Income Tax Appellate Tribunal - Delhi
Markanda Vanaspati Mills Ltd. vs Deputy Commissioner Of Income Tax on 30 January, 1997
Equivalent citations: [1997]62ITD263(DELHI)
ORDER
R.P. Garg, A.M. April, 1996.
1. These two appeals are by the assessee against the order of the CIT(A), for asst. yrs. 1978-79 and 1979-80. The common dispute in these appeals is concerning initiation of reassessment proceedings and assessment of excess sales-tax collected by the assessee.
2. In the original assessments, the assessee had neither declared the income on account of sales-tax collected nor claimed any deduction as a statutory liability thereof. It had, however, been asked by the AO to file certain details regarding this, vide questionnaire dt. 1st November, 1980, in relation to asst. yr. 1978-79 wherein the assessee was asked to file the following information :
"70(c). Copies of central excise, sales-tax accounts and when the amounts outstanding in these accounts were actually paid to the Departments concerned."
"70(e). Particulars of amount(s) paid/payable as sales-tax excise duty, customs duty, etc., which is disputed and the present stage of litigation in that regard."
Though the information was not given in the style in which it was asked for by the AO, the assessee gave the following details :
(i) Details of sales-tax payable as at 31st August, 1977.
(ii) Copy of the ledger account of Haryana sales-tax showing each and every collection and payment to the Sales-tax Department from 1st September, 1976 to 31st August, 1977 - Annexure 46/1.
(iii) Copy of the ledger account of Central sales-tax showing individually each and every collection and deposit with the Department from 1st September, 1976 to 31st August, 1977 - Annexure 46/2.
(iv) Copy of the ledger account of the sales-tax, Jammu from 1st September, 1976 to 31st August, 1977 - Annexure 46/3.
(v) Copy of the sales-tax account of Punjab showing balance brought forward from last year and no other transactions - Annexure 46/4.
(vi) Copy of audit balance sheet disclosing the total amount of Rs. 5,85,908.29 under the head 'Sales-tax' payable along with the break-up of this amount.
(vii) During the hearing of the case the learned AO had asked for a copy of the ledger account of Haryana sales-tax for the preceding year, i.e., for the year ended on 31st August, 1976 (relevant to asst. yr. 1977-78) which was furnished.
Answer to query at Sl. No. 70 was given in Annexure 46 as follows :
"MARKANDA VANASPATI MILLS LTD. - SHAHBAD MARKANDA (HARYANA) DETAIL OF SALES TAX PAYABLE AS ON 31ST AUGUST, 1977
----------------------------------------------------------------------
Sales-tax Haryana 4,02,875.76 This is balance in the running
account and is being paid as and
when the demand arises.
Central Sales-tax 6,029.51 - do -
Sales-tax, Jammu 60,000.00 The matter is in dispute and is
pending settlement with dealer
Praveen Singh Shiv Dass, Jammu
and Inderjit Balkishan, Jammu
Sales-tax, Punjab 1,17,003.02 Paid in the next year
-------------
Total 5,85,908.29
----------------------------------------------------------------------
Sd/ Director"
3. In relation to asst. yr. 1979-80, the assessee in response to the AO letter dt. 23rd May, 1981, brought to the notice of the AO the fact that the following information about the aforesaid sales-tax collections before issuing the notice under s. 148 :
"1. Details of sales-tax and Central sales-tax payable as on 31st August, 1978 (asst. yr. 1979-80) clearly appearing in the balance sheet as on 31st August, 1978;
(ii) Haryana sales-tax account showing individually each and every collection and deposit with the Sales-tax Department from 1st September, 1977 to 31st August, 1978.
(iii) Sales-tax account showing individually each and every collection and deposit with the Sales-tax Department from 1st September, 1976 to 31st August, 1977.
(iv) Central sales-tax account showing individually each and every collection and deposit with the Sales-tax Department from 1st September, 1976 to 31st August, 1977."
Vide assessee's letter dt. 17th February, 1988, in reply to notice under s. 148, the following details were also stated to be on record :
"(i) Copy of the sales-tax and Central sales-tax accounts, in which the impugned excess collection was credited as appearing in the books of accounts of the company.
(ii) Complete details and yearwise break-up of sales-tax suspense of Rs. 2,05,479. In this break-up, it was clearly disclosed as to how this excess amount was collected by the company.
(iii) Sales-tax and Central sales-tax assessment orders for the year ended on 31st March, 1977, and 31st March, 1978, were produced for perusal.
It was further stated by the assessee that the above information and papers furnished by the assessee clearly brought out the precise nature of excess collection which was known to the assessing authority when de novo assessment was made vide order dt. 29th November, 1984, for asst. yr. 1979-80, that the assessing authority after full application of mind to the above information, did not think it fit to make any addition on account of the excess collections and that it was, therefore, incorrect to say that the assessee-company failed to disclose fully and truly all material facts for the asst yr. 1979-80.
4. The assessee had collected sales-tax in excess by charging the same on sale price including excise duty, but claimed (and accepted by the sales-tax authorities) in the assessment under ST Act that there was no liability on excise portion thereof. This was before filing the return under the IT Act. In the income-tax proceedings, the reason for not offering the excess collection of sales-tax was that there was no clarity in the beginning as to whether it was to be refunded to the customers or to be paid to the Government and it, therefore, neither declared the income nor claimed the expenditure. It is also a matter on record that the aforesaid amount has not yet been refunded to the concerns from which the sales-tax had been collected.
5. The reopening of assessment is to assess sales-tax collected by the assessee on excise duty which was found not payable. The Revenue's claim is that it was a fact well-known to the assessee that the excess collection was not a liability under the ST Act when it filed the returns but, even then the assessee did not declare the same as its income. The assessee's contention is that there was no failure or omission on its part to disclose the material facts necessary for assessment of the said amount. The material fact for bringing such income to tax is the factum of receipt of sales-tax by the assessee and that fact was not only enquired into by the AO, but necessary material thereof was also brought on record in the original assessment proceedings for both the years under consideration. When the entire receipt is disclosed by the assessee, it is unusual to contend that the assessee failed to disclose a part of the receipt which, according to the Revenue, is taxable. It is not as though the excess collection on account of sales-tax alone was a trading receipt/income of the assessee.
6. We have heard the parties and considered their rival submissions. To invoke the provisions of s. 147, the AO must have reason to believe that by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, income chargeable to income-tax has escaped assessment. In other words, the income chargeable to tax must escape assessment by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The duty of the assessee is to make a full and true disclosure of all material facts necessary for assessment. The assessee is not required to inform the AO as to what legal inference should be drawn from the facts disclosed by him nor to advise him on questions of law. [See Calcutta Discount Co. Ltd. vs. ITO (1961) 41 ITR 191 (SC)]. In the case of Gemini Leather Stores vs. ITO (1975)CTR (SC) 127 : (1975) 100 ITR 1 (SC), their Lordships of the Supreme Court held that in the proceedings of original assessment of the assessee, though the assessee did not disclose certain transactions evidenced by certain drafts the ITO himself discovered the fact relating thereto but by oversight did not bring the amount represented by the drafts to tax as income of the assessee. The reopening of the assessment under s. 147(a) was held to be not justified. The Supreme Court also held that after the discovery of the primary facts relating to the transaction evidenced by the drafts, it was for the officer to make necessary enquiries and draw proper inference as to whether the amounts represented by the drafts could be treated as part of the total income of the assessee. This the officer did not do. It was clearly a case of oversight and it could not be said that the income chargeable to tax had escaped assessment by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts. He could not, thereafter, take recourse to s. 147(a) to remedy the error resulting from his own oversight. This is what happened in the present case. The assessee had in the original assessment proceedings disclosed the material facts in relation to the collection of sales-tax in both the years under consideration. It is well settled that whatever is collected by way of sales-tax is a part of trading receipt and, therefore, income of the assessee. [See the decision of the Supreme Court in the case of Chowringhee Sales Bureau (P) Ltd. vs. CIT (1973) 87 ITR 542 (SC), and in the case of Sinclair Murray & Co. (P) Ltd. vs. CIT (1974) 97 ITR 615 (SC)].
7. Against this receipt a deduction was of course to be allowed on account of the assessee's liability as per the relevant Sales-tax law and only the net amount was to be taxed as income of the assessee. When the entire amount of sales-tax collected was assessable as trading receipt and the factum of receipt was disclosed in the original assessment proceedings, in our opinion, the assessee cannot be accused of not disclosing as to how much was the taxable amount. It is a matter of computation of income and that is the job of the AO. When the entire receipt was disclosed, it was for the AO to tax that amount after allowing the liability and he should not have left it untaxed on the assumption that there was a corresponding statutory liability payable by the assessee. The assessee's failure to disclose only a part of the collection not payable under sales-tax law may be a ground for not allowing the deduction, but it cannot be a ground for taxing the receipt. The assessee did not claim any deduction. Therefore, it cannot be a ground for reopening the assessment. The assessee's liability to tax on the receipt is a different matter and requires different consideration from the allowability of the equivalent amount as a deduction.
8. In this connection, we may refer to the decision of the Supreme Court in the case of M. B. Abdulla vs. CIT (1990) 183 ITR 96 (SC). In that case, the assessee was apprehended by the Central excise authorities and gold weighing 16,000 gms. was seized and confiscated. An addition was made in the income-tax assessment as income from undisclosed sources which was upheld by the Tribunal. In miscellaneous petition, the assessee claimed that if the amount was taxable, the equivalent amount should have been allowed as a deduction, based on the decision of the Supreme Court in the case of CIT vs. Piara Singh (1980) 124 ITR 40 (SC) the Tribunal rejected the petition on the ground that it was not claimed at the time of original hearing. The assessee filed SLPs before the Supreme Court. The Supreme Court, dismissing the petitions, held (as per head notes) :
"It was possible to take the view that the question whether an amount was business loss, even assuming that it was income, was substantially different from the question whether the amount was income, and was not merely an aspect of the same question. Considerations which went into the determination of whether an amount should be treated as income and the considerations which were relevant to determine whether, even assuming that was income, the amount was deductible, were different."
Accordingly, when the consideration for an amount to be income and its allowability as a deduction are different, the mere fact that the assessee failed to disclose a part of sales-tax collection as its income because it was not allowable as a deduction cannot lead to reopening of assessment on grounds of assessee's failure or omission to disclose the material facts for bringing an amount to tax, when the entire receipt by the assessee by way of sales-tax collection was disclosed in the original assessment proceedings; more so when the entire collection was a trading receipt of the assessee in view of the two decisions of the Supreme Court referred to above.
9. We, therefore, hold that the proceedings under s. 147 were not validly initiated and the assessments made for both the years are accordingly cancelled. The appeals are allowed.
M.A. Bakshi, J.M. 14th May, 1996
1. I have gone through the order proposed by my learned brother Shri R. P. Garg. Since I have not been able to persuade myself to subscribe to the view expressed by him, I hereby pass a separate order.
2. The appeals before us filed by the assessee relate to asst. yrs. 1978-79 and 1979-80. Original assessments for both these assessment years had been made under s. 143(3). During the course of assessment proceedings for asst. yr. 1978-79, the AO had issued a questionnaire dt. 1st November, 1980, wherein the assessee was asked to file the following information :
"70(c) Copies of Central excise, sales-tax accounts and when the amounts outstanding in these accounts were actually paid to the Departments concerned."
"70(e). Particulars of amount(s) paid/payable as sales-tax, excise duty, customs duty, etc., which is disputed and the present stage of litigation in that regard."
Though the AO had specifically asked the assessee to give the details of the amounts of Central excise and sales-tax accounts and to indicate the actual dates of payments to the Departments concerned, assessee furnished the details indicating the payments made upto the end of the previous year only. In response to a query at S.No. 70, assessee had furnished the following details :
MARKANDA VANASPATI MILLS LTD. SHAHBAD MARKANDA (HARYANA) DETAILS OF SALES-TAX PAYABLE AS ON 31ST AUGUST, 1977
----------------------------------------------------------------------
Sales-tax Haryana 4,02,875.76 This is balance in the running
account and is being paid as and
when the demand arises.
Central sales-tax 6,029.51 - do -
Sales-tax, Jammu 60,000.00 The matter is in dispute and is
pending settlement with dealer
Praveen Singh Shiv Dass, Jammu
and Inderjit Balkishan, Jammu
Sales-tax, Punjab 1,17,003.02 Paid in the next year
------------
Total 5,85,908.29
----------------------------------------------------------------------
Sd/ Director"
3. For asst. yr. 1979-80 the assessee in response to AO's letter dt. 23rd May, 1981, gave the information regarding the payments of sales-tax and Central sales-tax upto 31st Aug., 1978, i.e., upto the end of the previous year. Similarly, details of Haryana sales-tax collection and deposit for the period from 1st September, 1977 to 31st August, 1978, was furnished by the assessee before the AO.
4. The assessee had collected sales-tax in excess by charging the same on sale price including excise duty. However, the assessee claimed before the ST authorities that sales-tax was payable by the assessee only on the sale price without including excise duty. In other words, it was claimed that no sales-tax was chargeable on the amount of excise duty recovered by the assessee. This stand of the assessee was accepted by the ST Department well before the assessee filed the IT returns for the respective assessment years.
5. The assessee did not separately indicate in its books of account about the excess collection of sales-tax. The entire amount of sales-tax was credited to the sales-tax account and whatever payments were made to the ST Department, were debited to the said account. The assessee neither reflected the sales-tax collections as its trading receipts nor did it claim any deduction on account of its liability towards sales-tax. Since as per reply filed by the assessee in response to query No. 70 reproduced elsewhere in this order, the assessee had indicated that the amount of sales-tax collected was being paid as and when the demand arises, the AO while making the original assessment for asst. yr. 1978-79 and 1979-80 did not make any addition on account of excess collection of sales-tax. Subsequently it came to light that the assessee had made collections on account of sales-tax in excess of the actual liability. For asst. yr. 1981-82, CIT had passed an order under s. 263 but the said order was cancelled on the ground that there was no cessation of liability during the previous year relevant to asst. yr. 1981-82 and accordingly provisions of s. 41 were not attracted in regard to excess collection of sales made in asst. yrs. 1978-79 and 1979-80.
6. On the basis of the above information, the AO formed the belief that the income of the assessee had escaped assessment for asst. yrs. 1978-79 and 1979-80 and accordingly notices under s. 148 were issued. The assessee filed the returns and claimed that the excess collection of sales-tax was not liable to tax as it was not trading receipt and that the money collected was in trust with the assessee and refundable to the customers. The AO not accepting the claim of the assessee, made an addition of Rs. 1,08,580 for asst. yr. 1978-79 and Rs. 62,715 for asst. yr. 19 79-80 on account of escaped income on the basis of collection of sales-tax in excess of demand. The assessee appealed to the CIT(A) challenging the validity of the proceedings initiated under s. 147 as also the additions in respective assessment years. However, the CIT(A), Karnal, vide order dt. 15th May, 1991, dismissed the appeals of the assessee against which the assessee is in appeal before us. The issue raised in these appeals is, inter alia, relating to the validity of the proceedings under s. 147. It was vehemently argued by the learned authorised representative that the assessee had disclosed the primary facts before the AO during the course of original assessment proceedings and, therefore, initiation of proceedings under s. 147 was unwarranted. Whereas my learned brother has accepted the contention of the assessee in the proposed order, as already pointed out, I am unable to subscribe to that view.
7. It is absolutely clear by now that the dispute revolves around collection of sales-tax in excess of actual liability. It is not a case where the liability of sales-tax was upon the assessee and the same was passed on to the customers. It is a case where the assessee collected sales-tax on the excise duty component which was not payable to the Sales-tax Department. The question before us is as to whether the assessee had disclosed this fact of collection of sales-tax in excess of actual liability either in the books of account or in any documents furnished before the AO during the course of assessment proceedings. It is admitted fact that the assessee had reflected the entire sales-tax collections in its books of account under the head 'sales-tax collection'. Whatever payments were made to the Sales-tax Department were also debited to the account of sales-tax maintained separately. The assessee did not reflect the sales-tax collections as its trading receipts nor was the liability towards sales-tax claimed as a deduction. The AO had made specific queries from the assessee about the sales-tax collections and the dates of making the payments to the Sales-tax Department of such collections. The assessee had also been asked to indicate whether any liability was disputed by the assessee and to indicate the stage of litigation in that regard. I have elsewhere reproduced query No. 70(c) and 70(e) in this regard. I reproduce the same even at the cost of repetition as in my view this query goes to the root of the matter :
"70(c) Copies of Central excise, sales-tax accounts and when the amounts outstanding in these accounts were actually paid to the Departments concerned."
"70(e). Particulars of amount(s) paid/payable as sales-tax, excise duty, customs duty, etc., which is disputed and the present stage of litigation in that regard."
It is clear from the above query that the AO had not confined himself to the payments made to the Department during the previous year but had asked specifically to give the entire details as to when payments were made to the Department in regard to such collection. It is not disputed before us that the assessee instead of furnishing complete details as required by the AO furnished the details of payments and collections relating to the previous year only. The assessee did not give any information about the disputed liability, if any out of the "sales-tax, Haryana a/c". It is evident from the facts that the AO had not been informed by the assessee about the fact that substantial part of the sales-tax collection was not payable to the Sales-tax Department, one may not be able to say at this stage with certain degree of certainty as to whether the suppression of information was conscious or inadvertent. Nevertheless I have no doubt in my mind that there was omission to furnish the vital piece of information which was necessary for purposes of assessment.
8. It has to be borne in mind that assessment year involved in these appeals are 1978-79 and 1979-80 and s. 43B effective from 1st April, 1984 is not applicable. When s. 43B was not in the statute the Revenue did not object to directly crediting the sales-tax collected to the sales-tax collection account debiting the sales-tax payments to that account. Whereas it is by now well settled that the sales-tax collected by the assessee forms part of the trading receipts [Chowringhee Sales Bureau vs. CIT (1973) 87 ITR 542 (SC) and Sinclair Morray & Co. vs. CIT (1974) 87 ITR 615 (SC). It is also well settled that in a case where the books of account are maintained on mercantile basis, assessee is entitled to deduction in regard to the corresponding liability. Therefore, whereas the sales-tax collected from part of the trading receipts there being a corresponding liability allowable to the assessee before s. 43B was incorporated, there would be no income assessable to tax out of the trading receipts related to sales-tax. However, in a case where there is an excess collection by the assessee in the name of sales-tax without there being a corresponding liability, the excess would result in income chargeable to tax.
9. I agree with the finding of my learned brother that assessee had disclosed the entire sales-tax collections, at the time of original assessments. The information in this regard, admittedly, has not been suppressed. However, according to my learned brother since the assessee had disclosed the particulars relating to the trading receipts and the allowability of deduction on account of sales-tax liability belonging to a different area, the assessee cannot be accused of hiding or suppressing the material facts at the time of assessment. If every trading receipt would be income, then there could not be any difficulty in subscribing to this view. However, in my view, there is distinction between a trading receipt and income. Income is deduced by taking into account the receipts as well as the deductions/expenditure. When we consider that it is the income which has escaped assessment and not only the receipts then we have to ponder to find out as to whether the assessee had disclosed the entire material facts necessary for determination of income. To my mind, it was the duty of the assessee to disclose the facts relating to the sales-tax collections as also to disclose that there was no corresponding liability against the said collection or that the same was refundable to customers. The assessee not only failed to disclose the material facts necessary for assessment that there was no corresponding liability against part of the collections but disclosed wrong facts when against the details of sales-tax payable as on 31st August, 1977, the assessee indicated that the balance in the running account was being paid as and when demand arises. This gave an impression that the entire sales-tax collection was payable to the Sales-tax Department. From the information furnished by the assessee it cannot be said that the AO would have got even a clue about the act that the assessee had collected sales-tax in excess of its liability.
10. My learned brother has referred to the decision of the Supreme Court in the case of M. B. Abdulla vs. CIT 183 ITR 96 (SC) which in my humble view is inapplicable to the facts of this case. Their Lordships of the Supreme Court were considering a reference on a question of law. The jurisdictions of High Court and the Supreme Court in the matter of income-tax reference is advisory and normally whatever questions arise out of the findings of the Tribunal are considered and esteemed opinion rendered. Their Lordships in that case refused to consider an issue which had not been raised before the Tribunal. My learned brother has quoted from the said decision in the proposed order where their Lordships have expressed the view that "whether an amount was a business loss, was substantially different from the question as to whether the amount was income".
11. Their Lordships were faced with a situation where the business loss was claimed by the assessee to be allowed against the income which was refused to be considered by the Supreme Court. If such a situation had arisen before the Tribunal, it is doubtful if the claim could be ignored. However, it is not necessary for us to enter into that arena of dispute.
12. The issue before us is not on the one hand relating to income and on the other relating to loss. As I have clearly expressed, we are concerned with income which is derived by taking into account the trading receipts and the corresponding liability. The income cannot be determined without taking into account the deductions and expenditures. In the case of Chowringhee Sales Bureau (supra) their Lordships of the Supreme Court considered the nature of sales-tax collections and held that the same constitutes trading receipts. Regarding deductions in the case of cash system of accounting, it was held that the same was allowable as and when paid. Their Lordships did not hold that sales-tax collection was income. Deductions are to be taken into account for determination of income.
13. At this stage I would like to refer to the decision of the Supreme Court in the case of CIT vs. TSPL P. Chidambaram Chettiar (1971) 80 ITR 467 (SC). In this case it was held "that the mere fact that there was vague information before the officer at the time of original assessment, that the assessee's father had secretly received a sum of Rs. 1,80,000 from the mortgagor was by itself not sufficient to bring to tax that amount particularly in view of the fact that the assessee had denied the fact. The fact that the officer could have made further enquiry into the matter but did not do so did not take the case out of s. 34(1)(a) as the assessee had failed to place truly and fully all the material facts before him."
14. I would also like to refer the decision of the Jurisdictional High Court of Delhi in the case of Nawabganj Sugar Mills Co. Ltd. vs. CIT (1980) 123 ITR 287 (Del). In this case it was held that where the AO had accepted the facts stated by the assessee as correct and were later found to be false, proceedings for reopening of assessment could validly be initiated. Their Lordships at p. 295 held "In our considered opinion, when the material or primary facts disclosed were themselves false, the provisions of s. 34(1)(a) were attracted". It has further been held that once it was found that the basic material facts had been un truly stated, the entire edifice built thereon crumbled and for that reassessments were entirely justified. Similar view has been taken by the Delhi High Court in the case of Basti Sugar Mills Co. Ltd. vs. CIT (1983) 142 ITR 487 (Del).
15. On the basis of principles of law laid down by the Supreme Court and the Jurisdictional High Court of Delhi (supra), it is clear that the assessee had failed to disclose the material facts at the time of original assessment. In fact, the information furnished by the assessee was misleading and accordingly in my view the initiation of reassessment proceedings under s. 147(a) was justified and perfectly in order. The contention raised on behalf of the assessee to the contrary is accordingly rejected.
16. Since my learned brother has accepted the appeals of the assessee on the legal ground, he has not expressed his opinion about the assessability of the sales-tax collected in excess of the liability by the assessee. The only plea raised by the assessee on merits of assessment of the said sales-tax is that there was a possibility of the amount so collected being refunded to the customers. He specifically asked the learned counsel during the hearing of the appeal as to whether any amount has been refunded to the customers despite expiry of about two decades from the date of collection, it was fairly conceded that neither there has been any claim from the customers nor was any refund granted out of the said collections. It is, therefore, clear that the excess sales-tax collected by the assessee without there being corresponding liability was the income of the assessee and, therefore, liable to tax.
17. In the result, the appeals of the assessee are accordingly dismissed.
REFERENCE UNDER S. 255(4) OF THE IT ACT, 1961 28th May, 1996 As we have differed in our opinion, we request the Honourable President of the IT AT to refer the following point of difference to Third Member under s. 255(4) of the IT Act, 1961 :
"When the facts regarding entire collections on account of sales-tax were disclosed by the assessee in the original assessment proceedings, can the reopening of assessment under s. 147(a) of the IT Act, 1961, to bring to tax a part thereof representing the excess collection be justified on the ground that the assessee has failed to disclose that the said part was not a liability under the relevant sales-tax law ?"
Smt Moksh Mahajan, A.M.
1. This is an appeal which has come up for hearing before the Delhi 'C' Bench. After hearing the parties, the learned Members constituting the Bench could not agree on the following point :
"When the facts regarding entire collections on account of sales-tax were disclosed by the assessee in the original assessment proceedings, can the reopening of assessment under s. 147(a) of the IT Act, 1961, to bring to tax a part thereof representing the excess collection be justified on the ground that the assessee has failed to disclose that the said part was not a liability under the relevant sales-tax law ?"
The matter has now been referred to me under s. 256(4) of the IT Act, 1961, for my opinion on this point.
2. A close reading of s. 147(a) of the IT Act as it was there at the relevant period of time would show that it is an 'escapement of income chargeable to tax' and for 'his assessment for that year' which would attract the provisions, subject to fulfilment of other conditions of course. Thus, the amount in question should first constitute an income and then it should be assessable for the concerned year and that too in the hands of the assessee. In the context of sales-tax as is the case of the assessee, undisputedly the entire receipts collected alone would not constitute an income without taking into account the liability payable in this regard. Thus, the disclosure of facts in regard to liability payable are equally important to find out if the excess collection of sales-tax constitutes an income or not. In this context it is found that vide specific query raised marked as No. 70(c) and 70(e) the AO required the assessee to furnish the following information :
"70(c) Copies of Central excise, sales-tax accounts and when the amounts outstanding in these accounts were actually paid to the Departments concerned."
"70(e). Particulars of amount(s) paid/payable as sales-tax, excise duty, customs duty, etc., which is disputed and the present stage of litigation in that regard."
From the above it is clear that specific information was sought as to when the payments were actually made to the Department. The assessee without furnishing specific information gave copies of sales-tax accounts for the previous year 1st September, 1976 to 31st August, 1977, for asst. yr. 1978-79. Similar was the case for asst. yr. 1979-80 The information furnished by the assessee in no way gave clue to the payment of liability in regard to the sales-tax collected in excess. On the other hand, the remarks of the assessee that 'as and when demand arises' were misleading. This is evident from the fact that at the time the information was furnished, i.e., 3rd December, 1980, the sales-tax assessment for the year 1977-78 had already stood finalised as is evident from the order of the ST authorities which is dt. 14th December, 1979. As per this order no further liability in regard to sales-tax for the concerned assessment year existed towards the Department. This fact though within the knowledge of the assessee was not brought to the notice of the AO. Thus, the assessee did not make a true disclosure in regard to the facts pertaining to payment of liability. On the other hand, in an information furnished the assessee maintained that the demand is payable as and when raised. By this, the AO was precluded from making further enquiries in this regard. As held by their Lordships of Supreme Court in the case of Phool Chand Bajrang Lal & Anr. vs. ITO & Anr. (1993) 203 ITR 456 (SC), "where the transaction itself, on the basis of subsequent information is found to be a bogus transaction the mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be a disclosure of true and full facts in the case". As to the collection of excess amount being kept in trust for the customers there was no such indication available in the reply of the assessee. It could not, therefore, be said that the amounts were treated as money in trust for customers from whom the same were collected.
3. Coming to the collection of sales-tax in excess of what was actually payable, the same constituted income for the years concerned. This is for the reason that sales-tax collected was in the course of carrying on business by the assessee. The same, therefore, formed part of trading receipts, as held by their Lordships of Supreme Court in the case of Chowringhee Sales Bureau vs. CIT (1973) 87 ITR 542 (SC) and in the case of Sinclair Murray & Co. (P) Ltd. vs. CIT 1974) 97 ITR 615 (SC). The sales-tax collected formed part of the consideration for the sale and thus part of the turnover of the seller. In this context we would like to quote the observations of their Lordships of Gujarat High Court in the case of Motilal Ambaidas vs. CIT (1977) 108 ITR 136 (Guj).
"Held, that whenever any sale takes place, whether the price quoted to the purchaser includes sales-tax or whether sales-tax is separately collected, the sales-tax forms part of the consideration for the sale and it forms part of the turnover of the seller. The amount of the sales-tax payable in respect of the sales effected by a particular assessee forms part of his trading receipts and has to be shown on the credit side. As and when he pays the sales-tax to the authorities, he can claim deduction for the sales-tax paid; in case he has to refund the sales-tax to the original purchaser who purchased the goods from him, then the amount to refunded will also be a deduction which he can claim and it must be granted to him, that being deduction on the expenditure side. Therefore, in the instant case, the assessee-firm, which was maintaining its account on mercantile basis, was bound to show as trading receipt, all the amounts which accrued due to it or which were collected by it as sales-tax and it was bound to show on the debit side of the accounts, the amounts which it paid by way of sales-tax. The fact that no such entries showing credits and debits in respect of sales-tax collected and sales-tax paid, were made by the assessee-firm, does not alter the real substance of the transaction nor does it alter the real character of what was required to be done by the assessee in this case."
4. In the case of the assessee the amount collected constituted the income of the assessee for the years in which it was collected. This is for the reason that years involved are 1978-79 and 1979-80 when the provisions of s. 43B of the Act were not on the statute. Thus, in view of above I agree with the views expressed by the Judicial Member that the income for asst. yrs. 1978-79 and 1979-80 escaped assessment because of non-disclosure of true facts in regard to the sales-tax liability payable for the years concerned.
5. As regards case laws cited on both sides I would like to state that it is on facts available in each case which would determine the reopening of assessment. There could be possibly no dispute in regard to propositions expounded to in case referred to on both sides. It is the application of these propositions to facts in hand which is material. In the case of the assessee the information acquired subsequently exposed the falsity of the statement made by the assessee at the time of the original assessment. Therefore, the mere disclosure of the information at the time of original assessment proceedings could not be said to be a disclosure of the true and full facts and the ITO had jurisdiction to reopen the concluded assessment. In the circumstances, I would agree with the conclusion drawn by the Judicial Member that on the facts and circumstances of the case the reopening of assessments under s. 147(a) of the Act for both the assessment years, i.e., 1978-79 and 1979-80 were justified.