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Issues: Assessment of sales tax liability for a firm, justification of withdrawal for meeting sales tax liability, discharge of onus under Explanation to section 271(1)(c), cancellation of penalty levied on the firm.
Analysis: The case involves the Revenue seeking a reference to the High Court regarding the Tribunal's order on the assessment year 1970-71 for an assessee-firm. The main issues revolve around the firm's treatment of sales tax liability, withdrawal of funds for the same, discharge of onus under the Explanation to section 271(1)(c), and the cancellation of the penalty imposed on the firm. The assessee-firm withdrew an amount from the cash book to meet the sales tax liability on March 31, 1970. The Revenue contended that this withdrawal was an attempt to reduce taxable income, as the amount was not deposited in the treasury. The Revenue treated this amount as income of the assessee. The AAC confirmed this addition, leading to penalty proceedings under section 271(1)(c) for concealment of income. The Tribunal found that the assessee had a statutory liability to pay sales tax, and withdrawing funds to meet this liability did not constitute fraud or wilful neglect. Citing the Supreme Court's decision in Kedarnath Jute Mfg. Co. Ltd. v. CIT, the Tribunal held that the assessee had discharged the onus under the Explanation to section 271(1)(c). The Tribunal concluded that there was no concealment of income or deemed concealment, thus cancelling the penalty levied by the Revenue. The High Court agreed with the Tribunal's findings, stating that the sales tax liability was admissible even though not debited in the books of account. The Court held that the assessee was not guilty of concealment of income under section 271(1)(c) or deemed concealment under the Explanation. Consequently, the Court dismissed the Revenue's petition for reference to the High Court, with no order as to costs. In conclusion, the judgment emphasizes the importance of statutory liabilities and the discharge of onus under tax laws. The decision provides clarity on the treatment of liabilities and deductions, ultimately resulting in the cancellation of the penalty imposed on the assessee-firm.
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