Judgement

SABYASACHI MUKHARJI, J.:- This appeal by special leave is from the judgment and order of the Allahabad High Court dated 23rd December, 1971* in the Income-tax Reference. The assessee is a limited company under the Indian Companies Act and derived its income from the manufacture and sale of sugar and confectionery. The assessment for the assessment year 1958-59 was completed under the Indian Income-tax Act, 1922. The Income-tax Officer in the said assessment, inter alia, made following additions besides others in respect of the following items :

(i) For cane cost Rs. 48,500/-

(ii) For shortage in cane Rs. 67,500/-

(iii) for salary of outstation staff Rs. 21,700/-

* Reported in 1972 Tax LR 577 (All).

2. The assessee did not challenge the said assessment order made by the Income-tax Officer in so far as the additions of the above amounts in appeal or otherwise. It was the case of the assessee that it did not appeal because it wanted to keep good relations with the revenue although, according to the assessee the above additions made by the Income-tax Officer were totally unjustified and illegal.

3. On 14th March, 1963 the Income-tax Officer issued a notice under