SHARMA AND CO Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner applies under Article 226 of the Constitution for relief against proceedings initiated by a notice under Section 148, Income-tax Act, 1961.

(2.) THE petitioner is a partnership firm. It was the sole selling agent of the Kanpur Cotton Mills, a branch of the British India Corporation Ltd. On March 23, 1955, it entered into an agreement with Kailash Nath Agrawal. THE agreement recited that it was not in a position to continue the selling agency in accordance with the wishes of the British India Corporation and that it owed Rs. 8,39,351 to the said corporation, and that in the circumstances the corporation desired its resignation from the selling agency and to appoint instead Kailash Nath Agrawal or a business unit controlled by him. THE amount owed by the petitioner to the corporation was to be liquidated by the corporation by retaining out of the commission earned by the new selling agent a specified amount to be adjusted against those dues from time to time. On the same day, March 23, 1955, the petitioner informed the corporation of the agreement and tendered its resignation as sole selling agent. Simultaneously, Kailash Nath Agrawal also wrote to the corporation on March 23,1955, referring to this agreement and requested the corporation to appoint M. K. Brothers, a firm of which he was a partner, as sole selling agent. THE corporation, on that same day, communicated its acceptance of the petitioner's resignation and of the terms contained in the agreement for the appointment of Kailash Nath Agrawal or his nominee as selling agent and the manner of liquidation of the amount due from the petitioner to the corporation. On March 26, 1955, the board of directors of the corporation, after giving credit for the security of Rs. 1,00,000 provided by the petitioner and the price of 292 bales belonging to it, noted :

(3.) DURING the previous years relevant to the assessment years 1957-58 to 1959-60, M. K. Brothers paid Rs. 50,000 annually to the corporation on the same account and similarly a sum of Rs. 33,333 during the previous years relevant to the assessment year 1960-61. These amounts were also assessed for those assessment years under Section 10(5A)(d) as representing part of the compensation for termination of the agency. A reference is pending in the matter in this court.