High Court Of Rajasthan
Gyan Chand Jain vs. CIT-I
Assessment Year : 1998-99
Section : 37(1)
Amitava Roy, Cj. And Jainendra Kumar Ranka, J.
Db IT Appeal No. 568 Of 2011
January 24, 2013
ORDER
Jainendra Kumar Ranka, J. – This instant appeal under Section 260-A of the Income-tax Act, for the assessment year 1998-1999 has been preferred by the appellant herein assailing the order dated 20.05.2011, passed by the learned Income-tax Appellate Tribunal, Jaipur Bench,’B’, Jaipur, (in short ITAT sustaining the dis-allowance to the extent of Rs. 19,93,474/- which was the amount claimed as commission paid/ payable to the Sub-brokers by the appellant.
2. The; brief facts of the case are summarised herein below:
The appellant-assessee was a delcredere selling Agent of M/s Hind Spinners and M/s . Hind Syntex Ltd., Dewas, pursuant to the agreements for selling of the yarn manufactured by these Companies in the territory of District of Bhilwara, Rajasthan, the appellant received commission to the extent of Rs. 45,81,710/ and sum of Rs. 19,93,474/- was claimed as brokerage payable on .the sale effected through sub-brokers. The appellant accordingly claimed the said amount of Rs. 19,93,474/- as had been paid/payable to various Sub-brokers, who acted as Sub-brokers, the appellant claimed that they in fact, provided services and were paid accordingly.
3. The learned Deputy Commissioner of Income-tax, Circle, Bhilwara, called for the relevant details from the appellant-assessee and vide order dated 30.03.2001 dis-allowed the commission/brokerage claimed by the appellant. The learned Assessing Officer, during the course of hearing however required the appellant to:—
(i) Furnish the details of sales effected through Sub-brokers;
(ii) Lead evidence to the fact that the sales were made through Sub-brokers;
(iii) Details of outstanding from the parties to whom sales of yarn were made through Sub-brokers; and
(iv) To provide Sub-brokers with their books of account and record to verify the genuineness of the brokerage paid to the Sub-brokers.
4. It is stated by the learned Assessing Officer, in the order that neither the appellant-assessee produced the account books of Sub-brokers till the conclusion of proceedings nor any evidence had been led to show that any sales were made through the said Sub-brokers. The learned Assessing Officer, further observed that not a single penny was paid to the Brokers as brokerage and the amount was simply credited in their respective accounts. In fact, he observed that not even amount of this year but even commission of earlier years was not paid to the said Sub-brokers and for years together. It was further observed by him that how the small time Sub-brokers would work for the appellant-assessee without even receiving any amount towards the services they claimed to have rendered and accordingly came to the conclusion that the appellant-assessee did not incur the said expenditure, it was merely claimed but no services were rendered by the said Sub-brokers.
5. Aggrieved by the order passed by the learned Assessing Officer, the appellant-assessee, preferred an appeal before the learned Commissioner of Income-tax (Appeals) (in short CIT(A)’, who considered the matter at length and initially, remanded the matter back to the learned Assessing Officer to verify the veracity of the details submitted by the appellant-assessee before the learned CIT (A) as well as affidavits filed before him (CIT A) . The learned Assessing Officer in remand proceedings conducted detailed inquiry as was directed by the learned CIT(A) and after detailed remand report furnished to the CIT (A) , came to the conclusion that even signatures on the affidavits so filed were different then the ‘one on summons u/s 131 of the IT Act. Even one of the Sub-broker namely; Shri Shivraj Jain, gave a statement under Section 131 of the IT Act in his assessment proceedings for the Assessment Year 1998-1999, as to having not given an affidavit and did not confirm the commission paid by the appellant-assessee to him. He further stated that he did not even work, as Sub-broker for the appellant-assessee. It may be observed that the appellant furnished affidavits of the said Sub-brokers before the learned CIT(A).
6. After considering the issue at length and the remand report of the Assessing Officer, the learned CIT (A) confirmed the dis-allowance holding that (i) the appellant had failed miserably to prove the genuineness of payment of so called brokerage to the Sub-brokers; (ii) certain glaring irregularities have been found in the affidavits filed on behalf of the Sub-brokers; (iii)the genuineness of the affidavits are questionable; (iv) there was no provision in the Sales Agency Agreement with the principal Company, wherein the Agent (Appellant) has been authorized to engage sub-brokers; (v) the fact was, that not a single penny out of commission earned was paid to the brokers in the form of brokerage which resulted. in several lacs of rupees; and lastly it was observed by the CIT(A) that payment was not made even in the subsequent years.
7. Thus, the learned CIT(A)/Ultimately came to the conclusion that the Sub-brokers did not render any service and not a single penny out of substantial commission due to them was paid and it does not accord with the human probabilities, thus sustained the disallowance.
8. Aggrieved by the said Appellate order, the appellant preferred an appeal before the learned Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (in short the ITAT). The learned ITAT vide its order dated 20.5.2011′ upheld the disallowance made by the learned Assessing Officer as well as confirmed by the learned CIT (A) by re-iterating the facts stated by the learned CIT (A) . It was further observed that under similar circumstances, the learned ITAT for the immediate past Assessment Year i.e. 1997-1998 confirmed the dis-allowance to the extent of Rs. 9,78,461/- and that the issue became final so far as the assessment year 1997-1998, is concerned, as it was not challenged in further appeal before this Hon’ble Court. While confirming the dis-allowance, the learned ITAT even held that some of the Sub-brokers are not assessed to income-tax though they have heavy credit balances. It was further observed that in some of the cases, since the recipients did not come forward or since the amount was not remitted/paid, the amount was written off in the books of appellant meaning thereby that the amount was not to be remitted as no services were rendered and no amount was payable. The learned ITAT considered the affidavits as well as the submissions of the appellant in detail, and observed as under:—
“It is true that sub-brokers are having substantial credit balances M/s. Shivam Agency is having a credit balance of Rs. 2,78,878/-and its income is below Rs.40,000/- and therefore no return of income was filed. The closing balance in respect of M/s. Nakoda Yarn as on 31.3.2008 is Rs.13,24,400/- and its income was below Rs.40,000/- and therefore no return of income was filed. The credit balance in respect of M/s. Shivam Agency as well as M/s. Nakoda Yarn remained the same till 31.3.2003. A sum of Rs .2,24,553/-has been written off in the account of M/s. Nakoda Yarn. Similarly, Lodha Yarn Suppliers is having credit balance of Rs. 13,29,643/- as on 31.3.1998 and the same continued till 31.03.2004 as per the details filed on 29.03.2002 . This party has also stated in the affidavit that it has not filed income-tax return because income is below Rs. 40, 000/-. In the Case of M/s. Surekha Synthetics, the credit balance as on 31.03,1998 is Rs.8,01,382/- and its income was below taxable limit. In the case of M/s. CMD Yarn Suppliers the credit balance is Rs.13,67,436/-and the same continued upto 31.03.2004.”
9. It further observed that:.
“The other details filed in the paper book clearly show that commission so debited in the account of sub-brokers is not genuine. In the Case of M/s. Dyna Collections, the closing credit balance is Rs,14,13,555/- and the same continued upto 31.03.07. A sum of Rs. 1,84,276/- has been written off during the financial year 2003-2004. In the affidavit, the proprietor of M/s. Dyna Collections stated that he is an income tax assessee. However, he has not shown about the extent of income disclosed. No prudent businessman having an income of less than Rs.40,000/- will be keeping the amount outstanding. It is noticed that in most of the cases of the sub-brokers, the credit balance remained the same for the last so many year,”
10. The learned ITAT further referred to the Judgments of the Hon’ble Apex Court, in the Case of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) and of Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89 (SC) . Thus., all the three lower Authorities came to the conclusion that no services were rendered by the-Sub-brokers there was no necessity to engage services of Brokers/Sub-brokers in the light of the agreement with the principal Company,’ and further not a single penny was paid to the Sub-brokers for years together. One is required to arrive at the conclusion on the basis of human probability. Human probability cannot be ignored for persons like Sub-brokers or men of no means who render services to some but do not receive any amount for years together. None would leave hard earned money, for their day to day needs if actual services have been rendered by the said persons. It was upon the appellant to discharge the onus which heavily lay on him and he miserably failed for the reasons stated herein before. The Hon’ble Apex Court,in the Case of Durga Prasad More (Supra) , has observed as under:—
“Now coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus on a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it. Herein the assessee was receiving some income. He says that it is not his income but his wife’s income. His wife is supposed to have had two lakhs of rupees neither deposited in banks nor advanced to others but safely kept in her father’s safe. Assessee is unable to say from what source she built up that amount. It was said that the said amount was just left in the hands of the father in law of the assessee. The Tribunal disbelieved the story, which is prima-facie a fantastic story. It is story that does not accord with human probabilities.
Science has not yet invested any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to Judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece or evidence.”
11. The Hon’ble Supreme Court in yet another case, of Sumati Dayal (supra) has observed as under :—
“In our opinion the majority opinion after considering the surrounding circumstances and applying the test of human probabilities has rightly concluded that the claim about the amount being winnings from races is not genuine. It cannot be said that Explanation offered by the assessee in respect of the said amount has been rejected unreasonably and that finding that the said amounts are income of the assessee from other sources is not based on evidence.”
12. The learned counsel for the appellant-assessee Mr. Gargeiya took us through, the various orders and submitted that substantial questions of law arise out of the order of the learned ITAT and that the order passed by the learned ITAT is perverse and that the learned ITAT has recorded finding which is perverse in nature to arrive at the findings and contrary to the facts on record. We have considered the submissions of the learned counsel for the appellant and have perused the order of the learned ITAT and are not persuaded to agree with the learned Counsel as he has failed to point out the perversity in the said order. It is essentially a finding of fact not only recorded by the Tribunal but by the learned Assessing Officer as well as by the First Appellate Authority that no services were rendered by the Sub-brokers, and no amount was Paid to them either during the year or even later.
13. It being essentially a finding of fact, the appeal is liable to be dismissed as no substantial question of law arise out of the order passed by the learned Income-tax Appellate Tribunal. The appeal, therefore, fails and is dismissed.
[Citation : 354 ITR 662]
