ORDER
Phool Singh, Judicial Member
1. These appeals of the assessee as well as of revenue were inter-connected involving one assessee and one ground, i.e., why all these appeals are being disposed of by a composite order.
2. I.T.A. Nos. 1697 & 1784 (ASR)/1989 are cross appeals involving assessment year 1983-84. At the time of hearing, representatives of both the parties agreed that these appeals are to be dismissed on one legal point. The plea was that the assessee, who was supposed to file return of income for the assessment year 1983-84 by 30-6-1983 filed the return under section 139(4) on 10-7-1983. He also filed revised return on 25-3-1986. According to the assessee’s plea the assessment should have been completed by 31-3-1986 but admittedly the assessment has been completed on 23-3-1987. The legal plea of the assessee was that it 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 High Court in the case of Kumar Jagadish Chandra Singh (supra) and upheld the decision of the Delhi High Court in the case of O. P. Malhotra (supra) and that of Eapen Joseph’s case (supra). According to the learned counsel for the assessment, the assessment in this case should have been completed by 31-3-1986. As return of income was under section 139(4) of the Act, no extension of one year under section 153(1)(c) of the Act and as assessment was completed on 23-3-1987, which is barred by time in view of the decision of the Hon’ble Supreme Court (supra). This decision has been considered to by the learned D.R. also but nothing to add. Respectfully following the decision of the Hon’ble Supreme Court, we dismiss both the appeals of the assessee as well as that of the revenue as these appeals become infructuous as assessment order stand annulled.
3. Both the appeals are dismissed.
4. In the remaining three appeals, the only ground relates to the additions of Rs. 50,000 in the assessment year 1984-85, Rs. 25,000 for the assessment year 1985-86 and Rs. 60,000 in the assessment year 1986-87 by the Assessing Officer on account of suppressed commission allegedly earned by the assessee on sale of property, which since has been deleted by the CIT(A).
5. The relevant facts are that the assessee-company was engaged in sale and purchase of property. During the assessment year 1984-85, the assessee had shown an income of Rs. 1,19,963 in P&L A/c as amount of commission earned on sale and purchase of property. The assessee submitted details in respect of amount of Rs. 1,05,439 earned by it as commission but details about the remaining commission of Rs. 14,524 was not submitted. From the above details the Assessing Officer noted that the assessee is explanation about the non-furnishing of details for earning amount is the same as submitted in the assessment year 1983-84. The AO noted further that from the details it is not possible to verify whether the assessee has truly and faithfully disclosed the income from commission from the sale and purchase of property as in just earlier year, he did not disclose the details of commission of Rs. 66,112 but in the year under consideration, he has shown such amount of commission at Rs. 14,524. According to the Assessing Officer, the assessee has not charged 2% commission from the purchaser and seller. He gave out the instances as in the case of sale of one property 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 workout the taxable income with reference to the provisions of sub-section (2) of section 145 and made the addition of Rs. 50,000. The assessee came in appeal and raised same pleas as were taken before the CIT(A) in appeal of the assessment year 1983-84 and he followed his earlier order and deleted the addition. The Revenue is in appeal.
6. In the assessment years 1985-86 and 1986-87, the facts are identical except the difference in the amounts of additions made in each year and the CIT(A) deleted these additions in the appeal and these three appeals came for disposal before us.
7. The learned D.R. placed reliance on the orders of the Assessing Officer for all the years and contended that admittedly the books of account of assessee were not complete as the assessee has shown details in respect of part of the amount of commission earned by it and has given rest of the amount without supporting evidence or details thereof. Further he has reiterated the same facts as noted by the Assessing Officer in each assessment year that in some cases out of the list given by the assessee relating to those transaction, the assessee has not charged commission at all though 2% is the general rate of commission to be charged from the sellers as well as purchasers. The learned D.R. further pointed out that in some cases no commission at all is charged or sometimes it is only charged from the seller or from purchaser. In such circumstances, the Assessing officer rightly addressed the books of account as incomplete and incorrect and rightly resorted to the provisions of section 145(2) of the Act and additions were rightly made. As against it, the learned counsel for the assessee has placed reliance on the order of the CIT(A) and it was submitted that the learned CIT(A) has considered all the facts given by the assessee for being non-charging of commission from either parties or charging less amount of commission from either parties. The learned A.R. also contended that the amount has rightly been deleted, which was added on the basis of surmises and conjunctures as the Assessing Officer failed to do any act to bring on record that any amount of commission was actually received by the assessee and did not account for. Even though the list of all the sellers and purchasers were submitted to the Assessing Officer, yet he failed to examine any of them. Apart from it, the assessee submitted 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 consideration was being given in respect of part of the property and admittedly the details of the rest of properties dealt with by the assessee in any assessment year by which commission was earned were not furnished. The Assessing Officer called upon the assessee to furnish the remaining details but it was not furnished. For example in the assessment year 1983-84, the amount of commission shown by the assessee was Rs. 2,07,237 but details in respect of amount of Rs. 1,41,125 alone was furnished and for remaining amount of commission for Rs. 66,000 the assessee failed to produce relevant vouchers or to furnish complete details and other details. This practice is continued in all the assessment years before us. Even before us no details of the remaining amount of commission had been furnished and it shows that the accounts of the assessee were incomplete to that extent and that amount is based on the memory of the assessee and likelihood of concealing any amount out of that cannot be ruled out.
9. So far as the details of major part of the amount of commission is concerned, the same has been furnished by the assessee giving out the names of properties dealt in, the names of sellers and purchasers and amounts of sale consideration, etc. The Assessing Officer noted that in certain cases less amount of commission is charged from the purchaser and seller and in some cases the commission is charged from either seller or purchaser and in some cases no commission was charged. The Assessing Officer was justified in calling for an explanation and the explanation of the assessee is that it is only business expediency that sometime lesser amount of commission is charged and sometimes it is charged from one of two parties and sometimes no commission is charged. These explanations were also not convincing one to some extent. The assessee was expected to give out the reasons for each case of not charging commission but he has not come out with any such explanation. Secondly, in case of charging of lesser rate of commission, the assessee was again expected to come with specific details as to what forced him not to charge 2% general rate of commission from sellers and purchasers.
Particularly in case where no commission is charged by the assessee, it was obligatory on the part of the assessee to give out the reasons thereof. Nothing has been done by the assessee. Mere giving out 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 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. In such circumstances the Assessing Officer was justified in not summoning the parties who would have not dared to speak the truth rather would have supported the case on the assessee. However, the fact remains that the assessee has not come with specific details of these properties from which the assessee has shown to have earned some part of the commission. Further he has also not come with specific reasons as to why he has not charged commission @ 2% from seller and purchaser or why he has charged commission from one of the parties or did not charge the commission at all from both the parties. In the case of failure on the part of the assessee to come with definite explanation, the Assessing Officer was justified in rejecting the book-results and 60 resort to the provisions of section 145(2) of the Act.
10. The other plea of the assessee is that after 1989-90, the Department has accepted the amount of commission as shown by the assessee in the assessments made under section 143(3) of the Act, as shown in the comparative chart, submitted before us. In this connection, the Bench enquired from the learned counsel for the assessee to submit details of properties dealt by the assessee for the assessment years 1983-84 to 1989-90 and also the properties sold after the assessment year 1989-90 so that comparison can be made as to what type of commission is being charged by the assessee or not being charged or whether details are appearing in full or not. These details have not been furnished before us in spite of one month passed and thus that chart of the assessee as well as the plea of the assessee that no addition was being made by the Assessing Officer for the assessment year 1991-92 onwards, will help the assessee as no comparison can be made to those years with the years under consideration in the absence of any details of all the years.
11. So far as the quantum of addition is concerned, we are of the definite opinion that very reasonable addition has been made in all the three cases before us and no interference is warranted. The result is that each of the ground of each appeal stands allowed as we restore the orders of the Assessing Officer and reverse 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. The Revenue is in appeal against the same.
14. The learned D.R. placed reliance on the orders of the Assessing Officer and the learned counsel placed reliance on the orders of the CIT(A).
15. It may be relevant to point out that the amount of Rs. 11,400 stands taxed in the hands of Smt. Raj Kumari on substantive basis who has shown it as amount of capital gain. That amount cannot be taxed in the hands of assessee again. Further the Assessing Officer has not conclusively proved that the transaction was benami on behalf of the assessee-company. Mere taking of amount from this firm by Smt. Raj Kumari will not be sufficient to treat this amount as invested by this firm in that transaction. We, accordingly, are of the opinion that the CIT(A) has rightly deleted this addition and we confirm his findings.
16. The result of the above is that I.T.A. No. 1785 (Asr)/1989 is partly allowed and I.T.A. Nos. 1786 (Asr)/1989 and 1787(Asr)/1989 are allowed. ITA Nos. 1697 & 1784/(Asr)/1989 also dismissed.
R. K. Bali, Accountant Member
1. I have had the advantage of reading the order proposed by my learned Brother, the Judicial Member Shri Phool Singh. As I am unable to persuade myself to agree with his conclusions reached by him with regard to his action of reversing the order of the CIT(A) who deleted the addition of Rs. 50,000 for assessment year 1984-85; Rs. 25,000 for assessment year 1985-86 and Rs. 60,000 for assessment year 1986-87 made by the Assessing Officer on account of alleged suppression of commission income earned by the assessee on sale of property, I give my order of dissent as under.
2. The facts for the assessment year 1984-85 and those relating to assessment year 1983-84 have been recorded by my learned brother in his proposed order in para-5 and a reference is made in para-6 that in assessment years 1985-86 and 1986-87 the facts are identical except the difference in the amount of additions made which have been deleted by the CIT(A).
3. The assessee derives income by acting as a commission agent in relation to sale of immovable property comprising of houses, plots, etc. The assessee during the course of hearing has furnished before us a comparative chart showing the commission income declared, additions made by the Assessing Officer and its subsequent treatment in the hands of the appellate authorities which I will like to reproduce hereunder :
———————————————————————-
Asst. Commission Addition Relief
Year Income by
declared 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
143(3) dated
17-2-1994
1994-95 3,73,440 NIL N.A. Asst.
completed
under section
143(3)
1995-96 3,85,330 NIL N.A. -do-
1996-97 4,95,350 NIL N.A. -do-
----------------------------------------------------------------------
A perusal of the above chart indicates that from assessment year 1991-92 onwards the commission declared by the assessee has been accepted by the Assessing Officer while assessing the case under section 143(3) as a scrutiny assessment and no additions were made. For the assessment year 1983-84 which was also in appeal before us, the assessment has to be annulled in view of the decision of the Supreme Court in the case of Kumar Jagdish Chandra Sinha (supra). For the assessment year 1984-85 the Assessing Officer made an addition of Rs. 70,000 mainly relying on his order for the assessment year 1983-84. For the assessment year 1985-86 the addition made by the Assessing Officer was Rs. 25,000 again based on his earlier decision for assessment years 1983-84 and 1984-85. For the assessment year 1986-87 the addition made by the Assessing Officer was Rs. 60,000 on the basis of reasoning of earlier years and also about seven instances noted at para 2 at page 2 of the assessment order.
4. On appeal, the learned CIT(A) deleted the additions for all the assessment years before us, viz., assessment years 1983-84 to 1986-87. The CIT(A) passed a detailed speaking order for assessment year 1983-84 and deleted the addition after referring with approval to the observations of his predecessor in office the CIT(A), Jalandhar, for the assessment year 1982-83 wherein it was held that it is for the assessee to decide as to whether the commission should be charged from the seller or from the purchaser or from both or from none at all. It is again between the assessee and the payer of commission to decide as to the rate on which the commission should be paid. The question of making addition would arise in a case where it is found that the assessee has received commission but has not accounted for the same in the books. The CIT(A) for the assessment year 1982-83 deleted the addition of Rs. 15,548 and that decision was accepted by the Revenue. The CIT(A) deleted the addition of Rs. 50,000 for assessment year 1983-84 but although 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 (supra).
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 for the assessment year 1986-87 should be reproduced to bring the controversy in clear focus :
“7. Now, coming to the specific instances on the basis of which addition of Rs. 60,000 has been made. The Assessing Officer has mentioned that from Mrs. G. D. Madhar commission chargeable was Rs. 7,600 whereas it is charged at Rs. 3,800 only. From the Chart available on record page 1, it is seen that Rs. 3,800 commission was charged from the seller and Rs. 7,600 commission was charged from the purchaser, i.e., total commission shown by the appellant is Rs. 11,400 whereas the Assessing Officer says that it was chargeable at Rs. 7,600 only. Regarding Shri Lal Chand Sondhi Advocate, Khadi & Gram Udyog was the tenant of the property of Shri Lal Chand Sondhi and because of the tenancy Khadi Gram Udyog purchased the property from Shri Lal Chand. As per agreement clause (12) which is on the assessment file of the Assessing Officer, the bargain was struck through the appellant and the purchaser alone had agreed to pay the commission @ 2% of the sale price. This agreement is between Shri Lal Chand Sondhi the seller and M/s. Punjab Khadi Mandal. The appellant has duly declared the commission of Rs. 20,000 as per this agreement and no adverse inference can be drawn. Regarding instance No. 5 : Smt. Santosh Sethi, the Assessing Officer mentions that the commission required to be charged was Rs. 4,800 but actual charge is Rs. 2,400. Here also the details of assessment file show that the appellant has, in fact, charged Rs. 2,400 + Rs. 2,800, i.e., Rs. 5,200. Regarding instance No. 6 in the name of Shri Bharat Bhushan the Assessing Officer mentions that the commission required to be charged was Rs. 2,174 whereas only Rs. 1,087 has been charged. Here also the appellant has charged commission of Rs. 1,087 + Rs. 2,174, i.e., Rs. 3,261.
8. Thus, I find that the Assessing Officer’s observations are not based on record. There is no instance at all, where commission was actually charged but not recorded in the books. There are some instances where commission has been charged from only one party but this is part of the nature of business as has been held by the CIT(A)-II, Jalandhar, and in my appellate order for the asst. year 1983-84. I, therefore, hold that the addition of Rs. 60,000 is not, at all, sustainable and the same is ordered to be deleted.”
8. The Assessing Officer has made 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 Officer for assessment year 1986-87 was in relation to a sum of Rs. 38,150. The explanation of the assessee before the Assessing Officer was that he has furnished the list of the parties including the purchaser as well as the sellers from whom he has charged commission and since the agreement of sale of immovable property after the transaction was retained by the purchaser and the assessee is only interested in the commission earned by it, it was not possible for him at the stage of assessment to give details regarding the transactions in relation to which the commission was earned and credited to the P&L A/c. as the assessee has not retained the copies of the sale deed with it. The assessee explained to the assessing Officer that there was no universal rule that 2% commission is to be charged from the purchaser and the seller and the commission is charged keeping in view the amount involved in the deed and also the nature of relation between the client and the assessee. It was explained to the Assessing Officer that sometime the commission is charged either from the purchaser or from the seller sometime at 2% or in some cases even at a lesser percentage, viz., one and half percentage or one percentage or in some case no commission is charged. The assessee even requested the Assessing Officer to summon the persons from whom according to the Assessing Officer lesser commission has been charged to verify as to whether the commission shown by the assessee in its books of account was the correct amount received by it or not. However the Assessing Officer did not summon any of the parties to verify as to whether the commission credited by the assessee in its books of account tallied with the amount actually paid by the purchaser/seller but instead made ad hoc 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.
9. On appeal, the CIT(A) deleted the additions for the reasons given in the order reference to which has been made in the earlier paras. On further appeal by the Revenue my learned brother has reversed the order of the CIT(A) and restored that of the Assessing Officer for the reasons given in paras 8 to 11 of his proposed order.
10. The main justification for reversing the order of the CIT(A) given by my learned brother is that 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 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 would have supported the case of the assessee. Accordingly, my learned brother held that the Assessing Officer was justified in rejecting the books and the fact that from assessment year 1991-92 onwards even the Assessing Officer has not made any addition while passing order under section 143(3) in a scrutiny assessment has been brushed aside by my learned brother on the ground that the full details regarding the transactions in relation to which the commission earned in assessment years 1991-92 to 1996-97, were not filed by the assessee before the Tribunal.
11. I do not for a moment suggest that there was no prevalence of ‘on money’ payments in the real estate/sale of plots/houses but addition on account of commission relating to ‘on money’ payments would not be justified even if general note is taken of what is described by the revenue authorities as notorious practice, in the absence of tangible evidence. As rightly pointed out by the CIT(A) in his appellate order for assessment year 1982-83 which has been quoted with approval by the CIT(A) in assessment year 1983-84 and followed in the subsequent years that it is for the assessee to decide as to how he should conduct his business and it is solely the discretion of the assessee whether to charge commission from the seller or from the purchaser or from both or from none at all. The question of making addition would arise only if it is found as a fact that the assessee has in fact received the commission but has not accounted for the same in its books of account and this could have been done only by the Assessing Officer after summoning the purchaser and seller from whom the assessee has received the commission to find out as to whether he has correctly accounted for the commission received in the books of account. It is an admitted position that the Assessing Officer has not summoned any of the purchasers or sellers despite the fact that a specific request was made by the assessee to the Assessing Officer in this regard. In this view of the matter I am of the opinion that the additions were made by the Assessing Officer only on the basis of surmises and conjectures and were rightly deleted by the CIT(A) as there was no material on record to support the additions. Thus keeping in view the totality of the facts and circumstances of the case I am of the opinion that the order of the CIT(A) requires no interference 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
Chaturvedi, J.M.
1. 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 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 addition made by the Assessing Officer were not sustained and were rightly deleted by the CIT(Appeals), is justified ?”
2. It is palpable from the perusal of the assessment records that the Assessing Officer while making additions in respect of the alleged suppressed commission adumbrated on the findings recorded for the assessment year 1983-84. The order for the assessment year 1983-84 was quashed by the Tribunal in view of the ratio laid down by the Apex Court in the case of Kumar Jagdish Chandra Sinha (supra) wherein it was held that if the original return is belated, revised return cannot be filed. On that basis Tribunal held that the revised return as filed by the assessee was non est. As such extension of one year’s time was not available to the Assessing Officer. Assessment was not completed within the limitation period. Therefore, it was bad in law. For the assessment year 1983-84 there was no cleavage of opinion between the learned Members.
3. In order to appreciate the core of controversy, it is sine qua non, to consider the factual background of the case. The assessee was a partnership firm. It derived income from the brokerage of real estate. Some income was also earned from the management of the properties. During the assessment year 1984-85, assessee reflected in its P&L Account an income of Rs. 1,19,963 being amount of commission earned on sale and purchase of property. Assessee was required to file details of commission with reference to the names and addresses of purchasers and sellers. Details in respect of the amount of Rs. 1,05,439 were furnished by the assessee. On the basis of these details, the Assessing Officer drew certain presumptions. Taking into consideration the background for the assessment year 1983-84, Assessing Officer opined that from these details, sale and purchase transactions cannot be verified. It was also noticed from these details that assessee did not charge commission @ 2% from the purchasers and sellers. Some illustrations were given to show that the rate of commission was not 2% in all the cases. Assessing Officer asked for the explanation of the assessee. In the opinion of Assessing Officer, commission was undercharged. 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 on the assumption that in every case the assessee is required to charge commission @ 2%. There was absolutely no such trade practice prevailing. Complete details of commission was furnished before the Assessing Officer. Not even a solitary instance of not recording the commission in the books was pointed out in the impugned order. Not even a single transaction was probed by the Assessing Officer. According to the learned counsel additions cannot be sustained merely on the basis of presumptions and surmises.
5. Shri Labh Singh, the learned Departmental Representative appeared before me. Assessment records were produced as desired by the Bench at the time of hearing. Case was argued. It was submitted by Shri Labh Singh that the Assessing Officer was correct in making additions. The assessee did not disclose fully the amounts of commission in his books. It was found by the Assessing Officer that in some of the cases commission charged was less than 2%, which is invariably charged in each transaction. In some of the cases assessee did not charge commission from both the parties. It was also found that the assessee did charge commission @ 4% of the sale price both from the purchasers as well as from the sellers. On this basis, it can very well be inferred that assessee did not disclose the correct amount of commission, in the return.
6. Reference was also made to the decision of the Apex Court rendered in the case of Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89 wherein it was held that the Settlement Commission after considering the surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant’s claim about the amount being her winnings from races was not genuine.
7. The learned Departmental Representative further relied on the order of the Assessing Officer and argued that there was nothing wrong in deriving inference from human probabilities, as the assessee could not give any justification for charging the lower rate of commission. 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 hands is invariably much more than to the amount shown by these 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, 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 received by the assessee. I do not find in records any comparable case to establish that the prevailing rate of commission was 2% in this trade. In order to prove that such trade practice did exist in this trade, it was incumbent on the Assessing Officer to bring beyond the shadow of doubt the existence of such trade practice. I find that assessee charged 4% commission also. It was stated before me that the commission was charged depending upon the nature of work. The rate factor was decided as per the exigencies of the business.
9. The expression “burden of proof” really means two different things. It means sometime that a party is required to prove an allegation before the judgment can be given in its favour; it also means that on a contested issue one of the two contending parties has to introduce evidence. The burden of proof is of importance only where by reason of not discharging the burden which was put upon it, a party must eventually fail. Where, however, parties have joined issue and have lead evidence and the conflicting evidence can be weighed to determine which way the issue can be decided, the abstract question of burden of proof becomes academic. It assumes importance where no evidence at all is lead on the question in dispute by either side, in such a contingency the party on whom the onus lies to prove a certain fact must fail. Where, however, evidence has been led by the contesting parties on the question in issue, abstract considerations of onus are out of place; the truth or otherwise of the case must always be adjudged on the evidence led by the parties. In other words, onus is a determining factor comes into play where there is either no evidence on either side or where it is equally worthless or equally balanced. Where such is not the case and all available evidence is considered without reference to the onus and, without relying on the circumstances that the onus lies on a particular party, the issue is determined on facts, the onus cannot be said to have influenced the decision.
10. I now revert to the facts of the present case. It is clear from records that assessee has given details of the amount of “commission received” to the Assessing Officer. Assessing Officer harboured certain doubts as to the amount of commission received. Assessing Officer wanted the assessee to produce the agreements and the documents pertaining to the purchase 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 Assessing Officer did not make any enquiry as to the veracity of the claim. All the relevant facts were furnished before him. He did not probe even a single party. There is not even an iota of evidence to butress the point that the assessee did charge the amount of commission in excess to that which is recorded in the books.
12. In the assessment year 1985-86, the Assessing Officer made addition on ad hoc basis. He tried to justify the same on the one hand with reference to the invocation of section 145(2) and on the other by saving that the assessee paid amount to the regular employees, towards the house management expenses. There was no justification for making such payment. In view of this fact he invoked the section 145(2) and added Rs. 25,000. There appears to be no justification in making addition on the panoply of section 145(2).
13. Now coming to the concept of probabilities, it is necessary to see all the surrounding circumstances. De hors any clinching evidence to this effect, no contrary view can be taken in the matter. I find that the Assessing Officer justified the addition on the ground that it is a matter of general knowledge that in every transaction of sale and purchase of immovable property between the individuals, the exact amount which passes the hands is invariably much more than to the amount shown by the parties in sale deeds, etc. In other words, the prevalence of on-money is presumed in the trade. Shri Sud invited my attention on the decision of the Tribunal rendered in the case of ITO v. W.D. Estate (P.) Ltd. [1993] 45 ITD 473 (Bom.). The Tribunal held as under :-
“As has been rightly contended by the assessee there has been no action against any buyer for inclusion of the so-called ‘on-money’ paid by them for acquisition of premises and wherever such action had been taken, additions made have been deleted by the appellate authorities. When such is the position, we are of the view that the addition made by the Assessing Officer cannot be sustained even if we take into consideration the prevailing practice of payment of ‘on-money’ in real estate transactions.”
14. The maxim of English Law, as propounded by Holroyd, J. prescribes : “It is better than ten guilty men should espace rather than one innocent should suffer.” The principle of justice requires than no one should be punished on the basis of presumption. Addition should 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 (supra) 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 outside the books. Assessing Officer also referred certain transaction of the value less than Rs. 50,000. He tried to infer that lesser amount of consideration must be insisted to avoid getting questionnaire under section 230A(1). There is no material to support this finding. In the assessment year 1983-84, which of course is not relevant for considering the present case, the Assessing Officer found that the assessee advanced certain amount for the purchase of particular property to certain persons. This reasoning was relied for the subsequent years also but not any specific instance was given to support this finding.
16. I have perused the relevant documents and papers. I have also gone through the various reasonings laid down in the orders. On these facts and after hearing the rival submissions, I am inclined to agree with the view expressed by the learned Accountant Member.
17. The case will now go back to the regular Bench, which heard the appeal, for disposal, in accordance with the opinion of the majority.