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Issues:
1. Whether the addition of commission amount received by the assessee-firm subsequent to dissolution is valid for assessment year 1974-75? 2. Whether the assessee was following the cash system of accounting with regard to commission receipts and if it is sustainable in law? Analysis: 1. The case involved a partnership firm, Revathi Agencies, which dissolved by mutual consent with effect from March 31, 1974. The dispute arose regarding the inclusion of Rs. 1,52,807 received by the firm post-dissolution in the assessment for the year 1974-75. The Income-tax Officer contended that as the commission pertained to services rendered before dissolution, it should be considered income for the said assessment year. The Appellate Assistant Commissioner and Tribunal disagreed, citing the firm's cash system of accounting and the Supreme Court's decision in Nalinikant Ambalal Mody's case. The Tribunal held that the commission received after dissolution but earned before it should not be taxed. The Department's argument that the firm followed mercantile accounting was countered by the Tribunal's findings based on the absence of commission in the balance sheet and past payment patterns. 2. The crux of the issue was whether the firm followed cash or mercantile accounting for commission receipts. The Income-tax Officer claimed mercantile accounting based on past assessments, while the Appellate Assistant Commissioner and Tribunal found evidence supporting cash accounting. The Tribunal highlighted the absence of commission in the balance sheet and delayed payments from a major client, indicating a cash-based system. The Department challenged the Tribunal's findings, but the court upheld them, emphasizing the Tribunal's role as the highest fact-finding authority. The court concurred with the Tribunal's conclusion that the firm followed a cash system, thereby rejecting the Department's appeal and affirming that the commission amount need not be taxed for the assessment year in question. In conclusion, the court ruled in favor of the assessee, holding that the commission received post-dissolution need not be included in the firm's income for the assessment year 1974-75. The decision was based on the firm's cash system of accounting, as evidenced by its practices and records. The court upheld the Tribunal's findings and dismissed the Department's appeal, emphasizing the Tribunal's authority in determining factual matters.
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