KUMAR ENGINEERS Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THIS order shall dispose of Income-tax References Nos. 12 to 15 of 1985 relating to the assessment years 1974-75 and 1975-76. Out of the references, two are at the instance of the assessee and the other two at the instance of the Department. The questions of law claimed by the assessee as well as by the Department for the two years 1974-75 and 1975-76 are the same. The Income-tax Appellate Tribunal, Delhi Bench, New Delhi (hereinafter referred to as the Tribunal), has prepared one statement of case and referred the following two questions to this court for its opinion :

(2.) QUESTION No. (i) is at the instance of the assessee whereas question No. (ii) is at the instance of the Revenue for both the assessment years.

(3.) IN the original assessment order, the assessee had claimed payment of commission at the rate of six per cent. to Kumar and Co. and the same had been allowed at Rs. 35,845. In the course of assessment for the assessment year 1973-74, however, the Income-tax Officer had enquired and found that services were not rendered by Kumar and Company and so the commission should not have been paid. On the basis of this information, reassessment proceedings were initiated under Section 147 (b ). According to the Income-tax Officer, the provisions of Section 40a (2) were clearly applicable and no commission could be allowed to the assessee merely on the basis of an agreement. Similarly, for the assessment year 1975-76, the original assessment was made on April 20, 1976, and the commission claimed at Rs. 58,138 had been allowed. The Income-tax Officer reopened the assessment for this year as well for similar reasons.