Law: Income Tax Act, 1922

Section: 66,66(1)

(a) Income-tax Act (XI of 1922)----S.66(1)-Assesses, an individual partner in cinemas, exploiting films through Film Distributing firm owned by his son-Commission paid to such Distributing firm under an agreement not drawn on non-judicial stamp paper ---Question whether or not said agreement was collusive--Held, a question of fact-Fact of agreement not having been drawn according to law coupled with relationship of father and son between parties and suppression of income by latter-Held, constituted material for discarding agreement- Evidence need not essentially be direct, it may be even circumstantial-Quality and sufficiency of evidence--Held, not valid grounds, for interfering with findings of Tribunal. (b) Income-tax- -- Assessment--Income-tax Authorities finding that income, gains and profits cannot be properly adduced from version given by assessee-Books of account of assesses, held, can be rejected and Authorities can compute his income on such basis anti in such manner as determined by them but Authorities, in making such assessment, have to act on some rational basis and cannot lay hand on irrelevant material. JUDGMENT MUHAMMAD AFZAL LONE, J.--These two Reference Applications have been filed by the Assessee under section 66(1) of the Income-tax Act for the opinion of this Court on the following questions of law, arising cut of the Tribunal's order dated 7.12-1973. The reference relates to the Assess­ment Years 1969-70 and 1970-71. The questions of law, reproduced below, are common to both the years :-- (1) Whether on facts and in the circumstances of the case the Income-tax Officer and the Tribunal having accepted the factum of agency bet wean the assessee and Messrs Nails Films, was their any material on the basis of which it was open to the Tribunal to held that the distribution agreement dated 19-9-1968 was collusive and whether the finding is not vitiated as being Inconsistent, self-contradictory, based upon unsubstantiated assumption and surmises? (2) Whether on facts and in the circumstances of the case it was upon to the Tribunal to assume that lingo the agent who carried on business of distribution of films had conceded an addition of Rs. 10,000…

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