2004 (11) TMI 79 - HC - Income Tax

High Court affirms trader status, rejects commission agent classification, lack of proof results in income additions

The High Court upheld the Income-tax Officer's decision to classify the appellant as a trader for transactions with non-appearing parties, resulting in ... Appellant claims itself to be acting as commission agent - Income-tax Officer treated the appellant as a trader and not a commission agent - Addition regarding investment and profit was made to the declared income - Tribunal held that the assessee had failed to bring out any evidence that the transactions in question were not done by it, but the transactions were conducted on commission basis and, therefore, the Commissioner of Income-tax (Appeals) was not justified to observe that the appellant should be treated as conducting all the transactions on commission basis without any material brought on record by the appellant – no infirmity in tribunal’s order – This assessee’s appeal does not raise any question of law and is dismissed in limine. Issues:1. Determination of appellant's status as a commission agent or trader for the assessment year 1984-85.2. Adverse inference drawn by the Income-tax Officer due to non-appearance of certain parties.3. Appeal against the Commissioner of Income-tax (Appeals) decision treating the appellant as a commission agent.4. Tribunal's decision regarding lack of evidence supporting the appellant's claim of acting as a commission agent.5. Justification of Income-tax Officer's adverse inference and classification of the appellant as a trader.The High Court judgment involved the determination of the appellant's status as a commission agent or trader for the assessment year 1984-85. Initially, the Income-tax Officer classified the appellant as a trader instead of a commission agent. The Commissioner of Income-tax (Appeals) remanded the matter with specific directions. The Income-tax Officer, upon remand, required the appellant to prove its status as a commission agent. Subsequently, summons were issued under section 131 of the Income-tax Act, with only some parties appearing. The Income-tax Officer accepted the appellant as a commission agent for the parties who appeared but treated transactions with non-appearing parties as those of a trader, resulting in additions to the declared income. The Commissioner of Income-tax (Appeals) set aside the Income-tax Officer's decision, directing the acceptance of the appellant as a commission agent and acknowledging the profit from commission shown by the appellant.The appellant appealed the Commissioner of Income-tax (Appeals) decision, which treated the appellant as a commission agent. The Revenue, feeling aggrieved, appealed to the Tribunal. The Tribunal allowed the Revenue's appeal, stating that the appellant failed to provide evidence that the transactions were conducted on a commission basis. The Tribunal disagreed with the Commissioner of Income-tax (Appeals) observation that all transactions should be treated as commission-based without supporting evidence.During the High Court proceedings, the appellant's counsel argued that the appellant solely acted as a commission agent, providing names and addresses of transaction parties. The counsel contended that adverse inferences due to non-appearance of some parties should not have been drawn, emphasizing that payments were received via bank drafts, supporting the commission-based claim. However, the High Court noted that the assessing authority found the appellant unable to produce evidence of payments received through drafts, supporting the Income-tax Officer's adverse inference. The High Court upheld the authorities' findings, stating they were based on evidence and material on record without any flaws.Ultimately, the High Court concluded that the appeal did not raise any legal questions and dismissed it promptly. The judgment affirmed the Income-tax Officer's adverse inference and classification of the appellant as a trader for transactions lacking proof of commission agency status.