# Nos. 25-D of 1965 etc v. S. Desai, A. K. Verma and B. D. Shingari, for the (in all th - **Citation:** [1972] 1 S.C.R. 887 - **Court:** Supreme Court of India - **Decided:** 1971-09-24 - **Case number:** Civil Appeals Nos. 1364 B to 1373 of 1967 - **Bench:** C. A. Vaidialingam, P. Jaganmohan Reddy - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/nos-25-d-of-1965-etc-v-s-desai-a-k-verma-and-b-d-shingari-for-the-in-all-th-5483 - **Pages:** 9 ## Headnote Income-tax Act, 1922, s. 6~Reference to High Court-Tribunal's ffndings of fact whether arrived at without consideration of materiafs on record-Tribunal need not refer In its order to insignificant evidence. The three appellant companies were controlled by 0. Another company which was the selling . agent of the three appellant companies was also controlled by G. The question in Income-tax proceeding!I was whether the commission paid to the selling agent was a deductible item. In me origm•l assessments tor 1947-48 in the-cases of the three appellants the Income-tax Officer allowed the deduction but later he issued notices under s. 34 of the Income-tax Act, 1922 on the footing that in the circumstances of the case the commission was not allowable since the selling agent rendered no service whatsoever so as to earn any commission. In making the assessment under s. 34 it was so held by him. In the appeals filed by the Appellant companies, the Appellate Assistant Commissioner gave some relief by allowing deduction in respect of sums paid directly as commission to some sub-agents, but on the main question relating to the amounts paid to the selling agent he agreed with the Income-tax Officer. The contention that action could not be taken under s. 34(1) (c) was also rejected. The Appellate Tribunal took the same view. The appellants then asked the Tribunal to refer four questions to the High Court under s. 66( 1) of the Act. The Tribunal rejected the applications. The High Court under s. 66(2) directs the Tribunal to refer the fourth ques· tion relating to the applicability of s. 34 but held the other three questions to be quesetion t>f fact. In appeal before this Court against the order of the High Court it was contended that the Tribunal had erred in not taking into account the evidence of two witnesses produced by the appellants, as also two receipts showing payments made to some sub-agents by the selling agent. The High Court's view that it is not every piece of evidence available on record that must be dealt with by the Tribunal. was questioned. illlLD : The criticism that the evidence of the two witnesses producoo by the appellants was not considered as such by the Tribunal was only technically correct. The Tribunal had not referred to witness R by name but had referred to the relationship between the selling agent and the firm of which R was a proprietor, as well as to the effect of a telegram which was claimed to show privily of contract between the selling agent and R's firm. 'Therefore it could not be said that the Tribunal had not considered R's evidence. As to the other wltness S, his evidence had only to be read to be rejected; the Tribunal had moreover given reasons for not acting on his evidence. The two receipts relied on by the appellants lost all significance after the rejection of the evidence of the two aforesaid witnesses. Obviously in view of the other evidence against the appclldllts the Tribunal did not think it worthwhile to refer to the two receipts. [893 H; 894 E; 895 CJ 1t must accordingly be held that the finding of Tribunal was based on matenal on the record and that the finding was such which could on the SUPREME COURT REPORTS [l 972] l $.C.R. evidence be reasonably reached. The High Court was hence justified in holding that the first three questions were questions of fact and in declining to give a direction to the Tribunal to refer those questions. [895 G] Udhavdas Kewalram v. C.I.T., Bombay City, [1967] 66 I.T.R. 462, referred to. A ## Text ~· 887 A M/S. BASTI SUGAR MILLS CO. LTD. AND ORS. B c D E F G H ~ l COMMISSIONER OF INCOME· TAX, DELffi & RAJASTllAN 1 September 24, 1971 [C. A. VAIDIALINGAM AND P. JAGANMOHAN REDDY, JJ.] Income-tax Act, 1922, s. 6~Reference to High Court-Tribunal's ffndings of fact whether arrived at without consideration of materiafs on record-Tribunal need not refer In its order to insignificant evidence. The three appellant companies were controlled by 0. Another company which was the selling . agent of the three appellant companies was also controlled by G. The question in Income-tax proceeding!I was whether the commission paid to the selling agent was a deductible item. In me origm•l assessments tor 1947-48 in the-cases of the three appellants the Income-tax Officer allowed the deduction but later he issued notices under s. 34 of the Income-tax Act, 1922 on the footing that in the circumstances of the case the commission was not allowable since the selling agent rendered no service whatsoever so as to earn any commission. In making the assessment under s. 34 it was so held by him. In the appeals filed by the Appellant companies, the Appellate Assistant Commissioner gave some relief by allowing deduction in respect of sums paid directly as commission to some sub-agents, but on the main question relating to the amounts paid to the selling agent he agreed with the Income-tax Officer. The contention that action could not be taken under s. 34(1) (c) was also rejected. The Appellate Tribunal took the same view. The appellants then asked the Tribunal to refer four questions to the High Court under s. 66( 1) of the Act. The Tribunal rejected the applications. The High Court under s. 66(2) directs the Tribunal to refer the fourth ques· tion relating to the applicability of s. 34 but held the other three questions to be quesetion t>f fact. In appeal before this Court against the order of the High Court it was contended that the Tribunal had erred in not taking into account the evidence of two witnesses produced by the appellants, as also two receipts showing payments made to some sub-agents by the selling agent. The High Court's view that it is not every piece of evidence available on record that must be dealt with by the Tribunal. was questioned. illlLD : The criticism that the evidence of the two witnesses producoo by the appellants was not considered as such by the Tribunal was only technically correct. The Tribunal had not referred to witness R by name but had referred to the relationship between the selling agent and the firm of which R was a proprietor, as well as to the effect of a telegram which was claimed to show privily of contract between the selling agent and R's firm. 'Therefore it could not be said that the Tribunal had not considered R's evidence. As to the other wltness S, his evidence had only to be read to be rejected; the Tribunal had moreover given reasons for not acting on his evidence. The two receipts relied on by the appellants lost all significance after the rejection of the evidence of the two aforesaid witnesses. Obviously in view of the other evidence against the appclldllts the Tribunal did not think it worthwhile to refer to the two receipts. [893 H; 894 E; 895 CJ 1t must accordingly be held that the finding of Tribunal was based on matenal on the record and that the finding was such which could on the SUPREME COURT REPORTS [l 972] l $.C.R. evidence be reasonably reached. The High Court was hence justified in holding that the first three questions were questions of fact and in declining to give a direction to the Tribunal to refer those questions. [895 G] Udhavdas Kewalram v. C.I.T., Bombay City, [1967] 66 I.T.R. 462, referred to. A CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1364 B to 1373 of 1967. Appeals by special leave from the judgment and order dated March 14, 1967 of the Delhi High Court in Income-tax Cases Nos. 25-D of 1965 etc. V. S. Desai, A. K. Verma and B. D. Shingari, for the appellants (in all the appeals). R. H. Dhebar, B. B. Ahuja and R. N. Sachthey, for the res-· pondent (in all the appeals). The Judgment of the Court was delivered by c Vaiclialingam, J. These ten appeals, by special leave, are directed againsrt the common judgment and order dated March 14, D 1967 of the Delhi High Court declining to direct the Income-tax Appellate Tribunal, Delhi Bench, to refer along with the statement Qf case, questions Nos. 1 to 3 enumera>ted in their applications. The reference was asked for by the three different Companies by whom tl\e above appeals are filed in respect of Income-tax E Ca.se No. 20-D of 1965 connected with I.T.C. Nos. 21-D to 29-D of 1965 arising from a common order of the Incom~-tax Appellate Tribunal, Delhi Bench .. As the facts in 1the case and ques'~nts of the recipient company. 3. Whether in view of the facts and in the circumst· ance< of the case 1he Tribunal has rightly concluded that Dr. Sir G. C. Narang signed le•ters acting as the Chairman of the Nawabgani Sugar Mills Co. Ltd. when he had no capacity to deal with the sub-agents in that capacity. 4. Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the provisions of S. 34(1) (a) were rightly invoked."' By its order da!ed Februarv 19, 1965 the Appellate Tribunal rejected the. said applications on the ground that no auos•ion of law arose from the order of the-Tribunal and that the decision of the Tribunal was exclusively on facts. 892 SUPREME COURT REPORTS [1972] l S.C.R. The appellants filed applications before the Delhi High Court A under s. 66(2) of the Act, 10 direct the Incom~tax Appellate Tribunal to refer the four questions, enumerated above. Th·~ High Court, by its order dated March 14, 1967, directed the Income-tax Appellate Tribunal to s•tate a case and refer question No. 4 alone, bu:t rejected th.e applications of the appellants in so far as th!~y related to questions Nos. 1 to 3. The view to the High B Com t is •that the points covered by the questions Nos. l to 3 are all on facts and that in the face of the findings recorded by the Appellate Tribunal, no question of law arose for consideration. Mr. V. S. Desai, learned counsel for the appellants, urged that the Income-tax Appellate Tribunal, which is •the final authority on facts, has J!Ot ·taken into account the material ·~vidence adduced C b\y the parties. He further urged that the appellants had adduced the evidence of ceI'tain witnesses to establish that Ml s Gokul Nagar Sugar Mills Co. Ltd. were the selling agent and the persons who gave evidence had been appointed as sub-agents by them and that commissions were also paid to them by the selling agent. Particularly, the counsel pointed out that the evidence of Ram D Sahai Dhir and Shiv Nand Verma has not at all been adverted to by the Appellate Tribunal. The counsel also urged that certain receipts produced Nos. 948 dated April 24, 1946 and 298 da·ted February 13, 1947 showing the payments made by M/s Gokul Nagar Sugar Mills Co. Ltd. as commission to their sub-agents have not been even referred to by th~ Appellate Tribunal. The counsel further pointed out that even 1he High Court has held that the Income-tax Appellate Tribunal has made no reference to 1the evidence of these two witnesses, nor has it adverted to the receipts claimed to have been given by the sub-agents. The High Court's view in this regard ithat it is not every piece of evidence available on rxord that must be dealt with by the Appellate Tribunal, is strenuously criticised by Mr. V. S. Desai. The counsel relied on the decision of this Court in Udhavdas Kewalram v. Commissioner of Income-tax, lJombay City(') where it has been held that the Tribunal has to act judicially and consider all the evidence in favour and against the assessee and 1hat an order recorded on E F a review of only a part of 'lhe evidence and ignoring the remaining evidence, cannot be regarded as conclusively determining the G questions of fact raised before the Tribunal. Mr. Desai, hence urged that the High Court was not justified in declining to direct the Appellate Tribunal to rder questions Nos. 1 to 3. Mr. R. H. Dhebat, learned counsel for the Department has ··eferred us to the findings recorded by the Income-tax Officer, !he Appellate Assistant Commissioner as well as the elaborate disH cussion contained in the order of the Appella~~ Tribunal, and (1) [1967] 66 l.T.R. 462. A B c D E F G H BAST! SUGAR MILLS v. c.1.T. (Vaidialingam, J.) 893 pointed out that all relevant material on record has been taken into· account by al! the authorities, including the Appellate Tribunal and that the appellants can have no grievance in that regard. All material facts have been considered and findings have been recorded on facts against the appellants that M/s Gokul Nagar Sugar Mills Co. Ltd. rendered no service whatsoever as selling agent and that the materials on record conclusively establish that the appellants themselves were dealing with their sub-agents direct. The learned counsel further pointed out that the Income-tax Officer summoned Dr. Gokul Chand Narang under s. 37 of the Act to produce the correspondence with the sub-agents as well as the sugar mills. Only 13 letters spread over a period of three years written by D;. Gokul Chand Narang in his personal capacity and in the ktter heads of M/ s Gokulchand Ram Sahai were produced. None of the replies to those letters from the sub-agento were produced. The counsel finally urged that the order of the High Court declining to direct the Appellate Tribunal to refer que9tions Nos. 1 to 3 is correC't. We are of the opinion that there is no substance in these appeals. We have gone through the orders of the Income-tax Officer, .the Appellate Assi&tant Commissioner, as well as the Income-tax Appellate Tribunal. No doubt, there is a resolution produced by the appellants dated July 26, 1944 in and by which the sugar selling agency of Nawabganj Sugar Mills Co. Ud. is given to M/s Gokul Nagar Sugar Mills Co. Ud. on -0-12-0%. There is no other evidence to show the nature of the arrangement or as to how exactly this resolution is to be carried out. A reading of questions Nos. 1 to 3 clearly shows that the points raised therein are purely questions of fact. But as the· contention of Mr. V. S. Desai is that certain material facts have no>t been considered at all by •the Tribunal and hence the findings arrived at by it cannot be conclusive, in view of this infirmity, we will rder to the evidence on record not with a view to decide whether the Tribunal has properly appreciated the evidence, but to see whether there was evidence to support the findings recorded by the Tribunal and whether that finding could on that evidence be reasonably reached. · We have already referred to the resolution dated July 26, 1944. The first criticism of Mr. V. S. ~sai is that the evidence of sub-ageil'ts appointed by ithe selling agent has not been considered by the Appellate Tribunal. The two witnesses in this regard are Ram Sahai Dhir and Shiv Nand Verma. The contention of Mr. V. S. Desai that the evidence of Ram Sahai Dhir has not been considered, as such, by the Appellate Tribunal, is only technically cormct because it is seen from the order of ~he Appellate Tribunal that it has referred fo the relationship between 894 SUPREME COURT REPORTS [ 1972] 1 5.C.R. the appellants and a company known as Mis Ramdev and ComA pany. Ram Sahai Dhir in his evidence has clearly stated tha'l he is the sole proprietor of Mis Ramdev and Company. He has further stated that after he got the sub-agency from M1 s Gokul Nagar Sugar Mills Co. Ltd. he along with his brother and son formed a partnership for this purpose in the name of Ml s Ramdev and Company. The Appellate Tribunal in paragraph 7 of its B order has considered a 'telegram sent on September 1, 1948 to Mis Ramdev and Company by the Chairman of Nawabganj Sugar Mills Co. Ltd. That telegram states that the agency of M/s Gursardndas Kapur and Sons has been terminated and M/s Ramdev and Company is asked to sell and freely secure challans. Ram Sahai Dhir in his evidence has stated tha't Mis Gursarandas C Kapur and Sons were the selling agent of the appellants originally and that he started his own sugar business in or about 1947. Therefore, the telegram. as held by the Appellate Tribunal, clearly shows tha,t the appellants were having direct . Ltd. is no where in the p'cture. This telegram also shows that rhis privity of contract between ·~he appellants and Ramdev and Company D will not be there· if Ramdev and Company were tlre sub-a gen ls appointed by Mis Gokul Nagar Sugar Mills Company Ltd. Therefore, it is clear that the relationship betw~en the appellants and Mis Ramdev and Sons of which Sri Ram Sahai Dhir is the sok proprietor has been considered by the Appellate Tribunal. Regarding Shiv Nand Verma, his evidence has only to be read E to be rei·~cted. Even according to the appellants Mis Gokul Nagar Sugar Mills Company Ltd. was appointed as Selling Agent only by the resolution dated July 26, 1944. Apart from the very conrtradictory answers given by this witness, he has categorically stated in answer to a specific question put by th·~ appellants that he was appointed even in 1942 as sub-agent by Mis Gokul Nagur F Sugar Mills Company Ltd. on a commission of -0-4-0%. This evidence is absolu•tely false and of no use to support the case of the appollants because in 1942 Mis Gokul Nagar Sugar Mills Company Ltd. was not in the picture. The evidence of i.'iis witness does not establish that M,ls Gokul Nagar Sugar Mills Company Ltd. had appointed him as their sub-agents and were paying G him commission, in ·their capacity as the selling ag·~nt of the appellants. The Appellate Tribunal has referred to the evidence of Shiv Nand Verma given before the Incomo-tax Officer and it has also noted the reasons for not acting on that evidence. Therefore. it is not as if that the Appellate Tribunal was not conscious of this evidence on record which is absolutely valueless so far as the appellants are concerned. H Regarding the receipts Nos. 948 dated 24-4-1946 and '.!98 dated February l'l. 1947, it is no doubt trw~ that 1hey have not A B c D E F G H ' BAST! SUGAR MILLS v. C.I.T. (.Vaidia/ingam, J.) 895 been specifically adverted to by. the Appellate Tribunal. But it is rather surprising that the appellan1s should be able to produce only these two receipts when they claim that Mis Gokul Nagar Sugar Mills Company Ltd. has been acting as their selling agent from 1944. Further the persons who are mentioned there as. sub-agen.ts have not at all giwn evidence before the Income-tax authorities. Those receipts lose all significance especially when the evidence .of Ram Sahai Dhir and Shiv Nand Verma who claim to have been .appointed as sub-agents by the selling agent has been rejeoted by the Appellate Tribunal. Obviously, in vi·~w of the other evidence against the appeilants, the Appellate Tribunal did not think it worthwhile to specifically refer to these 1two receipts on record. But the non-reference to these two receipts cannot be. said to have in any manner vitiated the conclusion arrived at by the Appella1e Tribunal. As we have stated earlier, we have only referred to th<~se items of evidence on record to show that the finding of the Appellate Tribunal are based on the material on record and that the finding is such which could on that evidence be reasonably reached. The stat~ment in the order of the High Court that the Appellate Tribunal has not referred to the evidenc.~ of Ram Sahai Dhir as such is prima facie correct. But the High Court missed the crucial faot that his evidence is really as proprietor of Ml s Rrundev and Company and the relationship betw~n this company and the appellants has been considered by 1the Appellate Tribunal. As laid down by this Court in Udhavdas Kewa/ram v. Commissioner of Income-tax, Bombay City-1(1) the Income-tax Appellate 1;rjbunal has to act judicially in the sense that it has to consider with due care all ma 1terial facts ·and the evidence in favour of and against the assessee and record its finding on aJI the contentions raised by the assessee and the Coi:runissioner in the light of the evidence and the relevant law. From the discussion contained above rt is clear that it cannot be said that the Appellate Tribunal in the case before us has omitted. to consider any materi~l fact or any material piece of evidence. To conclude we are in ·agreemenl with tjl.e findings of the High Court that no point of law arises out of questions Nos. 1 to 3 and the High Court was justified in declining to give direction to the Appellate Tribunal to state a case and refer those questions. In the result the judgment and order of the High Court dated March 14, 1967 are confirmed and the appeals are dismissed with one set of costs to the respondent. G.C. Appeals dismissed. ------'··---· ·-·--- (1) [19671 66 l.T,P. 462.