COMMISSIONER OF INCOME TAX Vs. REVATHI AGENCIES

JUDGEMENT

(1.) AS per the direction of this court, the Tribunal referred the following two questions for the opinion of this court under section 256(2) of the Income-tax Act, 1961 :

(2.) THE assessee, Revathi Agencies, was a firm of four partners which carried on business in the purchase and sale of electrical goods. It had also acted as a distributing agent for electrical manufacturers and received commission. THE said partnership firm was evidenced by a deed of partnership entered into on April 1, 1962. On February 24, 1974, the four partners agreed to dissolve the firm by a deed of dissolution with effect from March 31, 1974, by mutual consent. THE accounts of the partnership were to be made up on March 31, 1974, and the profits or losses were divided in accordance with the provisions of the partnership deed dated April 1, 1962. Public notice of the dissolution of the partnership firm was also given.

(3.) ON the other hand, learned counsel appearing for the assessee, supporting the order passed by the Tribunal submitted that when the assessee was riot showing the commission receivable by it in the balance-sheet for the assessment year under consideration, that would go to show that the assessee is following the cash system of accounting. The statement of account showing the commission received from Bijlee Products in the months of January, February and March, 1973, would go to show that the assessee was following receipt basis. Learned counsel for the assessee admitted that with regard to the same items of income both the accounting methods were followed. According to learned counsel, the Appellate Assistant Commissioner as well as the Tribunal, which is the highest fact-finding authority, after going through the accounts, ultimately came to the conclusion that the assessee was following the cash system of accounting, and, therefore, the impugned addition cannot be sustained for the assessment year under consideration. Therefore, it is only after considering the sufficient materials on record, both the Appellate Assistant Commissioner as well as the Tribunal came to the conclusion that the addition is not sustainable.