Supreme Court of India
M/S. ANIS AHMAD AND SONSversusCOMMISSIONER OF INCOME TAX (APPEALS), KANPUR & ANR
- Citation
- 2008 INSC 78
- Decided
- 22 January 2008
- Disposal
- Case Allowed
- Bench
- P P NAOLEKAR
Holding
The assessee is a commission agent, not a trader, and no adverse inference can be drawn for the non‑appearance of traders whose summons were not served.
Summary
M/s. Anis Ahmad & Sons, a commission agent for raw hides and skins, filed its 1984‑85 return as a commission agent but the Assessing Officer treated it as a trader and levied a higher tax. After a remand, the Assessing Officer summoned ten traders under s.131(1); five appeared and supported the commission‑agent claim, while five could not be served as they resided outside Uttar Pradesh. The Assessing Officer drew adverse inference from the non‑appearance of those five and again assessed the assessee as a trader. The Commissioner of Income Tax (Appeals) reversed this, but the Income Tax Appellate Tribunal and the High Court upheld the trader assessment. The Supreme Court held that the assessee could not be held liable for the non‑appearance of the out‑of‑state traders, that the evidence showed it operated solely as a commission agent, and that the adverse inference was unjustified, thereby restoring the Commissioner’s order and quashing the lower courts’ decisions.
Issues considered
- Whether an adverse inference can be drawn against a taxpayer for non‑appearance of persons summoned under s.131(1) when summons could not be served
- Whether the assessee should be treated as a trader despite filing returns as a commission agent
- Whether the assessment as a trader is justified in view of evidence of commission‑agent activities in the previous assessment year
Legislation cited
- Income Tax Act, 1961s. 131(1), s. 143(3), s. 271(1)(a), s. 271(1)(c), s. 273(2)(a)
Subjects
Income TaxCommission AgentTraderSection 131Adverse inferenceAssessment YearTax assessment
Judgment
[2008] 1S.C.R.1021
A M/S. ANIS AHMAD AND SONS -Y·
V.
COMMISSIONER OF INCOME TAX
(APPEALS), KANPUR & ANR.
(Civil Appeal No. 582 of 2008)
B JANUARY 22, 2008
(P.P. NAOLEKAR AND LOKESHWAR SINGH PANTA, JJ.) T
•
Income Tax Act, 1961- s.131-Assessment Year 1984-
c 85 - Assessee filing return as a Commission Agent - But
Assessing Authority treated assessee as Trader and
accordingly assessed taxable income - Matter went upto
Appellate Tribunal which remanded the matter to Assessing
Authority - On remand, Assessing Authority issued summons
to ten traders under s. 131 ( 1) - Five traders appeared and gave
D
evidence in favour of assessee - Other five traders residing !<.
outside the State did not appear as they could not be served •
with the summons, for which, Assessing Authority drew adverse
inference against the assessee and passed order treating it
to be a Trader- Correctness of - Held: Not correct-Assessee
E
cannot be held responsible for non-appearance of the five
traders residing outside the State - It led satisfactory evidence
that its business is only that of the Commission Agent and not
that of a Trader - Moreover, for earlier assessment year,
Assessing Authority had accepted assessee as Commission
F Agent. t.
Assessee-appellant filed income tax return for the
Assessment year 1984-85 as a Commission Agent for
Traders of raw hides and skins. The Assessing Authority,
G however, treated assessee as a 'Trader' and accordingly
assessed its taxable income. The matter went upto the ,..t·
Appellate Tribunal, which remanded the matter back to
the Assessing Authority. On remand, the Assessing
Authority issued summons to ten traders under section
H 1021
MIS. ANIS AHMAD & SONS v. COMMNR. OF INCOME 1022
TAX (APPEALS), KANPUR & ANR.
131 (1) of the Income Tax Act, 1961. Five traders appeared A
~y
and gave evidence in favour of the assessee, but the other
five traders, who were residing outside the State, did not
appear as they could not be served with the summons.
The Assessing Authority drew adverse inference against
the assessee by treating its transactions with the absentee B
traders as having been done by the assessee in the
capacity of a Trader and not as a Commission Agent.
'f Assessee filed appeal which was allowed by the
~ Commissioner of Income Tax (Appeals). The Appellate
Tribunal, however, upheld the decision of the Assessing
Authority. High Court concurred with the findings
c
recorded by the Assessing Authority as confirmed by the
Appellate Tribunal and dismissed the appeal in limine.
In appeal to this Court, the contention of the
assessee is that for non appearance of the traders 0
summoned by the Assessing Authority, no fault could
.. ..
}
have been laid upon the assessee and the Assessing
Authority, the Appellate Tribunal as well as the High Court
was not justified in drawing adverse inference against the
assessee holding it to be a 'Trader'.
E
Allowing the appeal and restoring the order passed
by the CIT(Appeals), the Court
HELD: 1.1. For the year 1983-84, the Assessing
Authority had accepted the claim of the assessee-
A appellant dealing in the business of hides and skins as 'a F
Commission Agent'. The assessee filed a chart of
payments made to the purchasers by the traders through
the assessee acting as a Commission Agent. The five
traders, who appeared before the Assessing Authority,
supported the claim of the assessee to be 'a Commission G
Agent' and not 'a Trader' and the Assessing Authority
-- --+......
accepted their evidence holding the assessee as a
Commission Agent in respect of the transactions
conducted with them by the traders. The assessee could
not be held responsible for non-apperance of those five H
1023 SUPREME COURT REPORTS [2008] 1 S.C.R.
A 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 assessee has led satisfactory evidence that
B its business is only that of the Commission Agent and
not 'a Trader' dealing in the goods. [Para 12] [1028-A, B,
C, D, E]
1.2. The subject-matter of assessment for the year
1984-85 was opened by the Revenue after a lapse of about
C 10-11 years holding the assessee as 'Trader' in respect of
dealers living outside the State. The assessee could not
be treated unequally between those traders who had
appeared before the Assessing Authority and supported
the claim of the assessee and on the contrary drawing
D adverse inference against the assessee for non-
appearance of other five traders to whom summons of
the Assessing Authority could not be served. On this
ground itself, the order of the Assessing Authority cannot '
be found reasonable, tenable and justified. The Assessing
E Authority for the assessement year 1983-84 had accepted
the claim of the assessee having acted as Commission
Agent in respect of the same articles which were brought
by the sellers to the Arhatdaars (Commission Agents) in
the Mandi (Market) for sale. [Para 12] [1028-E, F, G, H;
F 1029-A]
1.3. The Commissioner of Income Tax was right in
holding the assessee as an 'Arhatiya' (Commission Agent)
for the year 1984-85 and not as 'trader' as held by the
Assessing Authority and accepted by the Income Tax
G Appellate Tribunal as well as by the High Court. [Para 13]
[1029-A, B]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 582
of 2008.
/ -
H From the final Judgment and Order dated 1.11.2004 of
M/S. ANIS AHMAD & SONS v. COMMNR. OF INCOME 1024
TAX (APPEALS), KANPUR & ANR. [L.S. PANTA, J.]
the High Court of Judicature at Allahabad in I.TA. No. 94 of 2004. A
-)'
Subramonium Prasad, Varuna Bhandari Gugnani and R.C.
Kohli for the Appellants.
TS. Doabia, V. Gulati and B.V. Balaram Das for the
Respondents. B
The Judgment of the Court was delivered by
1 LOKESHWAR SINGH PANTA, J. 1. Leave granted.
• 2. This appeal has been filed by the appellant-firm against
the judgment and order dated 01.11.2004 passed by the High c
Court of Judicature at Allahabad in Income Tax Appeal No. 94/
2004. By the impugned judgment, the High Court dismissed
the appeal of the appellant in /imine and affirmed the order dated
15.01.2004 of the Income Tax Appellate Tribunal, Lucknow
Bench. D
3. The facts in short are as under:-
1.
'(
The appellant-firm (hereinafter referred to as "the appellant-
assessee") is carrying on business as Commission Agent in
raw hides and skins. The raw hides and skins comprises of
buffalo hides, cow hides, katta and katai or goat and sheep E
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 Bi/ti
,..,+ Register, after that bundles are prepared and each Vyapari is F
given his Lot Number. Sometimes, the Vyaparis requested the
Arhatdaars (Commission Agents) to pay the freight charges of
the trucks. The Arhatdaar opens account of each Vyapari in his
Ledger Book where numbers of different types of pieces of raw
hides are entered without entering the money value thereof. The G
Vyaparis sometimes stayed in the Mandi for 4 or 5 days to
..
"\ study the market themselves and then they would give
instructions to Arhatdaars for selling their goods.
4. When goods are sold, the sale price minus commission
and other charges are credited in the account of the Vyaparis H
1025 SUPREME COURT REPORTS [2008) 1 S.C.R.
A and commission charges or other charges receivable are
credited in the relevant accounts and full sale price of the goods '1'-
is debited to the account of the purchaser. The Arhatdaars shall
maintain full details such as weight rate, the name of Vyaparis
whose goods are sold and name of the purchasers in Taul/
8 Shumar Bahi. This book contains original entry. Thereafter,
entries are passed through iakarand posted in relevant accounts
of ledger. This practice is being followed by each and every
Arhatdaar. The Vyaparis paid the balance amount generally in '(
cash, in installments or full after receipt of the amount from the •
c customers. The rate of commission on different type of hides
and skins is settled by the Association and no Arhatdaars can
charge anything more on that account.
5. The appellant-assessee filed income tax return for the
assessment year 1984-85 declaring Rs. 1,32,830/- as its total
D income as Commission Agent. The Income Tax Officer, Circle
-11, Kanpur, vide assessment order dated 13.03.1987 framed
under Section 143(3) of the Income Tax Act, 1961 (hereinafter 1.
referred to as "the Act") has treated the appellant-assessee as
•
'a Trader' and not as 'a Commission Agent' and assessed its
E total income Rs.4,06,810/- for payment of income tax. He issued
penalty notice under Section 271 (1 )(a) and 271 (1 )(c) and
273(2)(a) of the Act, separately.
6. Being aggrieved, the appellant-assessee preferred an
appeal before the Commissioner of Income Tax (Appeals). The
F Commissioner of Income Tax vide order dated 04.04.1988
t·.
partly allowed the appeal. The appellant-assessee and the
respondent-Income Tax Department feeling aggrieved against
the order of the Commissioner of Income Tax filed two separate
appeals before the Income Tax Appellate Tribunal. The Tribunal
G by order dated 19.08.1993, 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
H any evidence in support of its claim that there was no
MIS. ANIS AHMAD & SONS v. COMMNR. OF INCOME 1026
TAX (APPEALS), KANPUR & ANR. [L.S. PANTA, J.]
-'y discrepancy in its accounts as pointed out by the Assessing A
Officer or as found out by Commissioner of Income Tax (Appeals)
in his order dated 04.04.1988.
7. On remand, the Assessing Officer issued summons to
ten traders under Section 131 (1) of the Act. In response to the
summons, five traders appeared and gave evidence in favour B
of the appellant-assessee. The remaining five traders did not
r appear because they could not be served with the summons as
.. they were residing outside the State of U.P. The Assessing
Authority has drawn adverse inference against the claim of the
appellant-assessee and assessed Rs.2,30,704/- as total c
income for the assessment year 1984-85 treating the transaction
with the absentee traders as having been done by the appellant-
~ assessee in the capacity of 'Trader' and not as 'Commission
Agent'.
D
).,
8. The appellant-assessee has assailed the impugned
..,, order dated 29.03.1996 of the Assessing Authority before the
Commissioner of Income Tax (Appeals), who vide his order
dated 09.06.1997 set aside the said order by holding as
follows:-
E
"The appeal relates to a fairly old year, for which reason
the scope for enquiry has been reduced, now. In my opinion,
it was rather arbitrary to treat the appellant as dealer in
respect of outside U.P. parties who did not appear before
A the A.O. while accepting him as an 'Arhatiya' in respect of F
'
those who appeared before the A.O. The A.O. did not get
-i
..(,
any enquiry done from the said 'Arhat Market'. Therefore,
in my opinion, it is no longer desirable to stretch this
dispute. Accordingly, the A.O. is directed to accept the
appellant as an 'Arhatiya' for this year and also to accept
G
~
the profit from commission shown by him"
>,
9. The Revenue, feeling aggrieved, preferred an appeal
before the Income Tax Appellate Tribunal. The Tribunal by its
order dated 15.01.2004 allowed the appeal and held that the
appellant-assessee has failed to produce any evidence that H
1027 SUPREME COURT REPORTS [2008] 1 S.C.R.
A the transactions, in question, were not conducted by the
appellant-assessee as 'Vyapari' but the transactions were
conducted on commission basis. Being aggrieved against the
said order, the appellant-assessee filed Income Tax Appeal
before the High Court. The High Court, as noticed above, has
B concurred with the findings recorded by the Assessing Authority
as confirmed by the Appellate Tribunal and dismissed the
appeal in limine. Now, the appellant-assessee is before this
Court. •
10. We have heard Mr. Subramanium Prasad, the learned
C counsel for the appellant-assessee and Shri T.S. Doabla,
learned Senior Advocate for the respondents, and with their
assistance examined the material on record. The learned
counsel for the appellant-assessee submitted that the High
Court has committed grave error of fact and law in dismissing
D the appeal in limine without proper appreciation of the facts
and legal proposition of law. According to him, for non-
appearance of the traders summoned by the Assessing
Authority, no fault could have been laid upon the appellant-
assessee and the Assessing Authority, the Appellate Tribunal
E as well as the High Court are not justified in drawing adverse
inference against the appellant-assessee holding it to be
'Trader' in relation to the transactions conducted by the appellant-
assessee of the same goods in the same manner as was
conducted with the traders whose evidence was accepted by
F the Assessing Authority.
11. Per contra, the learned senior counsel appearing on
behalf of the respondents has sought to support the order of the
Assessing Authority which has been confirmed by the Appellate
Tribunal as well as by the High Court, contending that this Court
G in exercise of its discretionary jurisdiction under Article 136 of
the Constitution of India shall be slow in interfering the well-
reasoned orders of the authorities and the High Court based
upon the proper appreciation of the facts in issue and the law.
12. Having considered the respective contentions of the
H
M/S. ANIS AHMAD & SONS v. COMMNR. OF INCOME 1028
TAX (APPEALS}, KANPUR & ANR. [L.S. PANTA, J.]
-'i learned counsel for the parties and having gone through the A
entire material on record, we are of the view that the impugned
judgment and order of the High Court cannot be sustained. The
record reveals 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 B
.. "(
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, have supported the claim of the
appellant-assessee to be 'a Commission Agent' and not 'a c
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 appellant-assessee could not be held responsible for non-
appearance of those five traders to whom the summons were
D
j. 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 the Commission Agent and not
'a Trader' dealing in the goods. Now, the subject-matter of E
assessment for the year 1984-85 has been opened by the
Revenue after a lapse of about 10-11 years holding the
appellant-asseessee as Trader' in respect of dealers who are
now living outside the State of U. P. The appellant-assessee could
not be treated unequally between those traders who had F
appeared before the Assessing Authority and supported the
claim of the appellant-assessee and on the contrary drawing
adverse inference against the appellant-assessee for non-
appearance of other five .traders to whom summons of the
Assessing Authority could not be seNed. On this ground itself, G
.
..:>
the order of the Assessing Authority cannot be found reasonable,
tenable and justified. As noticed above, the Assessing Authority
for the assessment year 1983-84 had accepted the claim of
the appellant-assessee having acted as Commission Agent in
respect of the same articles which were brought by the sellers H
1029 SUPREME COURT REPORTS (2008] 1 S.C.R.
A to the Arhatdaars in the Mandi for sale. -r-
13. In this view of the matter, the Commissioner of Income
Tax is right in holding the appellant-assessee as an 'Arhatiya'
(Commission Agent) for the year 1984-85 and not as 'trader'
as held by the Assessing Authority and accepted by the Income
B Tax Appellate Tribunal as well as by the High Cou11.
14. In the result, for the foregoing reasons, this appeal is '(
allowed and the order of the High Court dated 01.11.2004 .._
passed in l.T.A. No. 94/2004 upholding the order dated
c 15.01.2004 of the Income Tax Appellate Tribunal, Lucknow
Bench, in ITA No. 1170/Alld/1997 for the Assessment Year 1984-
85 and the original order of the Income Tax Officer dated )-
29.03.1996 holding the appellant-assessee as 'Trader' and not
'Commission Agent' are quashed and set aside and as a result
thereof, the order dated 09.06.1997 recorded by the
D
Commissioner of Income Tax (Appeals) II Kanpur, in Appeal A
No.CIT(A)ll/5/IT0.2(7)/96-97/67 shall stand restored. The •
parties, however, are left to bear their own costs.
B.B.B. Appeal allowed.
E
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