9911796707
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Issues:
1. Reopening of assessments under section 34(1)(b) for non-disclosure of managing agency commission. 2. Tax liability of the assessee on managing agency commission waived for specific years. Analysis: The case involved the managing agents of a public limited company, where assessments for certain years were reopened under section 34(1)(b) due to non-disclosure of managing agency commission accrued to the company. The Income-tax Officer held that the alleged waiver of commission by the assessee amounted to a gift and confirmed the assessments. The Appellate Assistant Commissioner found no valid waiver resolution or correspondence, leading to the confirmation of assessments. The Tribunal also upheld the decision, stating that the non-receipt or waiver of commission post-accrual still necessitated taxation. The main issues referred to the court were the validity of assessment reopening and the tax liability on the waived commission. The managing agency agreement specified that the commission becomes payable on the certification of the company's annual balance-sheet by auditors. The court rejected the argument that income accrual was postponed until balance-sheet certification, emphasizing that the right to commission arose at the end of the year. The absence of documentary evidence supporting the waiver claim, except for notations in the managed company's accounts, raised doubts on the timing and validity of the waiver. Comparison with precedents highlighted that alterations to commission terms during the accounting year could impact accrued income, but in this case, no such alterations were evidenced. Citing relevant legal precedents, the court concluded that the waiver post-accrual did not alter the terms of the original agreement under which the income accrued. The absence of any agreement or transaction during the accounting year to modify the commission terms meant that the income had accrued to the assessee as per the original agreement. Consequently, the court affirmed the department's and Tribunal's view that the income had accrued to the assessee, and the waiver merely constituted a disposal of the accrued income. Ultimately, both questions regarding assessment reopening and tax liability on the waived commission were answered against the assessee, who was directed to bear the department's costs.
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