TaxTMI 
TaxTMI 
1985 (3) TMI 102
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....t') on receipt of information from the audit party that Shri P.G. Oommen is the son of Shri P.O. George, who was substantially interested in the assessee-company. It was pointed out by the audit that section 40(c) of the Act was attracted to the payment and that the commission paid in excess of Rs. 72,000 should have been disallowed. The excess amount was brought to tax by the ITO in the reassessment made by him. 3. Before the Commissioner (Appeals), the assessee questioned the validity of the reopening of the assessment and also contended that section 40(c) was not attracted to the payment of commission. The Commissioner (Appeals) accepted the contention of the assessee that the fact that Shri P.G. Oommen was a relative of the shareholder....
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....es in the companies circle as well as other assessment wards. It is also found that shortly after receipt of the audit note, the ITO sent a letter to the assessee on 21-4-1980 asking for particulars about Shri P.G. Oommen including his relationship. A reply was furnished by the assessee by the letter dated 14-5-1980. It is significant that in this letter the assessee makes no mention about the fact that these particulars had been already furnished at the time of original assessment. It was after ascertaining the particulars that the assessment was reopened. This will indicate that the ITO was not aware of the relationship earlier. We are, therefore, unable to accept the contention of the assessee that at the time of the original assessment,....
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.... agent is an individual. This does not seem to be material. The reason is that the department has no case that Shri P.G. Oommen was not an independent selling agent and that he had no organisation or establishment of his own in functioning as a sole selling agent. In the decisions referred to above, it has been pointed out that a sole selling agent will have to perform several functions and to organise several things for carrying on business as sole selling agent and that payments made to such a selling agent cannot be treated as an 'expenditure' which is referred to in section 40(c). It was also suggested by the department that this case law had not developed at the time of reopening the assessment. There is no merit in the contention, bec....