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Issues Involved:
1. Whether the addition of Rs. 1,18,05,966 on account of excise duty refund under section 41(1) of the Income-tax Act was justified. 2. Whether the excise duty refund amount can be considered as income despite pending appeal before the Supreme Court. 3. Whether the assessee can raise an additional claim under section 80HH. 4. Whether the assessee can file an audit report for claiming deduction under section 80HHC. Issue-Wise Detailed Analysis: 1. Addition of Rs. 1,18,05,966 on Account of Excise Duty Refund: The court examined whether the Income-tax Appellate Tribunal was justified in upholding the addition of Rs. 1,18,05,966 made by the Assessing Officer under section 41(1) of the Income-tax Act. The assessee received a refund from the Central Excise Department during the year 1991-92, which was placed under "liability" in their accounts. The Assessing Officer invoked section 41(1), arguing that the refund should be treated as income. The Tribunal upheld this view, but the court noted that the matter was pending before the Supreme Court, meaning there was no final adjudication. Referring to precedents such as J. K. Synthetics Ltd. and Bharat Iron and Steel Industries, the court concluded that the provisions of section 41(1) could not be invoked as the liability had not ceased irrevocably. Therefore, the court answered this issue in the negative, favoring the assessee. 2. Excise Duty Refund as Income Despite Pending Appeal: The court considered whether the refund amount could be treated as income while the appeal was pending before the Supreme Court. It was noted that the refund was subject to the final decision of the apex court, and thus, the liability had not ceased. The court cited the Supreme Court's decision in Union of India v. J. K. Synthetics Ltd., which emphasized that the liability to tax under section 41 would depend on the outcome of the appeal. Consequently, the court held that the refund amount could not be considered as income during the period in question. 3. Additional Claim Under Section 80HH: The Revenue questioned whether the Tribunal was right in allowing the assessee to raise an additional claim under section 80HH. The court did not provide a detailed analysis on this issue as it was contingent upon the primary issue of whether the refund amount was taxable. Since the court found that the refund was not taxable, this question became moot and was not specifically answered. 4. Filing Audit Report for Deduction Under Section 80HHC: The Tribunal had permitted the assessee to file an audit report for claiming deduction under section 80HHC, considering the refund as deemed business income. The court noted that since the refund was not taxable, this issue also became irrelevant. Hence, the court did not provide a separate answer for this question. Conclusion: The court concluded that the excise duty refund amount could not be treated as income under section 41(1) of the Income-tax Act due to the pending appeal before the Supreme Court. Consequently, the questions raised by the Revenue regarding additional claims and audit reports for deductions under sections 80HH and 80HHC were not addressed. The court's decision favored the assessee, and the special civil application was withdrawn to allow further agitations before the Commissioner of Income-tax (Appeals).
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