Law: Income Tax Act, 1922

Section: 13

[Indian Income Tax Act, 1922 (XI of 1922)].........Section 13, proviso Rejection of accounts-Income-Computation of-Contract entered into by managing agent of assessee-company found to be not genuine-Object of managing agents to enrich themselves--No evidence that additional income was received by assessee Rejection of account of assessee-company and addition of income from contracts-Whether justified-Held no-Proviso to Section 13, whether applies-Held no. The assessee-company consisted of a group of textile mills. A firm was the managing agent of the company. The Income Tax Officer discovered that several contracts entered into by the managing aggnt on behalf of the assessee were not genuine. He, therefore, did not accept the income as disclosed by the assessee company and applying the proviso to Section 13 of the Indian Income tax Act, 1922, made on addition of Rs. 76,92,566 to the amount already disclosed. The Tribunal, however, found that though the contracts were not genuine the assessee was not responsible for it. The managing agency Erin had, in fact, no regard for the Welfare of the assessee-company and had taken advantage of their position to enrich themselves. Upon a scrutiny of all the circumstances the Tribunal came to the conclusion that as far as the assessee-company was concerned it could not be said that the alleged income either accrued to, or was received in fact by, the assessee-company. On a reference "Held, that the question whether the assessee received anything in excess of the prices mentioned in the contracts was a pure question of fact. The Tribunal had com: to a clear finding upon appreciation of the entire material and evidence on the record and that finding of the Tribunal was justified in law, The proviso to Section 13 could not be invoked in the instant case and the addition of a further amount to the income of the assessee-company could not be sustained. ORDER [The judgment of the court was delivered by KANTAWALA C.J.]. In this case, at the instance of the revenue, two questions are referred for our determination and they are as under : "1. Whether the finding of the Tribunal that there is no basis for the addition of Rs.…

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