9911796707
TMI Blog1982 (2) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years involved in these two references are 1949-50 and 1950-51, the relevant accounting year of the assessee being the years ending on April 30, 1949, and April 30, 1950. Briefly stated, the facts are these : For the relevant two years the assessee in its returns claimed to have paid to the two companies known as M/s. Gokulnagar Sugar Mills Co. Ltd. and Great Sugar Combine Ltd. selling agency commission with reference to certain territories at the rate of 0-12-0 (75 paise) per cent. on the sales. It is common ground that the assessee is one of the companies belonging to one group of companies carrying on sugar business. Another company in the same group is Nawabganj Sugar Mills Co. Ltd. It seems the ITO took up the assessment of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Co. Ltd., he allowed the claim of the assessee also for sole selling agency commission. Similar orders were passed in the case of the other companies in the group whose claims of sole selling agency commission were also accepted. That is how the assessee before us, also bad its claim for paying selling agency commission accepted. In the assessment proceedings of Nawabganj Sugar Mills Co. Ltd. for the assessment year 1952-53, the ITO examined the claim for selling agency commission in greater detail. He held on an examination of the material before him that the claim for sole selling agency commission could not be allowed inasmuch as the sole selling agents had rendered no service to the assessee. Consequent on the information that the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the basis of the facts disclosed a finding was given by the ITO upholding the claim of the assessee for payment of the selling agency commission. The finding may be correct or incorrect. Merely because the finding did not find favour with, the Revenue was no justification for the issuance of a notice under s. 34(1)(a) of the Act of 1922. Such a notice could only be issued if primary facts had not been disclosed. It could not be issued merely because the inference from such facts is not acceptable. It is submitted that it was for the ITO to find out whether services were rendered by the selling agent or not after the primary facts had been disclosed. Reliance in support of the contention was placed on a decision of this court given in a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section: Provided that the Income-tax Officer shall not issue a notice under clause (a) of sub-section (1) (i) for any year prior to the year ending on the 31st day of March, 1941 ; (ii) for any year, if eight years have elapsed after the expiry of that year, unless the income, profits or gains chargeable to income-tax which have escaped assessment or have been under-assessed or assessed at too low a rate or have been made the subject of excessive relief under this Act, or the loss or depreciation allowance which has been computed in excess, amount to, or are likely to amount to, one lakh of rupees or more in the aggregate, either for that year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the ITO even with regard to the claims of Nawabganj Sugar Mills Co. Ltd. For the assessment year 1952-53, it was found as a fact that the selling agents had rendered no service. The same is the finding in respect of the present assessee for the two years in question. Consequently, it was rightly held that the assessee had failed to truly disclose all the primary facts. A distinction has to be made between the falsity of the material facts disclosed by the assessee and the erroneous inference which an ITO may draw from the material facts which are otherwise full and true. Indeed, this precise question with regard to the same assessee came up for consideration before a Bench of this court in references made for the assessment years 1947 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial facts must be relevant to full and true disclosure. The terms of s. 147(a) of the Act of 1961, postulates that there must be positive ground for belief before issue of notice. The grounds cannot be created during assessment, as was done in that case, where the ITO issued notice under s. 147(a) acting on the basis of the names circulated by the Department of persons in whose names bogus deposits were made by the assessee-companies. Similarly, reliance on the decision in Calcutta Credit Corporation's case [1971] 79 ITR 483 (Cal) is misplaced. That was a case in which the claim of financial allowance paid by the assessee to a third party was originally allowed by the ITO. Notice was issued under s. 148 of the Act of 1961 to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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