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CASE NO.: Appeal (civil)  582 of 2008

PETITIONER: M/s Anis Ahmad and Sons

RESPONDENT: Commissioner of Income Tax (Appeals),Kanpur & Anr.

DATE OF JUDGMENT: 22/01/2008

BENCH: P. P. Naolekar & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T

[Arising out of S. L. P. (C) No.3135 of 2005]

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  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 limine and affirmed  the order dated 15.01.2004 of the Income Tax Appellate  Tribunal, Lucknow Bench. 3.      The facts in short are as under:-         The appellant-firm (hereinafter referred to as \023the  appellant-assessee\024) 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 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  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 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  and commission charges or other charges receivable are  credited in the relevant accounts and full sale price of the  goods 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/Shumar Bahi.  This book contains original  entry.  Thereafter, entries are passed through jakar and 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 customers.  The rate of commission on  different type of hides and skins is settled by the Association

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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  income as Commission Agent.  The Income Tax Officer, Circle  \026II, Kanpur, vide assessment order dated 13.03.1987 framed  under Section 143(3) of the Income Tax Act, 1961 (hereinafter  referred to as \023the Act\024) has treated the appellant-assessee as  \021a Trader\022 and not as \021a Commission Agent\022 and assessed its  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\026assessee preferred an  appeal before the Commissioner of Income Tax (Appeals).  The  Commissioner of Income Tax vide order dated 04.04.1988  partly allowed the appeal.  The appellant\026assessee and the  respondent\026Income 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 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 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  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 of  the appellant\026assessee.  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 has drawn adverse inference against the claim of the  appellant\026assessee and assessed Rs.2,30,704/- as total  income for the assessment year 1984-85 treating the  transaction with the absentee traders as having been done by  the appellant\026assessee in the capacity of \021Trader\022 and not as  \021Commission Agent\022.  8.      The appellant\026assessee 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:-   \023The 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  the A.O. while accepting him as an \021Arhatiya\022 in  respect of those who appeared before the A.O.   The A.O. did not get any enquiry done from the  said \021Arhat Market\022.  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 \021Arhatiya\022 for this year and also  to accept the profit from commission shown by  him\024

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\026assessee has failed to produce any evidence that the  transactions, in question, were not conducted by the

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appellant\026assessee as \021Vyapari\022 but the transactions were  conducted on commission basis.  Being aggrieved against the  said order, the appellant\026assessee filed Income Tax Appeal  before the High Court.  The High Court, as noticed above, has  concurred with the findings recorded by the Assessing  Authority as confirmed by the Appellate Tribunal and  dismissed the appeal in limine.  Now, the appellant\026assessee is  before this Court. 10.     We have heard Mr. Subramanium Prasad, the learned  counsel for the appellant\026assessee and Shri T.S. Doabia,  learned Senior Advocate for the respondents, and with their  assistance examined the material on record.  The learned  counsel for the appellant\026assessee submitted that the High  Court has committed grave error of fact and law in dismissing  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\026 assessee and the Assessing Authority, the Appellate Tribunal  as well as the High Court are not justified in drawing adverse  inference against the appellant\026assessee holding it to be  \021Trader\022 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 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 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  learned counsel for the parties and having gone through the  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 \021a  Commission Agent\022.  The appellant\026assessee filed a chart of  payments made to the purchasers by the traders through the  appellant\026assessee acting as a Commission Agent.  The five  traders, who appeared before the Assessing Authority, have  supported the claim of the appellant-assessee to be \021a  Commission Agent\022 and not \021a Trader\022 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 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 \021a  Trader\022 dealing in the goods.  Now, the subject-matter of  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 \021Trader\022 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  appeared before the Assessing Authority and supported the  claim of the appellant-assessee and on the contrary drawing

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adverse inference against the appellant-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.  As noticed above, the  Assessing Authority for the assessment year 1983-84 had  accepted the claim of the appellant\026assessee having acted as  Commission Agent in respect of the same articles which were  brought by the sellers to the Arhatdaars in the Mandi for sale. 13.     In this view of the matter, the Commissioner of Income  Tax  is right in holding the appellant\026assessee as an \021Arhatiya\022  (Commission Agent) for the year 1984-85 and not as \021trader\022 as  held by the Assessing Authority and accepted by the Income  Tax Appellate Tribunal as well as by the High Court. 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 I.T.A. No. 94/2004 upholding the order dated  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\026assessee as \021Trader\022 and not  \021Commission Agent\022 are quashed and set aside and as a result  thereof, the order dated 09.06.1997 recorded by the  Commissioner of Income Tax (Appeals) II Kanpur, in Appeal  No.CIT(A)II/5/ITO.2(7)/96-97/67 shall stand restored.  The  parties, however, are left to bear their own costs.