TaxTMI 
TaxTMI 
1962 (7) TMI 57
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....nia ... 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 managed company both when it was a private limited company as well as when it became a public limited company was overwhelmingly subscribed by the three Singhania brothers, their wives, sons, members of their families, their relations, employees and friends (vide annexure "A" to the statement of the case). According to the managing agency agreement (annexure "B" to the statement of the case) the managing agency of the assessee was to last for twenty years and they were entitled to be reappointed though not for more than twenty years at a time.....
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.... 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 firm and the managed company. Paragraph 8 provided for the lending of money by the managing agents to the firm. Paragraph 9 provided as follows: "In case the managing agency company alters its name or is wound up for the purpose of reconstruction or changes its constitution, the same shall not in any way affect their appointment as managing agents of the company." Paragraph 11 of the agreement was also similar to paragraph 12 of the earlier agreement with the assessee that in case of transfer of the business of the manag....
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....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 Rs. 2,50,000. The Income-tax Officer completed the assessment without including in it the sum of Rs. 2,50,000. A few months later the Income-tax Officer was succeeded by another officer. The successor noticed that the receipt of Rs. 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 response to the notice the assessee submitted the return but contended that the amount of Rs. 2,50,000 was receipt of a capital nature not liable to tax. This contention was rejected and the amount of Rs. 2,50,000 was subjected to tax. The assessee went up in appeal before the Appellate Assistant Commissioner and contended that the notice under section 34 was bad in law and the sum of Rs. 2,50,000 was not revenue income. The Appellate Assistant Commissioner rejected both the contentions holding that the termination of the managing agency was not genuine and ....
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....eceived Rs. 2,50,000." It went on to hold: "It is true in the accounts of the individual partners the amount of Rs. 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 Rs. 2,50,000 was received by the assessee as compensation from the managed company for termination of the managing agency business. If he had been more alert, if his mind was alive to the question of the taxability of the amount, if he had made enquiry and investigation, he might have discovered the nature of the receipt but as he did not do so, he did not know its real nature and consequently, there was an omission on his part to consider the question of its taxability. The successor derived information of the nature of the receipt and of the fact that it had not been included in the original assessment. On....
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....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 even one letter was exchanged between the managed company and the assessee regarding the termination of the managing agency.........If the termination was genuine one would expect the assessee to protest against the highhanded and unjust act of the managed company in terminating the contract." It was noted that the assessee recorded the receipt of Rs. 2,50,000 for relinquishment of the managing agency. "Relinquishment" according to the dictionary meaning is merely voluntary surrender. The assessee quietly went out of office without a word of protest. The Tribunal further held that the office of managing agency was a luc....