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TMI Blog1998 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... is barred by time and assessment should be annulled. He has also placed reliance on the decision of Rajasthan High Court in the case of CIT v. Shah Bros. [1988] 171 ITR 19/36 Taxman 194, decision in the case of Eapen Joseph v. CIT [1987] 168 ITR 26/35 Taxman 213 (Ker.) and the decision of Delhi High Court in the case of O.P. Malhotra v. CIT [1981] 129 ITR 379/7 Taxman 98 and that of the Allahabad High Court decision in the case of Dr. S.B. Bhargava v. CIT [1982] 136 ITR 559/11 Taxman 28. This plea of the learned counsel of the assessee was not accepted by the learned CIT(A) on the ground that the Hon'ble High Court of Calcutta in the case of Kumar Jagadish Chandra Sinha v. CIT [1982] 137 ITR 722 has held otherwise after interpretation of section 153(1)(c) of the Act in which return under section 139(4) of the Act was also treated as revised return and assessment could be completed up to 31-3-1987 and thus held that assessment order was not barred by limitation. It is now contended by the learned counsel for the assessee that the Hon'ble Supreme Court in the case of Kumar Jagdish Chandra Sinha v. CIT [1996] 220 ITR 67/86 Taxman 122 has reversed the decision of the Hon'ble Calcutta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty sold for Rs. 4 lacs, the assessee has shown Rs. 4,000 as commission while it should have been Rs. 8,000. In the same way, in some cases, no commission was charged as particularly in cases of Sr. No. 13. He specifically asked the assessee to explain the reasons as to why commission has not been charged or under-charged from various parties. The assessee gave explanation vide reply dated 12-6-1987 to the effect that charging of low rate of commission was very much inherent in their trade and they had been following this practice in the past too and the Department never objected. Sometimes the rate of commission if charged @ 2% becomes too much and parties are not coming forward to part with that amount, that is why in such cases lower rate of commission is charged. Sometimes to promote the business, no commission is charged from any party but it is not the practice that commission is charged and not accounted for in the books. The assessee's explanation was considered and following the order of the assessment year 1983-84, the Assessing Officer found himself not satisfied with the same as well as about the correctness and completeness of the account books. He proceeded to work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted a comparative chart showing the commission income and additions made by the Assessing Officer. A perusal of the chart will reveal that from the assessment years 1983-84 to 1989-90, the additions have been made by the Assessing Officer to the commission income declared by the assessee and in all the cases the CIT(A) deleted the additions and the Department did not come in appeal before the Tribunal. The learned counsel further pointed out that from the assessment years 1991-92 to 1996-97, no addition has been made by the Assessing Officer to the commission income shown by the assessee even though assessments have been completed under section 143(3) of the Act. Relying upon this, the contention is that the Department itself accepted the contention of the assessee after assessment year 1991-92 and no addition was made. On the basis of the above, he contended that the additions were rightly deleted and the grounds be rejected. 8. We have considered that rival submissions and perused the records. It is undisputed fact that the assessee was showing commission income and details giving out the names of the property, names of sellers and purchasers and the amount of sale consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the names of the parties, who were involved in the sale and purchase of properties and asking the Assessing Officer to summon any of them and to find out whether the amount as shown by the assessee in that transaction alone passed the hands or some more amount was transferred to assessee will not be taken as sufficient. It is a matter of general knowledge that in every transaction of sale and purchase of immovable properties between individuals, the exact amount which passes the hands is invariably much more than to the amount shown by those parties in sale deed, etc. After transfer is over, each of the parties will always remain stick to the amount shown in the registered sale deed as in case they come with other figures, naturally they will face consequences for violation of different laws. The same thing will apply in the cases of commission to be charged by property dealers as in case the Assessing Officer is examining any of the parties or the transaction undisputedly first they will support property dealer, otherwise he will reveal the actual truth of that transaction, which is always known to him and will bring both the parties to face different types of proceedings and it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that of the CIT(A). 12. One additional ground is involved in the assessment year 1984-85, which relates to the addition of Rs. 11,400. 13. The Assessing Officer noted that in assessment year 1984-85, Smt. Raj Kumari wife of one of the partners of the assessee-company had declared a short term capital gain of Rs. 11,400. The Assessing Officer looked into the assessment records of Smt. Raj Kumari for the assessment year 1973-74 onwards and found that assessee was regularly engaged in the business of purchase and sale of land and the profit arising out of such transactions were to be taxed as business profits and not capital gains. He treated the business of Smt. Raj Kumari as benami of the assessee-company on the ground that the entire investment was made by the assessee-company from its accounts and thus he treated the amount of Rs. 11,400 as income of the assessee. The learned CIT(A) deleted this addition on the ground that this lady is being separately assessed to tax and already the amount of Rs. 11,400 has been subjected to tax as capital gain in the hands of Smt. Raj Kumari by the same Assessing Officer and that amount again cannot be taxed in the hands of the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asst. Year Commission Addition Relief by CIT(A) Remarks 1983-84 2.07,237 50,000 50,000 Under Appeal for I.T.A.T. 1984-85 1,19,963 70,000 70,000 -do- 1985-86 33,209 25,000 25,000 -do- 1986-87 1,59,375 60,000 60,000 -do- 1987-88 1,03,122 60,000 60,000 -do- 1988-89 1,70,792 28,760 28,760 -do- 1989-90 2,40,543 81,975 81,975 -do- 1991-92 1,95,740 NIL NIL Assessment completed under section 143(3) dated 31-12-1991 1992-93 3,41,560 NIL NIL Asst. completed under section 143(3) dated 26-3-1993 1993-94 3,47,710 NIL N.A. Asst. completed under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the Revenue is in appeal against the order of the CIT(A) yet that appeal has become only of a academic nature since the assessment for assessment year 1983-84 has been annulled by us on the basis of the decision of the Supreme Court in the case of Kumar Jagdish Chandra Sinha. 5. For the assessment year 1984-85 the addition of Rs. 70,000 made by the Assessing Officer was deleted by the CIT(A) relying on his order for the assessment year 1983-84 and the observations of the CIT(A) for assessment year 1982-83 which have been extracted by me in para 4 above. 6. Similarly, for assessment year 1985-86 the CIT(A) deleted the addition of Rs. 25,000 on the basis of his reasoning for assessment year 1983-84 and his predecessor in office for assessment year 1982-83. 7. For the assessment year 1986-87 also the CIT(A) deleted the addition and further discussed in para 7 of his order the seven instances on the basis of which the addition of Rs. 60,000 was made by the Assessing Officer and gave his finding in para 8 that no addition was justified in the facts and circumstances of the case. In this connection it will be in the fitness of things that paras 7 and 8 of the CIT(A)'s order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additions only on the ground that complete details with regard to the transactions of immovable properties in respect of which the commission was earned by the assessee were not furnished, although the Assessing Officer himself admits that the assessee did furnish the details in respect of a large number of properties in relation to which the commission was earned and disclosed in the books of account. The details of total commission income declared have been given in the chart reproduced by me in para 3 above. Out of the above declared income, according to the Assessing Officer, the assessee has not given details of commission earned amounting to Rs. 14,524 out of total commission receipts of Rs. 1,19,963 for assessment year 1984-85. For the assessment year 1985-86 the total commission credited to the P L A/c. was Rs. 32,209 and there is no allegation in the assessment order that details for a part of this commission has not been furnished by the assessee. For assessment year 1986-87 the commission credited to the P L A/c is Rs. 1,59,375 out of which details were furnished in respect of Rs. 1,21,225. Thus the details which were not furnished even according to the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery transaction of sale and purchase of immovable properties between individuals, the exact amount which passes the hands is invariably much more than to the amount shown by those parties in sale deeds, etc. After transfer is over, each of the parties will always stick to the amount shown in the registered sale deed as in case they come with other figures, naturally they will face consequences for violation of different laws. The same thing will apply in the case of commission to be charged by property dealers as in case the Assessing Officer is examining any of the parties or the transaction undisputedly first they will support property dealer otherwise he will reveal the actual truth of that transaction, which is always known to him and will bring both the parties to face different types of proceedings and it is the trade secret of such property dealers that they did not indulge in such type of things with the clear understanding that other two parties, viz., seller and the purchaser will also keep the secret. For the above reasons my learned brother is of the view that the Assessing Officer was justified in not summoning the parties who would have not dared to speak the truth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference and has to be upheld. Therefore I will adjudicate the grounds of the Revenue relating to the above additions against the Revenue and in favour of assessee. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 The Members who heard these appeals having difference of opinion on the following points, the case is referred to the Hon'ble President, Income-tax Appellate Tribunal under section 255(4) of the Income-tax Act, 1961 for the opinion of the Third Member: "Whether, in the facts and circumstances of the case, the view of the Judicial Member that the addition of Rs. 70,000 for assessment year 1984-85; Rs. 25,000 for assessment year 1985-86 and Rs. 60,000 for assessment year 1986-87 for alleged suppression of commission income is correct or the view of the Accountant Member that the additions made by the Assessing Officer were not sustainable and were rightly deleted by the CIT(A), is justified?" THIRD MEMBER ORDER Per Chaturvedi, J.M.- These appeals came up before me as a Third Member to express my opinion on the following question: "Whether, in the facts and circumstances of the case, the view of the Judicial Member that the addition of Rs. 70,000 for assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Assessee explained vide its letter dated 12-3-1987 that charging of low rate of commission was very much inherent in their trade and they had been following this practice since last many years and it was accepted by the Department in the past. There was nothing sacrosanct about the rate of commission. It was charged as per the business exigencies. No uniform rate of commission can be charged in this trade. It is dependent on the nature of the transaction. At times to promote the cause of business lower rate was charged from the customers. The explanation offered by the assessee was not accepted by the Assessing Officer. He invoked the provisions of section 145(2) of the Income-tax Act, 1961 (hereinafter called the Act) and made addition of Rs. 50,000 (not Rs. 70,000 as mentioned in the question). For the same reasoning, a sum of Rs. 25,000 was added for the assessment year 1985-86 and Rs. 60,000 was added for the assessment year 1986-87. 4. Shri N.K. Sud, learned counsel for the assessee appeared before me to argue the case. It was vehemently contended that the additions made by the Assessing Officer were not supported by any material on record. The additions were made simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey come with other figures, they will face consequences for violation of different laws. Correct facts cannot be gathered from the parties. Therefore, recourse to be made to the circumstantial evidence. The Assessing Officer rightly decided the issue by taking into consideration the circumstantial evidence. It was submitted that under hand payments are prevalent in the real estate transactions. 8. I have heard the rival submissions in the light of material placed before me and precedents relied upon. The addition was made solely on the ground that the assessee did not disclose the commission fully. In deriving this conclusion the Assessing Officer proceeded on the assumption that assessee was charging commission @ 2% from the buyers as well as from the sellers. In the order of assessment the Assessing Officer referred the instances where either the commission had not been charged at all from one party or it had been charged at a lower rate. He took into consideration the rate of 2% in view of the prevailing trade practice in this type of business. There is no discussion in the order as to the fact that how rate of 2% can be the yardstick for adjudging the amount of commission re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase and sale of properties. It was pointed out to him that the agreement remains with the parties. The assessee worked only as a middleman and he earned his commission. He did not keep the papers connected with the parties. Next the Assessing Officer objected that in large number of cases the assessee did not charge commission either from the purchasers or from the sellers and the amount of commission charged was less than 2% which is the normal rate of commission. It is nowhere laid down that how this normal rate of commission was determined. The assessee had given some particulars of property transactions where the commission declared was 2% from one party alone and not from both the parties. He also referred to a case where commission charged was 4% from one party. In my opinion, Revenue cannot put any restriction on the assessee to charge a particular rate of commission. It is within the discretion of the assessee to charge the amount which he considers to be just and proper in the interest of the business. However, if Revenue finds that some extra amount is charged, such extra amount can be put within the net of tax. In the instant case, there is no such finding. 11. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be made merely on surmises. It should be supported by cogent material and evidence. The ratio of the Apex Court rendered in the case of Sumati Dayal cannot be stretched to the facts of the present case as because the bona fide of the transaction was not in doubt. The Department did not detect any concealment. 15. Initially the burden is on the Revenue to prove each item which is liable to be taxed as revenue receipt. This burden depends upon the nature of income and the circumstances of the case. The assessee discharged the initial burden by furnishing explanation and the details. Assessing Officer in his discretion had chosen not to examine such details. Without verifying the contents, he formed opinion. The basis of such opinion was the prevailing trade practice. The entire case of the revenue is erected on the edifice of the prevalence of such trade practice. There is absolutely nothing to establish that trade practice. The assessee denied the existence of any such trade practice. No adverse inference can be drawn from the fact that assessee did charge lesser amount of commission from the parties. Assessing Officer did not pin-point any instance of commission charged outs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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