S.P.Goyal, J.

1. The assessee is a private limited firm engaged in the manufacture and sale of electrical goods, such as switches and plugs. It appointed on April 1, 1965, M/s. Kay Engineering Sales Corporation, as their sole selling agents on a payment of 5 per cent. commission on the net sales of the products manufactured by the assessee after deducting trade discounts, freight, sales tax, distributors commission, etc. During the accounting year ending March 31, 1966, the assessee claimed a deduction of Rs. 1,27,313 alleged to have been paid to the sole selling agents. During the course of the original assessment proceedings, on enquiry by the ITO, the assessee by its detailed letter dated April 22, 1967, furnished the complete details running into 60 pages about the payment of commission and its justification. The claim was accepted and the assessee was allowed deduction by the ITO, vide assessment order dated September 28, 1968. Later on, while examining the assessees accounts for the next assessment year, the ITO on the basis of the following material formed the opinion that the sole selling agency firm did not render any service to the assessee and hence the income to