9911796707
TMI Blog1971 (9) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: "M. K. Brothers had undertaken to pay off gradually the outstanding unsecured debts of Rs. 5 1/2 lakhs due by Messrs. Sharma & Company to the extent of 1/7th of their selling agency commission or Rs. 50,000 per annum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed by the respondents that the proceedings so initiated are intended to tax the amount of Rs. 3,92,200 in the hands of the petitioner. The entire argument before us on behalf of the respondents is that the petitioner is liable to tax in respect of that amount either under section 41(1) or section 28(ii)(c) of the Income-tax Act, 1961. The petitioner disputes the application of those two provisions and contends in addition that there was no jurisdiction in the Income-tax Officer to initiate the proceedings under section 148. The first question is whether the Income-tax Officer acted within his jurisdiction in initiating the proceedings under section 148. A notice under section 148 is issued for making an assessment or reassessment pursuant to section 147. Section 147(a) provides for such assessment or reassessment if the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year. The essential basis for such a procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of limitation of four years prescribed by section 149(1)(b) the proceeding is barred by time. Even if we assume that the conditions of section 147(a) are satisfied, is the petitioner liable to tax in respect of the amount of Rs. 3,92,200 under section 28(ii)(c) or section 41(1) ? The petitioner contends that neither provision of the Act of 1961 can be invoked, because, if at all, it is the Indian Income-tax Act of 1922 which can be applied. The respondents, on the contrary, say that the Act of 1961 applies because of section 297(2)(d)(ii), which provides: "297. Repeals and savings.-(1)...... (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (11 of 1922) (hereinafter referred to as the repealed Act),-...... (d) where in respect of any assessment year after the year ending on the 31st day of March, 1940,-...... (ii) any income chargeable to tax had escaped assessment within the meaning of that expression in section 147 and no proceedings under section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under section 148 may, subject to the provisions contained in section 149 or section 150, be issued w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rently, that was not found possible and, therefore, the corporation wrote off the amount as a bad debt. We fail to see how this can be construed as compensation or other payment due to or received by the petitioner. Neither was it due to or received by the petitioner nor was it compensation or other payment at or in connection with the termination of the sole selling agency formerly held by the petitioner. Learned counsel for the respondents has been unable to satisfy us that the provisions of section 10(5A) are attracted. As regards section 10(2A), it provides: "Where for the purpose of computing profits or gains under this section, an allowance or deduction has been made in the assessment for any year in respect of any loss, expenditure or trading liability incurred by the assessee, and, subsequently, during any previous year, the assessee has received, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or has obtained some benefit in respect of such trading liability by way of remission or cessation thereof, the amount received by him or the value of the benefit accruing to him shall be deemed to be profits and gains of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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