JUDGMENT :

J.C. Shah, J.

Madhya Pradesh Industries Ltd. hereinafter called "the Company" is engaged in the business of mining manganese ore. On March 18, 1952 the Company appointed Messrs. J.K. Alloys Ltd. hereinafter called "Alloys" as its selling agent. In the account year relating to Assessment Year 1953-54 the Company paid Rs. 1,13,052/8/9 to the selling agents and claimed it as a revenue outgoing in the computation of its profits for that year. The Income Tax Officer made an order of assessment without expressly referring to the claim for allowance to Alloys.

2. On December 26, 1960 the Income Tax Officer issued a notice to the Company in exercise of the power under Section 34 of the Indian Income Tax Act reciting that having "reason to believe that" the income of the Company assessable to income tax for Assessment Year 1953-54 had "(a) escaped assessment, (b) been under assessed", he proposed to reassess the said income that had;"(a) escaped assessment, (b) been under-assessed" and directed the Company to deliver a return of the total income of the Company assessable for the said Assessment Year 1953-54. The Company by letter dated January 30, 1961 called upon the Income Tax Off