2013 (7) TMI 572 - HC - Income Tax

Disallowance on commission paid whether assesse would be entitled for the exemption on the commission paid to the sub-brokers Held that - 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 subbrokers 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 said issue being essentially a finding of fact - the appeal is liable to be dismissed as no substantial question of law arise - Court relied upon the judgement of Sumati Dayal v. CIT (1995 (3) TMI 3 - SUPREME Court) 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 appeal decided against assesse.

Summary

Issues:
- Disallowance of commission claimed as payable to sub-brokers by the appellant for the assessment year 1998-99.

Analysis:
The appellant, a del credere selling agent of two companies, claimed a commission of Rs. 45,81,710 and brokerage of Rs. 19,93,474 payable to sub-brokers for sales of yarn in a specific territory. The Assessing Officer disallowed the claimed amount as commission/brokerage, citing lack of evidence of sales through sub-brokers and non-payment of brokerage to them. The appellant failed to produce sub-brokers' account books or evidence of sales through them. The Assessing Officer concluded that the claimed expenditure was not incurred as no services were rendered by sub-brokers, and no payments were made to them.

The Commissioner of Income-tax (Appeals) upheld the disallowance, noting the appellant's failure to prove the genuineness of payments to sub-brokers, irregularities in submitted affidavits, absence of authorization to engage sub-brokers in the sales agreement, and non-payment of commissions for years. The Commissioner concluded that sub-brokers did not render services, and no substantial commission due to them was paid, sustaining the disallowance.

The Income-tax Appellate Tribunal affirmed the disallowance, emphasizing the absence of services by sub-brokers, non-payment of commissions, and discrepancies in sub-brokers' credit balances and income filings. Referring to legal precedents, the Tribunal highlighted the need to judge evidence based on human probabilities, concluding that no services were rendered by sub-brokers. The Tribunal dismissed the appeal, stating that no substantial legal questions arose, as the findings of fact by lower authorities remained consistent in denying the claim of commission payable to sub-brokers.

In summary, the disallowance of the claimed commission payable to sub-brokers by the appellant for the assessment year 1998-99 was upheld by the Income-tax Appellate Tribunal, based on the lack of evidence of services rendered by sub-brokers, non-payment of commissions, and discrepancies in sub-brokers' financial records and income filings. The Tribunal concluded that no substantial legal questions arose, as the findings of fact remained consistent across lower authorities, leading to the dismissal of the appeal.