GULATI,J. - (1.) THIS is an application under S. 256(2) of the IT Act, 1961.
(2.) THE assessee's accounts were rejected and an addition of Rs. 20,638 was made to the trading account. Another sum of Rs. 5,850 claimed to have been paid to Chaurasia Agencies, Varanasi, was also disallowed. The assessee's application for a reference under S. 256, (1) having been rejected, the assessee has now approached this Court under S. 256 (2) of the Act. The first question sought to be raised by the learned counsel is with regard to the rejection of the assessee's account books. We find that the account books of the assessee were rejected because it had not maintained any day to day manufacturing account and stock register and the cash sales were not verifiable. In these circumstances proviso to S. 145(1) was clearly applicable. Moreover, when the matter went before the Tribunal, the applicability of the proviso to S. 145(1) was not disputed. This has been clearly stated by the Tribunal in paragraph 4 of its appellate order. The assessee also did not raise any question with regard to the applicability of the proviso in its application under S. 256(1) of the IT Act. In these circumstances no question of law with regard to the rejection of the account books arises in this case.
(3.) AS regards the commission payable to Chaurasia Agencies, the Tribunal has found that it was a device adopted by the assessee to divert a part of its profit and it was not a genuine payment of services rendered. The Tribunal has also found that the partners of Chaurasia Agencies were closely related to the partners of the assessee firm, and the business was stated by Chaurasia Agencies with the aid of funds provided by the partners of the assessee firm. The Tribunal has also found that certain terms of the agreement were vague and uncertain and in fact that agreement was never acted upon. These circumstances provided enough material for a finding recorded by the Tribunal that the payment of commission to Chaurasia Agencies was not a genuine expenditure incurred by the assessee for the purposes of its business.;