TaxTMI 
TaxTMI 
2009 (3) TMI 76
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....in the circumstances of the case, the Tribunal was right in law in holding that the assessee had sold the scrap outside the books of account and in estimating the same at Rs.3,00,000/-? 3. The assessee, a Company, in which public are substantially interested, filed its income of return originally on 28.6.1985, which was revised upward as per revised return of income filed on 30.09.1981. The Assessing Officer has recorded in Paragraph No. 4.2 of the assessment order dated 13.3.1989 that on receipt of certain information from the Department of Revenue, Ministry of Finance, Government of India, New Delhi vide letter No. F.No.504/5/87-FTD dated 4.3.1987 it came to knowledge that the assessee Company had received a sum of US dollars 47,242 on 16.4.1985 as agent commission from a Japanese Company named Nisrbo Iwai Corporation, Tokyo, Japan. 4. The Assessing Officer thereupon initiated necessary inquiries as to whether such commission had been entered in the books of accounts by the assessee Company. After seeking various adjournments the assessee Company vide letter dated 7.5.1987 stated "no agent commission from Nissho Iwai Corporation was either been received or credited in compa....
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..../- shown as sale of scrap in books of accounts of the Company and further addition of the balance amount. The assessee carried the matter in appeal in relation to the further addition, namely the amount of Rs.30,87,256/-, which was added on application of provisions of Section 145(2) of the Act. Commissioner (Appeals) granted partial relief by holding that there was no basis for making addition to the tune of Rs.30,87,256/- towards estimated sale of scrap as the admission made by Shri R.N. Amin would not bind the company because Shri Amin was not a Managing Director at relevant point of time when such admission was made. However, Commissioner (Appeals) was of the opinion that the state of record maintained by the assessee was not full proof so as to enable the Assessing Officer to properly deduce the correct income for the year under consideration. Commissioner (Appeals) in this context recorded that However, as admitted by the appellant itself that there is no control and/or check on the generation of scrap and discrepancy on such count is inherent in the very nature on account of the volume of business, size and organization, No. of units and No. of personnel handling the matter.....
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....h took place on 15.6.1967, to point out that the Board itself had come to the conclusion that retention of funds by Shri R.N. Amin with him personally, was unwise and imprudent. Thereafter, learned advocate pointed out a copy of the declaration made under the Scheme of Voluntary Declaration of foreign currency assets etc. to contend that such a declaration was made by Shri Amin in his personal capacity and said documents categorically reveal that the amounts had been retained by Shri Amin, either in the account of Shri Jadeja or younger brother of Shri Amin at Singapore or in U.S.A, and therefore, the assessee Company was nowhere in picture nor did the assessee company have any knowledge about such funds being retained by Shri Amin. That in fact the declaration made for violation of Foreign Exchange Regulation Act, 1973 as it stood at the relevant time, was accepted and violation condoned by Reserve Bank of India by granting the amnesty under the said Scheme. Mr. Shah therefore submitted that the entire evidence indicated that the Company had at no point of time any knowledge about the commission payment by the foreign companies, nor was the company in actual or constructive receip....
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.... Poona, reported in (1970) 75 ITR 260 (Bom); (v) International Forest Co. Vs. Commissioner of Income-tax, Patiala, reported in (1975) 101 ITR 721 (J&K); (vi) Malani Ramjivan Jagannath Vs. Assistant Commissioner of Income-tax, reported in (2007) 207 CTR (Raj.)19. 13. On behalf of Revenue, learned counsel placed reliance on the communication dated 16.5.1987 (Annexure-18) to submit that Shri Amin had accepted that he was Managing Director of the company, he had entered into commission agent agreements with foreign concerns on behalf of the Company and he had received the funds on behalf of the Company. That mere retention of the funds by Shri Amin would not absolve the Company from offering the said amount for taxation because in the said letter, addressed by Shri Amin to the Board of Directors of the Company, there was categorical admission that the funds of the company were retained for working of the company and for benefit of enhancing the business of the company. In other words, according to Mr. Naik, it was not a case of unauthorized retention of the funds, as the funds belonged to the Company, Shri Amin was then the Managing Director, and Shri R.P. Jadeja, being an aut....
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....es the documents on which reliance has been placed, and which were before the Tribunal, it becomes apparent that Shri R.N. Amin has accepted, not only in his statement recorded on oath, but even in his communication addressed to the Board of Directors that in his capacity as a Managing Director, he was entitled to enter into the agreements with both, Indian and foreign Companies on behalf of the Company and no separate resolution for this purpose was necessary (Question and Answer number 13 of the statement dated 9.3.1989). In response to Question No. 14 as to whether agreements were binding on the Company, Shri Amin categorically replied in affirmative stating that the agreements are binding on the Company. It is further stated in the communication that Mr. Amin did not have any intention to retain the funds for any other purpose except for the working of the company and only idea was to use the funds for enhancing the business of the Company. It is further stated in the communication that the funds were brought back considering the changed market situation in Malaysia and also the need of the Company for funds for rehabilitation. It is nowhere stated by Shri Amin in the said comm....
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....ken place during the accounting period namely 1.3.1983 to 30.6.1984, the assessee Company took any steps to recover the so called outstanding commission amount. The inaction on the part of the Company to realize the commission, after services having been rendered by the Company, which fact is not denied by the Company, itself indicates that the Company was in knowledge of the fact that the amount of commission had already been received by its authorized agent. 20.In light of the aforesaid evidence on record, it is not possible to accept the submission that the Tribunal has committed any error while holding that the commission amount was taxable in hands of the assessee company for the Assessment Year in question namely 1985-86. 21.In so far as the second issue is concerned, suffice it to state that there can be no dispute with the propositions laid down in the judgments cited on behalf of the assessee. However, in the facts of the present case as noted hereinbefore, both, Commissioner (Appeals) and Tribunal, have recorded, in no uncertain terms, the fact of state of accounts being of such a nature that there was an inherent lacuna in the system of accounting. Commissioner (Ap....