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TMI Blog1972 (12) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings wanted to find out whether the imported motors had in fact been sold to the concerned agriculturists for the price mentioned in the relative bills. He, therefore, sent letters to 24 persons to whom the assessee had claimed to have sold the motors. Of these, the letters addressed to 9 persons were returned by the postal authorities as " not found ". 11 persons replied to the effect that they had not been supplied with any electric motors. Two persons stated that they had paid extra money over and above the amount shown in the bills issued by the assessee. Two others confirmed the transaction with the assessee. As a result of the said enquiry the Income-tax Officer entertained a doubt as to the genuineness of the bills issued by the assessee. He, therefore, sent a letter to the assessee on February 6, 1960, setting out the nature of the enquiries he had made and requiring the assessee to state whether it wants to cross-examine the persons who had sent replies adverse to the assessee, and if it so desires, calling upon it to pay the requisite batta for summoning those persons. The assessee replied by its letter dated October 15, 1960, to the effect that it did not sell any mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the assessment proceedings the Income-tax Officer examined the said three persons. Thangavelu stated that he purchased for one of his friends one electric motor and received a commission of Rs. 25. He stoutly denied that he had received a sum of Rs. 2,500 as commission and that he had passed on a voucher for the said sum. R. S. S. Mani stated that he did not book any orders from the agriculturists and that he did not receive any commission therefor. Kabir stated that through the influence of his brother, a police inspector in Chingleput District, he booked 100 orders from the ryots in Madurantakam taluk for the supply of pump-sets and those orders were handed over to the assessee and that he received a sum of Rs. 2,500 as commission for the work done by him. The assessee was given statements of these three persons, but it did not desire to cross-examine the above three persons but was satisfied with its mere assertion that the commission was in fact paid to the said three persons. At that stage the Income-tax Officer became aware of a suit, O. S. No. 533 of 1958, filed by one N. Venkatakrishna Reddiar in the City Civil Court, Madras, claiming commission from the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application for an import licence. The Tribunal, however, took into account the statements given by those persons as also the judgment of the Civil Court granting a decree to Venkatakrishna Reddiar for commission for procuring the applications from the agriculturists and also the letter dated August 29, 1956, sent by the assessee to Venkatakrishna Reddiar even before the import licence was granted showing that the assessee should have been assisted by Venkatakrishna Reddiar in procuring the applications from the ryots, and came to the conclusion that no commission had been paid to the said three persons. It, therefore, upheld the rejection of the claim for deduction by the Income-tax Officer. As regards the addition of a sum of Rs. 50,000 as undisclosed profits from the sale of imported motors, the Tribunal felt that the Income-tax Officer is justified in not accepting the returns submitted and the bills produced by the assessee and making an estimate of the sale price of the motors imported. The Tribunal also felt that the estimate made by the Income-tax Officer was reasonable. Before the Tribunal it was contended by the assessee that the assessing officer has erred in acting on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties paid Rs. 100 to Rs. 150 in excess of the billed amount. In some of the other letters it has been stated that they applied for certain electric motors and placed orders with the assessee through Venkatakrishna Reddiar but that the electric motors had not been supplied at all. One of the materials is a letter written by the assessee to Venkatakrishna Reddiar and this has not been disowned by the assessee. This letter shows that one person had been made to sign two or three applications for electric motors in different names on the suggestion of the assessee. Further, one of the bills has been issued in the name of one N. Sundararamanujam for an electric motor of 25 H.P. The said party had sent a reply to the query by the Income-tax Officer that he had not been supplied with any motor. On a further enquiry the Income-tax Officer found that the motor had been supplied to one Periasami for his use in the rice mill and that he had paid Rs. 3,117 in excess of the bill amount of Rs. 4,182.28. According to the learned counsel for the assessee those materials should not have been acted upon by the Income-tax Officer and, therefore, the estimate of suppressed income based on those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials. The assessee cannot say that its obligation stops once it files the return and that the Income-tax Officer is bound to accept its return as it is. In the event of an assessee failing to establish the truth and correctness of the return, it is open to the Income-tax Officer to reject the return. The power to reject the return and the evidence in support thereof is inherent and implied in the Income-tax Officer's power to enquire into the total income of the assessee. In this case the Income-tax Officer's enquiry showed that the return filed by the assessee could not be true and correct. Therefore, he called upon the assessee to substantiate the truth and correctness of the return by cross-examining the persons who gave replies to the Income-tax Officer adverse to the assessee. But the assessee did not avail of that opportunity but insisted that its return should be accepted. As already stated, the Income-tax Officer is not bound to accept the return unless he is satisfied about its truth and correctness. It is well established that the High Court in a reference under section 66 of the Income-tax Act cannot set aside a finding of fact arrived at by the income-tax authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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