Income Tax Appellate Tribunal - Indore
Deputy Commissioner Of Income Tax vs M. P. Laghu Udyog Nigam Ltd. (M. P. Laghu ... on 6 May, 1994
Equivalent citations: (1994)50TTJ(INDORE)357
ORDER
R. D. AGRAWALA, J. M. :
By this order we propose to dispose of four appeals and one cross-objection as it is convenient to do so. Out of these, while three appeals and the cross objection pertain to the asst. yr. 1982-83, one appeal is in respect of asst. yr. 1985-86.
2. The assessee before us is a public sector undertaking of the Govt. of Madhya Pradesh. In respect of the asst. yr. 1982-83 they filed return of income on 30th June, 1982, i.e., within time showing an income of Rs. 68,79,940. An interesting dispute between the Department and the assessee has arisen hereinafter itself inasmuch as while as per the assessee they filed only one revised return on the 7th Feb., 1986 showing an income of Rs. 53,28,234 about which there is no dispute whatsoever, as per the Department this is the second revised return and the assessee in fact filed a revised return on 12th Feb., 1985 showing a loss of Rs. 11,59,726. The intervening revised return showing loss (supra) assumes significance inasmuch as if no intervening return was filed by the assessee, assessment in respect of the asst. yr. 1982-83 as prescribed by S. 153(1)(a) of the IT Act should have been made before the 31st March, 1985, i.e., within two years from the end of the assessment year in which the income was first assessable. However, if as stated by the Department, loss returned was filed by the assessee before the expiry of the aforesaid period, viz., 31st March, 1985, limitation for the completion of the assessment would get extended by one year, i.e., upto 31st March, 1986 as envisaged by cl. (b) of sub-s. (1) of S. 153 of the IT Act. In the first even, the assessment order would be untenable in law while in the second situation devoid of any jurisdictional lapse, the assessment having been rendered on the 10th Feb., 1986.
3. Before, however, we proceed to take up the appeals one by one, it appears relevant to state about their chronology and the background as to why there are three appeals and one cross objection for the same year, i.e., asst. yr. 1982-83.
4. Assessment was firstly rendered by the Assessing Officer on the 10th Feb., 1986 under S. 144 of the IT Act. Aggrieved, the assessee filed an appeal which was disposed of by the learned CIT(A), Bhopal, vide order dt. 3rd July, 1986 as per which he did not approve of the ITOs action in completing the assessment ex parte on the 10th Feb., 1986 without waiting for the audit report. Finding the determination of the net income of the assessee at Rs. 75,00,000 by this ex parte assessment as unjustified the CIT(A) set aside the assessment with directions to the ITO "to complete it afresh in accordance with law after duly taking into account the material furnished by the appellant and after giving further opportunity". This resulted in another assessment order dt. 28th March, 1989 rendered under S. 143(3) of the Act against which the CIT(A) disposed of the assessees appeal vide order dt. 17th July, 1989. An order giving effect to the appellate order was passed by the CIT(A) on 21st Sept., 1989 against which the assessee filed appeal before the CIT(A). Thus, while ITA No. 931/Ind/90 has arisen as the assessees appeal against giving effect to order of the CIT(A), ITA Nos. 698 and 930/Ind/89 are the cross appeals against the regular assessment made afresh in respect of the asst. yr. 1982-83. Apart from this, the assessee also filed cross objection No. 6/Ind/90 against the Departments appeal for the asst. yr. 1982-83. The fifth case before us is the assessees appeal for the asst. yr. 1985-86.
5. The main controversy which rages through the three appeals and the cross objection for the asst. yr. 1982-83 pertains to the addition of Rs. 27,88,000 made by the Department towards "interest income capitalised". In this respect the assessees case to be stated succinctly is as follows.
6. Firstly, the assessment itself was void ab initio inasmuch as it was rendered for the first time on the 10th Feb., 1986 while the limitation to complete it expired on the 31st March, 1985.
7. Secondly, if the assessee did not succeed on the jurisdictional point, according to them no addition on the aforesaid count be made on merits as this addition was neither the subject-matter of the original assessment dt. 10th Feb., 1986 nor formed part of the directions of the learned CIT(A) (refer to his order dt. 3rd July, 1986 directing de novo assessment).
8. And thirdly, if the assessee failed on both these submissions, on merits such amount was not exigible to tax as the receipt was not revenue in nature and, inter alia, related to compensate the assessee towards the losses suffered by it in the running the units transferred as per the directions of the Madhya Pradesh Government which facts would be dealt with elaborately in the paragraphs hereinafter.
9. On behalf of the Department, the learned Departmental Representative vehemently contested all the three points and submitted that neither the assessment was time-barred nor the jurisdiction of the Assessing Officer was ousted in the facts and circumstances of the case from dealing with receipt of Rs. 27,88,000 in the fresh assessment and lastly in his submission, the amount in question was clearly a payment received by the assessee towards interest and alternatively a remission of the assessees liability to pay interest to the State Govt. and, therefore, clearly taxable the IT Act.
10. Before we deal with the rival submissions/contentions, facts that are necessary for the disposal of these appeals are summarised below.
11. The assessee, as stated earlier, is a public sector undertaking of the State of Madhya Pradesh (hereinafter referred to as the State Govt.). The assessee was running various small scale industries as suggested by the their name itself.
12. Vide orders dt. 9th Feb., 1971 and 2nd May, 1971 the State Govt. directed the assessee to transfer nine of their units enumerated in State Governments letter dt. 28th Oct., 1980, copy available at page 71 of the assessees paper book, to M. P. State Industries Corporation. As per this communication, the value of the assets of the nine transferred units amounting to Rs. 72.71 lacs was to be paid to the assessee in respect of which State Govt. passed an order on the 17th Nov., 1977. However, since due to some practical and administrative difficulties this direction could not be implemented, amended orders were issued by the State Govt. as are contained in the letter dt. 28th Oct., 1989 (supra).
13. Inter alia, these directions are that the State Govt. sanctioned a sum of Rs. 100.59 lacs for payment to the assessee.
The bifurcation of this amount is as under :
Rs.
A. Cost of the 9 units transferred from the assessee to the M.P. State Industries Corporation 72.71 lacs B. Grant to the assessee towards the loss resulting from the transfer of 9 units from the assessee to the M.P. State Industries Corporation 27.88 lacs Total 100.59 lacs
14. Insofar as the payment of this amount is concerned, the State Government directed that instead of cash, it would be adjusted towards the following dues of the State Govt. payable by the assessee :
Rs.
A. Receipts of the assessee towards village and small industries 73.50 lacs B. Interest receipts 27.09 lacs Total 100.59 lacs
15. It is this payment of Rs. 27.88 lacs being the grant made by the State Govt. to the assessee towards the loss resulting from the transfer of nine units from the assessee to the M. P. State Industries Corporation which is the bone of contention between the Department and the assessee.
16. Stopping here, we will now revert to the preliminary legal objection raised by the assessee that the assessment made on them was not maintainable from its inception. It may be pointed out that objection was not taken by the assessee before the learned CIT(A) during the first innings as a result of which the assessment was set aside to be done de novo, but was raised for the first time in the second innings and that too before the CIT(A) and not during the course of assessment under S. 143(3). However, the objection was considered by the CIT(A), but overruled.
17. Facts necessary to determine this issue are that the assessee firstly filed their return on the 30th June, 1982 showing an income of Rs. 68,79,940 as already pointed out earlier. Similarly, a revised return dt. 7th Feb., 1986 at an income of Rs. 53,28,234 also exists. The dispute is only in relation to the return allegedly filed by the assessee on 12th Feb., 1985 by which the Department got a fresh lease to complete the assessment upto 12th Feb., 1986 as contemplated by cl. (c) of sub-s. (1) of S. 153 of the Act. While the assessee clearly denies the filing of this intermediary return, as per the Department, it places reliance on the order sheet dt. 15th March, 1985 duly signed by the Assessing Officer. It reads as under :
"The original return was filed on 30th June, 1982 and it has been revised on 12th Feb., 1985/23rd Feb., 1985. The limitation stands extended. Please note in B. B. Sd/-
ITO"
In consequence of the aforesaid directions, the B. B., i.e., blue book finds the following entry :
"Revised return filed on 12th Feb., 1985 (minus) 11,59,726 - With an arrow it was mentioned "transferred to ITO, A Ward, Bhopal, vide order under S. 127 dt. 22nd Oct., 1985".
18. Apart from this, as is evident from the order of the learned CIT(A), the Dy. CIT also obtained confirmation from Shri S. D. Verma, the then Assessing Officer who vide letter dt. 8th June, 1990 confirmed the aforesaid facts. Further, next hearing in the case took place before Shri S. L. Khabya, Assessing Officer, on 6th Jan., 1986. The learned authorised representative of the assessee was present and order sheet entry of the said hearing finds place on the same page below the entry of 15th March, 1985 and the entry dt. 6th Jan., 1986 authenticated by the counsel.
19. Insofar as these facts pertaining to the order sheet, etc., are concerned, we too have seen the original document which clearly states about the filing of the revised return by the assessee as per the order sheet dt. 15th March, 1985. It may also be pointed out that the order sheet dt. 15th March, 1985 only relates to the filing of the disputed revised return by the assessee and no other fact. It is an independent order sheet and a judicial notice could be taken of that. It was written by the same person at the same time, i.e., in one stretch there being absolutely no difference even in the hue of the ink used for completing such order sheet. As far as the entry in the blue book is concerned, obviously it is secondary in nature, original document being the ITOs order sheet dt. 15th March, 1985. Although the learned counsel for the assessee contended that they were also maintaining day-to-day record of the proceedings which did not contain the fact of the filing of the intermediary revised return, but we find more force in the Departments case. We say so for a variety of reasons. The plea that the return was time-barred was raised by the assessee for the first time in the second innings and that too before the CIT(A) and not even before the Assessing Officer. No doubt, this revised return could not be ultimately traced by the Department but that does not clinch the issue. The return might be misplaced in the jungle of papers received and retained by the Department and may even go to show a lapse on their part in properly preserving important documents, but it does not militate against the positive material on record to show that such return was filed assessee. Order sheet dt. 15th March, 1985 is part of the quasi-judicial proceedings conducted by the ITO under the statutory authority vested in him by the IT Act, 1961. Till such time, anything to the contrary was proved, we are unable to doubt its varacity, genuineness much less its existence. As pointed out, this order sheet is on a paper which contains the records of the other dates in the assessees case and some of the order sheets are signed on behalf of the assessee and, therefore, this documents also for a very vital reason that the order sheet in question confines itself only to the filing of the revised return by the assessee makes it a wholly contemporaneous document.
20. In the result, we overrule the objection taken by the assessee that no intermediary revised return was filed by them on 12th Feb., 1985 and adopting the reasoning of the learned CIT(A) as of our own we hold that the assessee did file a revised return on 12th Feb., 1985 whereby the limitation to complete the assessment got extended and consequently the assessment made on the assessee on the 10th Feb., 1986 was well within time.
21. We now take up the other plea raised by the assessee that since the receipt of Rs. 27.88 lacs did not form part of the original assessment dt. 10th Feb., 1986 on which the CIT(A)s order dt. 3rd July, 1986 directing de novo assessment was reticent, the same could not have formed part of the fresh assessment completed by the Assessing Officer under S. 143(3). We wholly disagree with this.
22. As would be seen, the assessment order dt. 10th Feb., 1986 was rendered by the Assessing Officer under S. 144 of the IT Act as despite grant of sufficient time nobody turned up from the assessees side to participate in the proceedings.
23. The matter went in appeal before the CIT(A). The following contention was raised on behalf of the assessee before the CIT(A) :
"The learned counsel contended that the appellant had complied with all notices but then since the audit had been delayed, the appellant would furnish audit report only on 11th Feb., 1986 and, therefore, the ITO was not justified in completing the assessment ex parte on 10th Feb., 1986 without waiting for the audit report."
On the basis of this, the learned CIT(A) did not find the ITOs determination of the assessees income at Rs. 75 lacs as against Rs. 53,28,234 justified (wrongly mentioned as Rs. 16,90,992 in the appeal) and held that "it would be proper to restore the assessment back to the file of the ITO so that a fair and reasonable assessment of appellants income is made". He, therefore, set aside the assessment and directed the ITO "to complete it afresh in accordance with law after duly taking into account the material furnished by the appellant and after giving further opportunity".
24. This state of affairs clearly and unexeptionally goes to suggest that the Assessing Officer was under a legal obligation to complete the assessment on the basis of the audit report of the assessee and that the assessment was set aside lock stock and barrel to be made afresh in accordance with the provisions of law subject to providing the assessee of an opportunity of hearing and after taking into account the material (besides the audit report) furnished by them.
25. It is also interesting to point out that in the original return the assessee did not make any mention whatsoever about the receipt of Rs. 27,88,000 which fact was fairly conceded by their learned authorised representative appearing before us. He, however, added in the same breath that this was notified by the assessee to the Department in the advance tax estimate submitted in Form No. 29 on 14th/15th Dec., 1981 in the form of a note and that being so, it was the duty of the Assessing Officer to have taken into consideration this information even while completing a best judgment assessment. This argument is repelled on behalf of the Department with which we agree.
26. No doubt, the completion of an assessment under S. 144 is not an arbitrary affair with the ITO. However, what he is supposed to consider is "all relevant material which he has gathered on the basis of which he shall make the assessment of the total income or loss to the best of his judgment". We are unable to extend the obligation of the Assessing Officer to go into the three estimates which an assessee makes during an accounting year for the payment of advance tax. In saving so we do not mean that the Assessing Officer cannot use the information culled out from these estimates, yet there is a difference between the situation where the Assessing Officer is able to gather some information from one or more of such estimates and an obligation cast on him whereby he may be required to scan through these estimates. In the circumstances, the situation remains that the Assessing Officer was not possessed of any material whereby he could have come to know that the assessee had a receipt of Rs. 27.88 lacs during the relevant accounting period. Even at the cost of repetition it may be said that the audit report was also not before him when the ex parte assessment was completed.
27. The learned counsel for the assessee, however, made a reference to the ratio of the decision of the Honble High Court of Madhya Pradesh in the case of CIT vs. Jawaharlal Nagpal (1988) 171 ITR 136 (MP). In that case the assessee had filed his return for the asst. yr. 1973-74 declaring a total income of Rs. 14,840. The Assessing Officer added certain sums to the assessees income which was assailed before the AAC, inter alia, on the ground that the assessee was not given adequate opportunity of being heard. Accepting the assessees plea, the AAC set aside assessment and remanded the case to the ITO with direction to afford proper opportunity to the assessee in regard to each item of addition made by him.
28. After the matter came back to the ITO, he made further inquiry and found that apart from the additions made to the total income, which had been objected to by the assessee before the AAC, certain deposits in the names of certain persons were made by the assessee and that the said deposits represented the income of the assessee from undisclosed sources.
29. The ITO accordingly held that the sum of Rs. 1,64,250 was the income of the assessee from undisclosed sources. He also added the value of perquisite in respect of use of a car and finally completed the assessment at an income of Rs. 2,65,760. The Tribunal held that the new additions made by the ITO were on the basis of new sources of income and, therefore, without jurisdiction. When the matter went to the High Court, it held that in the fresh assessment proceedings after original assessment had been set aside, the ITO had no jurisdiction to take new sources of income.
30. As could be seen, the facts of the cited case are entirely different from the one before us. In the case before us, the assessment was completed even without the audit report. The receipt of the disputed amount of Rs. 27,88,000 was not before the Assessing Officer. On appeal, the CIT(A) abundantly made it clear that the determination of the assessees income at Rs. 75 lacs was not justified and that before the income of the assessee was determined, they should be given a fair and reasonable opportunity. Finally, the ITO was directed to complete the assessment afresh on the basis of the material furnished by the assessee which was obviously inclusive of the audit report and providing them an opportunity of being heard. In these circumstances, as has been narrated by us, it would be a travesty of facts if we agree that the Assessing Officer was trying to add any new source of income in the fresh assessment. In fact, it was only for the first time in the new assessment under S. 143(3) that the sources of income of the assessee whatsoever they were, gathered on the basis of the material produced by the assessee and assessment completed. Thirdly, this or any other source of income which stood disclosed by the consideration of the material, evidence and papers for which the Assessing Officer was under a legal obligation in terms of the directives of the learned CIT(A), not only could have been but should have been taken into consideration by the Assessing Officer in framing a proper and valid assessment. This objection of the assessee is also, therefore, overruled.
31. We thereafter consider the assessees case on merits.
32. As pointed out earlier, in terms of the directives of the State Government, nine units owned by the assessee were transferred to the M. P. State Industries Corporation vide orders dt. 9th Feb., 1971 and 2nd May, 1971 of the State Government. Naturally, the assessee had to be paid/compensated in respect of these units which had belonged to them. The State Government, as is manifest by the communication dt. 28th Oct., 1989 referred to above had fixed the cost of these transferred units at Rs. 72.71 lacs which had to be reduced from the share capital of the assessee. However, this process cold not see the light of the day owing to certain practical and administrative difficulties. The State Govt., therefore, vide communication dt. 25th Oct., 1980 decided that the assessee in addition to the aforesaid sum of Rs. 72.71 lacs be also paid an amount of Rs. 27.88 lacs towards the loss resulting from the transfer of nine units to the industries corporation. The learned counsel for the assessee submitted before us that this amount of Rs. 27.88 lacs be taken as the reimbursement of the loss suffered by the assessee corporation in running these nine units. If this submission is taken to a logical end, it would mean that such a loss was suffered by these nine units before they were transferred on the 9th Feb., and 2nd May, 1971. We specifically inquired from the assessees authorised representative to show to us the figures of the loss suffered by these nine units which could in the given circumstances be either an exact amount of Rs. 27.88 lacs or more than that. This drew a blank. We must say that we were not at all impressed by the submission made on behalf of the assessee that an inference be drawn by the Tribunal to the effect that the sum of Rs. 27.88 lacs represented the loss amount suffered by the assessee in running the nine units before they were asked to transfer to the States Industries Corporation. There is neither any material nor any warrant to do so. If the assessee had really suffered some losses in running these nine units, it is a fact within the special knowledge of the assessee which needless to state should have been proved by them before us as a fact of special knowledge as envisaged by the Indian Evidence Act. We equally discard the plea raised before us on behalf of the assessee that since all-most of the public sector undertakings/Corporations were running/returning huge losses, the assessee corporation did not stand as an exception and the theory advanced that the amount of Rs. 27.88 lacs be treated as reimbursement of the loss suffered by the assessee in running the nine units till 1971, be accepted. Such a pessimist and bleak state of affairs, we are afraid, we cannot subscribe to.
33. In fact what is clearly borne out from the State Governments communication dt. 28th Oct., 1980 is that it had advanced a sum of Rs. 73.50 lacs to the assessee Corporation for running its village and small industries. An interest, rate not known amounting to Rs. 27.09 lacs accrued thereon and, therefore, payable by the assessee to the Government. This amount had to be adjusted. The assessee were entitled to a sum of Rs. 72.71 lacs as the cost of the nine units transferred to the Industries Corporation. The State Government thought it fit to make a grant of the remaining amount which figure came to a sum of Rs. 27.88 lacs to the assessee which completed the adjustment, i.e., nothing payable by the assessee against the dues of the State Government of Rs. 100.59 lacs. The grant of Rs. 27.88 lacs is also justified as the payment of Rs. 72.71 lacs being the cost of the nine transferred units as already pointed out was delayed due to some administrative problems. This being so, is it not reasonable to treat the amount of Rs. 27.88 lacs as interest payable by the State Government to the assessee on the sum of Rs. 72.71 lacs. May it be pointed out that these units were transferred from the assessee to the Industries Corporation as back as in April/May, 1971, i, e., about 9-1/2 years before. The payment of Rs. 27.88 lacs by the State Govt. to the assessee when worked out would come to little less than 5% simple interest on the principle amount of Rs. 72.71 lacs. If the amount of Rs. 27.88 lacs had any other characteristic, it was the imperative duty of the assessee to have spelt out before us supported by the documentary evidence. The assessee is not an ordinary individual. They are a public sector corporation of the State Government and an amount of Rs. 27.88 lacs would not be payable by the State Government for nothing or without any rhyme or reason. The assessee have totally failed in bringing home their plea that the amount represented the loss suffered by them in having run these nine units. In these circumstances, we have to interpret the document/documents which are on record and the only logical and reasonable interpretation which could be put to the relevant document, viz., the State Govt.s letter dt. 28th Oct., 1980 is that the amount represented the interest on the principal sum of Rs. 72.71 lacs.
34. We are also not impressed by the submission on behalf of the assessee that no interest was due or was received by the assessee. As had already been shown by us, the interest was due. If an amount of Rs. 27.09 lacs was payable by the assessee to the State Government on the assessees receipt of Rs. 73.50 lacs, why not on the principles of reciprocity the State Government should also pay interest to the assessee for the delayed payment of Rs. 72.71 lacs being the cost of nine units. Whether the payment is made in cash or adjustment in respect thereof does not make any difference whatsoever in law.
35. The learned CIT(A) has rightly held that the above facts demonstrated that the Madhya Pradesh Government was debtor to the assessee for a sum of Rs. 72.71 lacs while it was a creditor to them for a sum of Rs. 100.59 lacs. Further, the assessee is a "person" as defined by sub-s. (31) of S. 2 of the IT Act, 1961. The excess of Rs. 27.88 lacs whether it is grant or given any other name was an amount received by the assessee by way of compensation for the transfer of these nine units.
36. In the circumstances, we are unable to agree with the assessee that the receipt of Rs. 27.88 lacs was in the nature of a capital receipt and, therefore, not liable to be taxed. It was clearly a revenue receipt and liable to be taxed.
37. It may also be pointed out that there is also sufficient force in the view taken by the learned CIT(A) that in the alternative the transaction of adjustment of which the payment of Rs. 27.88 lacs by the State Government to the assessee is a part, to the extent that it extinguished the assessees liabilities of payment of interest of Rs. 27.09 lacs, it amounted to a remission of liability. However, in view of our categorical finding that the receipt of Rs. 27.88 lacs was a receipt towards interest on a sum of Rs. 72.71 lacs due to the assessee from the Government of Madhya Pradesh, it would be taxable under S. 28(ii)(d) of the IT Act, 1961 as it falls within the phrase "any compensation or other payment received by any person for or in connection with vesting in the Government or in any corporation owned or controlled by the Government under any law for the time being in force of the management of any property or business. The payment in this case is interest and received by the assessee in lieu of the delay in the receipt of compensation/cost of nine units transferred by the State Government to another corporation.
38. Thus, the assessee also fails here.
39. The second grievance of the assessee against the regular assessment is against the dismissal of their claim for weighted deduction under S. 35B in a sum of Rs. 1,09,028.
40. At the hearing it was submitted that the issue was covered by a Tribunals decision dt. 22nd July, 1991 rendered in the assessees own case in respect of the asst. yr. 1981-82 (copy available on record) as per which the assessees claim was partly accepted by the Tribunal particularly in respect of the advertisement or publicity outside India towards the services or facilities in which the assessee dealt with and provided in the course of its business and travailing outside India for the promotion of sale outside India of such services or facilities. Part of the assessees claim was rejected. Following the view taken by our brother during 1981-82 we direct the Assessing Officer to ascertain the figures on which the assessee is entitled to the weighted deduction under S. 35B in terms of this order and accordingly allow the assessees claim. Thus, ITA No. 849/Ind/89 is partly allowed.
41. Insofar as ITA No. 931/Ind/90 is concerned, the first ground about the lack of jurisdiction in the Assessing Officer in completing the Assessment for the asst. yr. 1982-83 has already been decided by us against the assessee. The only other ground, namely, not allowing of relief to the assessee in tax and interest assuming while denying that the assessment did not deserve to be annulled also stands dismissed as not pressed before us. Thus, ITA No. 931/Ind/89 stands dismissed.
42. Insofar as Departments appeal ITA No. 930/Ind/89 is concerned, the same stands dismissed as the only ground taken therein pertaining to the assessees claim of weighted deduction under S. 35B stands already covered in the assessee appeal, ITA No. 849. Ind/89. Thus, ITR No. 930/Ind/89 also stands dismissed.
43. Taking up cross-objection No. 6/Ind/90 filed by the assessee, the same also stands dismissed as it was filed by them in response to the Departments appeal and in fact misconceived as the learned CIT(A) had not granted any relief to the assessee in respect of the addition of Rs. 27.88 lacs or in relation to the assessees claim under S. 35B of the IT Act and in any event of the matter, the assessees appeal on these two issues did exist as ITA No. 849/Ind/89. Thus, the cross objection No. 6/Ind/90 stands dismissed.
44. We now take up the assessees appeal for the asst. yr. 1985-86.
45. The basic grievance of the assessee revolves round the payment of sales-tax made by them to which they were entitled.
The Assessing Officer on scrutiny of sales-tax account found that the assessee had made the following payments which related to deferent years all earlier to the assessment year under consideration :
(i) Sales-tax for 1st June, 1983 to 30th June, 1983 3,39,955 (Accounting year 1982-83 relevant to asst. yr. 1984-85)
(ii) In respect of accounting year 1979-80 relevant to 24,413 & 1,575 asst. yr. 1981-82
(iii) In respect of accounting year 1978-79 relevant to 22,687 & 26 asst. yr. 1980-81
(iv) Accounting year 1973-74 relevant to asst. 1974-75 6,96,765 The assessee submitted that these amounts were not earlier charged to the revenue account and, therefore, payments made during asst. yr. 1985-86 should have been allowed. The Assessing Officer repelled the assessees plea on the premises that the assessee was making provision for payment of these taxes in its accounts.
46. As per the assessee, this did not represent the correct state of affairs which plea found support from the first appellate order.
47. We have considered the matter carefully. The learned CIT(A) has clearly stated in his order impugned before us that the assessee is maintaining accounts on mercantile basis. Further, the assessee had been making provision towards liability of sales-tax, but the same was being disallowed. However, the claim of payments to the extent of provision was being allowed, but anything in excess of the provision made was disallowed.
48. The learned CIT(A) has disposed of the issue in the following manner :
"As the assessee was maintaining accounts on mercantile system of accounting. It was not explained before the Assessing Officer as to how the payments in excess of anticipated liability were made. It is stated that the Dy. CIT(A) had also not given opportunity to produce evidence like sales-tax orders, etc., to prove complete facts. However, the appellant failed to produce copies of sales-tax orders and also was unable to explain the circumstances in which additional liability arose. However, challans for payment of sales-tax were produced before the Dy. CIT(Asst.). As the Assessing Officer was not satisfied with the challans he disallowed the claim in excess of the provisions made. The appellant has produced before me copies of sales-tax orders dt. 24th Dec., 1982 and appeal order dt. 4th March, 1983 for the period 1st July, 1978 to 30th June, 1979 and 1st April, 1978 to 31st March, 1979. These orders were not before the Assessing Officer. Assessing Officer is, therefore, directed to obtain these orders from the assessee and to consider the appellants claim if it is found that the liability had been incurred, during the year under appeal, he should entertain the claim and dispose of the same on merits. This direction should be complied with while giving effect to this order."
49. As would be seen, the CIT(A) has directed that if after going through the sales-tax order it was found that a particular liability had been incurred by the assessee during the current accounting period, the assessees claim should be entertained and disposed of on merits. If despite the assessees following mercantile system of accounting, provision made by them in respect of the payment of sales-tax in the past years were disallowed, we see no reasons to why the payments towards sales-tax made by the assessee during 1985-86 by them pertaining to the past years could be disallowed. The invocation of the provisions of S. 43B of the IT Act by the Assessing Officer is misconceived. Even if the actual payment exceeded the amount of provision which was disallowed, the assessee would be entitled to claim it on the basis of payment made during the year. To this extent, the directions of the learned CIT(A) are expanded.
50. In the net result, while ITA No. 849/Ind/89 for the asst. yr. 1982-83 and ITA Nos. 698/Ind/89 for the asst. yr. 1985-86 are partly allowed, ITA Nos. 931/Ind/90 and 930/Ind/89 for the asst. yr. 1982-83 stand dismissed and so cross-objection No. 6/Ind/90.