This practice is being followed by each
and every arhatdaar.
The vyaparis are paid the balance amount generally in cash,
in instalments or full after receipt of the amount from the customers. The rate
of commission on different types of hides and skins is settled by the
association and no arhatdaar can charge anything more on that account. The
appellant-assessee filed its income-tax return for the A.Y. 1984-85 declaring
Rs.1,32,830 as its total income as commission agent. The Income-tax Officer,
vide assessment order dated March 13, 1987, framed u/s.143(3) of the Act,
treated the appellant-assessee as ‘a trader’ and not as ‘a commission agent’ and
assessed its total income at Rs.4,06,810.
Being aggrieved, the appellant-assessee preferred an appeal
before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax
(Appeals) vide order dated April 4, 1988, partly allowed the appeal. The
appellant-assessee and the respondent-Income-tax Department feeling aggrieved
against the order of the Commissioner of Income-tax (Appeals) filed two separate
appeals before the Income-tax Appellate Tribunal. The Tribunal by order dated
August 19, 1993, without going into the merits of the case, set aside the
assessment order and remanded the file back to the Assessing Officer to re-scrutinise
the entire accounts after giving the appellant-assessee an opportunity of being
heard and also giving the appellant-assessee an opportunity of filing any
evidence in support of its claim that there was no discrepancy in its accounts
as pointed out by the Assessing Officer or as found out by the Commissioner of
Income-tax (Appeals) in his order dated April 4, 1988.
On remand, the Assessing Officer issued summons to ten
traders u/s.131(1) of the Act. In response to the summons, five traders appeared
and gave evidence in favour of the appellant-assessee. The remaining five
traders did not appear because they could not be served with the summons as they
were residing outside the State of U.P.
The assessing authority drew an adverse inference against the
claim of the appellant-assessee and assessed Rs.2,30,704 as the total income for
the A.Y. 1984-85, treating the transactions with the absentee traders as having
been done by the appellant-assessee in the capacity of ‘trader’ and not as
‘commission agent’.
The appellant-assessee assailed the impugned order dated
March 29, 1996, of the assessing authority before the Commissioner of Income-tax
(Appeals), who, vide his order dated June 9, 1997, set aside the addition by
holding the appellant-assessee as an ‘arhatiya’. The Revenue, feeling aggrieved,
preferred an appeal before the Income-tax Appellant Tribunal. The Tribunal by
its order dated January 15, 2004, allowed the appeal and held that the
appellant-assessee has failed to produce any evidence that the transactions, in
question, were not conducted by the appellant-assessee as ‘vyapari’, but the
transactions were conducted on commission basis. Being aggrieved by the said
order, the appellant-assessee filed an income-tax appeal before the High Court.
The High Court has concurred with the findings recorded by the Assessing Officer
as confirmed by the Appellate Tribunal and dismissed the appeal in limine.
On appeal, the Supreme Court noted that the record revealed
that for the year 1983-84, the assessing authority had accepted the claim of the
appellant-assessee dealing in the business of hides and skins as ‘a commission
agent’. The appellant-assessee filed a chart of payments made to the purchasers
by the traders through the appellant-assessee acting as a commission agent. The
five traders who appeared before the assessing authority had supported the claim
of the appellant-assessee to be a commission agent and not ‘a trader’ and the
assessing authority has accepted their evidence holding the appellant-assessee
as a commission agent in respect of the transactions conducted with them by the
traders.
The Supreme Court held that the appellant-assessee could not be held responsible for non-appearance of those five traders to whom the summons were issued by the assessing authority, as they are residing outside the State of U.P. For non-appearance of those traders, no adverse inference ought to have been drawn by the authorities below and the appellant-assessee has led satisfactory evidence that its business is only that of a commission agent and not ‘a trader’ dealing in the goods.
