B R ASSOCIATES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) At the instance of the assessee the Income Tax Appellate Tribunal stated the case and referred the following question of law for the opinion of this Court :

(2.) The assessee is an unregistered firm. The assessment initially was completed on 1-11-1971. On appeal before the Assistant Commissioner of Income-tax (Appeals), the Assistant Commissioner of Income-tax (Appeals) directed the Income-tax Officer to re-do the assessment after going into all the facts regarding assessment of Salami after giving the assessee an opportunity to produce the necessary evidence in support of payment of Salami. While re-doing the assessment as per the direction of the Assistant Commissioner of Income-tax (Appeals), the Income-tax Officer found that the assessee received Rs.8,500/- from M/s. D.S.Reddy Cloth Stores and Rs.9,000/- from M/s. Apsara Footwear as Salami in instalments. During the course of re-assessment onbehalf of M/s. D.S.Reddy Cloth Stores, the partners of the said firm and others were examined and cross-examined. However, the said D.S.Reddy and other partners of M/s. D.S.Reddy Cloth Stores denied payment of Salami or Pagadi to the assessee. The Income-tax Officer treated this income as from sources and assessed the same to tax.

(3.) Insofar as the Salami received f rom M/ s. Apsara Foot Wear is concerned, it was admitted by the assessee having received an amount of Rs. 9,000/- during the assessment year as Salami from M/s. Apsara Foot Wear. The assessee, however, contended that the said Salami should be considered as capital receipt and cannot be assessed to revenue receipts. It was further contended that the Salami was actually received in lieu of rent. However, the Income-tax Officer held that from the facts of the case it was clear that the . Salami amounts were received from M/s. Apsara Foot Wear at the time of building construction, the persons from whom these moneys were received were accommodated in the building as tenants and they were paying lesser rents. The Pagadi, therefore, according to the I.T.O., should be regarded as advance payment and hence it was held as taxable income. He, therefore, added another sum of Rs.9,000/- received from M/s. Apsara Foot Wear and taxed the said income.