JORAWAR SINGH vs. COMMISSIONER OF INCOME TAX

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ITA/145/2014HC Punjab & HaryanaPHHC01109270201410 March 2015Author: MR. JUSTICE A.B. CHAUDHARI,MR. JUSTICE M.M. AGGARWAL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the primary issue was whether the assessee had proven the payment of commission. The Tribunal, after considering the evidence, concluded that the assessee failed to establish that the commission was paid to agents/sub-agents. The court found that the assessee's inconsistent stands regarding the recipients of the commission (initially new customers, then agents) and the timing of the supporting affidavits (dated after the assessment year) were crucial factors. The court found no perversity in the Tribunal's finding of fact, as there was material on record to support the conclusion that the payment of commission had not been proved. The disallowance of 20% of expenses for telephone, conveyance, depreciation, and entertainment, further reduced to 10% by the ITAT, was also deemed not to warrant interference. Therefore, the appeal was dismissed.

What were the facts?

The appeal concerns assessment year 2008-09, filed by Jorawar Singh (assessee) against the order of the Income Tax Appellate Tribunal (ITAT). The ITAT had dismissed the assessee's appeal against the Commissioner of Income Tax (Appeals) (CIT(A)), who upheld the Assessing Officer's (AO) disallowance of a deduction of Rs. 6,42,870/- claimed under Section 37 of the Income Tax Act, 1961. The assessee, a LIC agent, received Rs. 24,80,612/- as commission. He claimed a deduction of Rs. 6,42,870/- alleging it was paid in cash to consumers as incentives. Initially, the assessee claimed payment to new policyholders, providing names for Rs. 1,42,045/- but not details for the balance. Later, the assessee contended the commission was paid through agents who introduced customers. The AO, CIT(A), and ITAT concluded the assessee failed to prove these payments.

What were the issues?

1. Whether the Tribunal erred in law by disallowing the deduction of Rs. 6,42,870/- claimed under Section 37 of the Income Tax Act, 1961, as business expenditure, when the assessee failed to prove the actual payment of commission to agents/sub-agents? Assessee's Contention: The assessee argued that the payments were business promotion incentives. Initially, it was claimed these were paid to new policyholders, and later, through agents who introduced customers. The assessee contended that the findings of the lower authorities were perverse. Revenue's Contention: The revenue contended that the assessee failed to establish that the commission was paid to agents/sub-agents as alleged. The affidavits produced were dated after the assessment year, and the assessee's stand on the recipients of the commission changed, indicating a lack of proof.

Which sections of the Income-tax Act were involved?

Section 37,Section 41

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH Date of decision:10.03.2015 Jorawar Singh

....Appellant

Versus Commissioner of Income Tax, Karnal

......Respondent CORAM: HON'BLE MR.JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICE HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr.S.K.Mukhi, Advocate, for the appellant. Mr.Yogesh Putney, Advocate, for the respondent. ****

S.J.Vazifdar, Acting Chief Justice (Oral): This is an appeal against the order of the Income Tax Appellate Tribunal (for short, the 'ITAT') dated 13.09.2013, dismissing the appeal against the order of the Commissioner of Income Tax (Appeals) (for short, the 'CIT), which in turn, confirmed the order of the Assessing Officer (for short, the 'AO'), disallowing the deduction claimed by the appellant/assessee in a sum of `6,42,870/-, under Section 37 of the Income Tax Act, 1961 (for short, the 'Act'). The proceedings pertain to the assessment year 2008-09. The appellant is a LIC agent, working and procuring the business under the insurance policies. The appellant received a commission from LIC of `24,80,612/-. The appellant has claimed to have paid the said commission and claimed the deduction of `6,42,870/-, contending that the same was paid in cash by him to the consumers. Initially, it was contended that the commission had been paid to the new policy holders. The names of 40 such persons was mentioned. The aggregate amount of the amount paid had come only to `1,42,045. The details in respect of the balance payment were not produced. It appears that the payment of such incentives to new customers was contrary to Section 41 of the Insurance SAILESH RANJAN 2015.03.13 16:56 I attest to the accuracy and integrity of this document -2- Act, 1938. That is a different matter altogether. The appellant, thereafter, contended that the commission was, thus, only a business promotion incentive. In further variance, however, made by the appellant, it was submitted that the amount of commission was paid not to the new customers directly but through the agents who introduced the appellant to the new customers. The AO, CIT and the ITAT went into the question as to whether the payment of commission has been made at all or not. This was essentially only a question of fact. After appreciating the evidence on record, they came to the conclusion that the appellant was unable to establish that the commission had been paid to the agents/sub-agents, as alleged subsequently. The affidavits of the said persons purporting to have received the alleged payments were dated 24.02.2012, i.e., after the assessment year. The finding is one purely of fact. No question of law, thus, arises in respect thereon. Faced with this, it was contended that the findings are perverse. We are unable to agree. It is not as if there was no material to come to that finding. The effect of the change in stand is also a question of appreciation of the facts and the findings. The ITAT has, after noticing all these facts, come to the conclusion that the payment of commission had not been proved. We are unable to term this finding as perverse. The expenses for telephone, conveyance, depreciation of cars and entertainment was disallowed only to the extent of 20% by the AO. It has been further reduced by the ITAT to 10%. The same does not warrant any interference.

The appeal is, therefore, dismissed. (S.J.Vazifdar) Acting Chief Justice 10.03.2015

(G.S.Sandhawalia) sailesh

Judge SAILESH RANJAN 2015.03.13 16:56 I attest to the accuracy and integrity of this document

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