9911796707
TMI Blog1962 (7) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... la Padampat Singhania ... 0 4 3 3. Vijaypat, s/o. Lala Kailashpat Singhania ... 0 4 3 4. Sri S.D. Garg ... 0 2 0 5. Lala Murlidhar ... 0 0 6 6. Lala Viswanath Bhartiya ... 0 0 3 7. Lala Mahabir Prasad Jatia ... 0 0 6 By an agreement dated August 8, 1941, the assessee firm was appointed managing agent of J.K. Cotton Manufacturers Ltd. This company was originally a private limited company. It was reconstituted into a public company by a scheme of rearrangement and reconstruction sanctioned by the District Judge, Kanpur, on March 17, 1941. The managed company commenced its business from October 1, 1941. The share capital of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mature termination of the contract. This amount was paid to the assessee on September 30, 1943, and the assessee retired from the managing agency business with effect from that date. By a deed of agreement dated September 30, 1943, the managed company appointed J.K. Commercial Corporation Limited, as its managing agents. The office allowance of ₹ 1,000 was raised to ₹ 2,000 per month, 10% commission on net profits was payable to it also as it was payable to the assessee. Commission on sales was to be given at 2% on net sales instead of at 2?%. The managing agency agreement dated September 30, 1943, is annexure D to the statement of the case. In the opening portion of this agreement it was recited that the managing agency of the assessee firm was determined by mutual consent . It was further recited that by resolution of the managed company dated September 28, 1943, the retirement of the firm was confirmed. It was also recited that the J.K. Commercial Corporation Limited was the successor in business and the assignees of the firm. Paragraphs 8 and 9 of this managing agency agreement were similar to paragraphs 8 and 9 of the managing agency agreement between the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as partners of the firm or as shareholders or directors of the company. The managing agency business was neither lost to them nor was it destroyed or sterilized. It continued to yield profits. For the assessment year 1944-45 which is the year under consideration the assessee submitted a return on March 27, 1946, without showing in the return the receipt of the sum of ₹ 2,50,000. During the assessment proceedings the assessee produced its account books as also the profit and loss account and the balance-sheet. The account books were duly seen by the Income-tax Officer and initialled by him on some pages. The finding of the Tribunal is that the balance-sheet and the profit and loss account filed before the Income-tax Officer did not disclose the receipt of ₹ 2,50,000. The Income-tax Officer completed the assessment without including in it the sum of ₹ 2,50,000. A few months later the Income-tax Officer was succeeded by another officer. The successor noticed that the receipt of ₹ 2,50,000 had escaped assessment, whereupon he issued a notice under section 34 on January 27, 1949, calling upon the assessee to submit a return in respect of that amount. In res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing in the balance-sheet to show that the receipt of ₹ 2,50,000 was on account of compensation received by the assessee from Messrs. J.K. Cotton Manufacturers, the managed company. The Tribunal also found that along with its return the assessee had sent a copy of its profit and loss account but there was no reference therein to the receipt of ₹ 2,50,000 which in the language of the Tribunal was obviously silent about the receipt of ₹ 2,50,000. The Tribunal concluded that there was nothing on which the Income-tax Officer could 'specifically conclude' that the assessee had received ₹ 2,50,000. It went on to hold: It is true in the accounts of the individual partners the amount of ₹ 2,50,000 could be noticed as being distributed in proportion to their shares and that the Income-tax Officer 'could have ascertained' and I might have known' that, could not preclude the reopening of the assessment under section 34(1)(b) as amended in 1948. On these findings it appears to be clear that even though the signatures of the Income-tax Officer appeared on some of the pages of the assessee's account books, he did not know that the sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness expenditure and of the assessee firm to claim it as a capital receipt or a receipt of a casual and non-recurring nature and thus evade payment of tax on it both ways. The Tribunal agreed with the Appellate Assistant Commissioner that as there was merely a change in the personnel of the managing agency, there was no loss of office, which might entitle the managing agents to payment, which was held to be collusive and it was held that there was no genuine termination of the managing agency. It was further held that the payment was not compensation for termination of the managing agency . By reference to the terms of the managing agency of the firm and subsequently of the company the alleged reasons for the change of the managing agency were rejected by the Tribunal. It observed: There was nothing on the record to show that the terms offered to the second managing agents were offered to the first managing agents or that the assessee firm had or would have refused to accept the terms offered to the second managing agents, nor was it possible to say that the terms of the second managing agents were onerous and would not have been acceptable to the first managing agents. Not ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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