BOMBAY HARDWARE SYNDICATE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee in this case is a firm carrying on business in hardware. During the accounting year ending October 23, 1957, it applied and got a licence from the Chief Controller of Imports and Exports, New Delhi, for importing 205 electric motors under a scheme formulated by the Government of India for import of electric motors for the use of the agriculturists. Under that scheme the applicant for an import licence should get requisitions for the supply of electric motors from agriculturists who require motors and send them along with the application for licence. During the assessment year 1958-59 corresponding to the accounting year ending October 23, 1957, the assessee had sold 198 motors out of the said imports. It submitted a return of its income for that year showing its total income as Rs. 93,484.

(2.) THE Income-tax Officer, in the course of the assessment proceedings wanted to find out whether the imported motors had in fact been sold to the concerned agriculturists for the price mentioned in the relative bills. He, therefore, sent letters to 24 persons to whom the assessee had claimed to have sold the motors. Of these, the letters addressed to 9 persons were returned by the postal authorities as "not found". 11 persons replied to the effect that they had not been supplied with any electric motors. Two persons stated that they had paid extra money over and above the amount shown in the bills issued by the assessee. Two others confirmed the transaction with the assessee. As a result of the said enquiry the Income-tax Officer entertained a doubt as to the genuineness of the bills issued by the assessee. He, therefore, sent a letter to the assessee on February 6, 1960, setting out the nature of the enquiries he had made and requiring the assessee to state whether it wants to cross-examine the persons who had sent replies adverse to the assessee, and if it so desires, calling upon it to pay the requisite batta for summoning those persons. THE assessee replied by its letter dated October 15, 1960, to the effect that it did not sell any motor for non-agriculturists for a price higher than the one set out in the bill, that if the Income-tax Officer wants to rely on the statements of some of the agriculturists who had sent replies adverse to it, it is the Income-tax Officer who has to offer them for cross-examination, and that it cannot pay the batta for those persons whose statements the Income-tax Officer intends to rely. THE Income-tax Officer, thereafter, had to proceed with the assessment on the materials on records.

(3.) THERE was a further appeal to the Income-tax Appellate Tribunal. Before the Tribunal the assessee contended that the commission of Rs. 7,850 paid to the three persons by names, Thangavelu, Mani and Kabir, should have been allowed as an expenditure incurred by the assessee for securing the requisite applications from the agriculturists for the supply of motors which is prerequisite for making an application for an import licence. The Tribunal, however, took into account the statements given by those persons as also the judgment of the Civil Court granting a decree to Venkatakrishna Reddiar for commission for procuring the applications from the agriculturists and also the letter dated August 29, 1956, sent by the assessee to Venkatakrishna Reddiar even before the import licence was granted showing that the assessee should have been assisted by Venkatakrishna Reddiar in procuring the applications from the ryots, and came to the conclusion that no commission had been paid to the said three persons. It, therefore, upheld the rejection of the claim for deduction by the Income-tax Officer.