Case Law (SC) -- The burden to prove of the receipt of commission in Sikkim is upon the assessees, once, the AO issued summons u/s 131 to those who had allegedly paid the commission to the assessees and which were not complied with the same.

"Once, the AO issued summons to those who had allegedly paid the commission to the assessees and the summons were issued under Section 131 which were not complied with and it was the assertion on behalf of the respective assessees that they earned the income of commission within Sikkim, the burden to prove the same was upon the assessees. Under the circumstances, the ITAT wrongly and erroneously shifted the burden upon the AO to prove the contrary. Therefore, in absence of any material on record that the commission was earned only in Gangtok, the assessees cannot be permitted to say that they were liable to pay the tax under the Sikkim Manual, 1948 and not under the Income Tax Act, 1961. It appears that the assessees with mala fide intention and to evade the payment of tax under the Income Tax Act, 1961 came out with a case that they earned the income within Sikkim, which has not been established and proved. It was a clear attempt on the part of the respective assessees to wriggle out of the clutches of the Income Tax Act, 1961. 

11. As regards the submission on behalf of the respective assessees that as there was no original assessment under the Income Tax Act, 1961, there could not have been the re-assessment under sections 147/148 of the Act, 1961 is concerned, the same has no substance in view of the binding decision of this Court in the case of Sun Engineering Works P. Ltd. (supra)."

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"14. In view of the above and for the reasons stated above and the findings recorded by the AO, CIT(A), confirmed by the High Court, it cannot be said that the High Court has committed any error in upsetting the findings recorded by the ITAT. We are in complete agreement with the view taken by the AO, CIT(A) and the High Court on all issues including the issue of control and management of the affairs of the assessee companies by Rattan Gupta from Delhi; jurisdiction of the AO at New Delhi; applicability of the Income Tax Act, 1961; that the assessees did not prove that the income was earned by way of commission in Sikkim and therefore the tax was not liable to be paid under the Income Tax Act, 1961 and  was liable to be paid under the Sikkim Manual, 1948. We are also in agreement with the view taken by the High Court on levy of interest in view of the binding decision of the Constitution Bench in the case of Anjum M.H. Ghaswala (supra), which has been subsequently followed in the case of Karanvir Singh Gossal (supra). 

15. In view of the above and for the reasons stated above, the present appeals fail and the same deserve to be dismissed and are accordingly dismissed."

Mansarovar Commercial Pvt. Ltd v. CIT CA No. 5769/2022 dated 10.04.2023


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