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Issues:
1. Whether the order passed by the learned CIT under section 263 of the IT Act, 1961 for the assessment year 1985-86 was erroneous and prejudicial to the interests of the Revenue. 2. Whether the amount of Rs. 94,476 realized by the assessee as Rajasthan Sales-tax and not deposited within the accounting period was rightly allowed by the ITO. 3. Whether the amendment to section 43B by the Taxation Laws (Amendment) Act, 1987 was operative for the assessment year in question. 4. Whether the decision of the Gujarat High Court in Lakhanpal National Ltd. vs. ITO supports the Department's case. 5. Whether the first proviso to section 43B introduced by the Finance Act, 1987 is prospective or retrospective. Analysis: 1. The assessee, a registered firm dealing in the purchase and sale of tractors, motor cycles, and accessories, contested the order passed by the CIT under section 263 of the IT Act for the assessment year 1985-86. The CIT believed that the assessee's order was erroneous as it did not include an amount of Rs. 94,476 realized as Rajasthan Sales-tax. The CIT revised the assessment order to include this amount as the assessee's income, relying on the decision of the Gujarat High Court in Lakhanpal National Ltd. vs. ITO. However, the assessee argued that the amount was paid within the due date as per the Rajasthan Sales-tax Act, and the amendment to section 43B by the Taxation Laws (Amendment) Act, 1987 was clarificatory and operative for the assessment year in question. 2. The assessee contended that the amount of Rs. 94,476 realized as Rajasthan Sales-tax was rightly allowed by the ITO as it was paid within the stipulated time frame as per the Rajasthan Sales-tax Act. The CIT, however, disagreed and revised the assessment order to include this amount as the assessee's income. The ITAT, considering the conflicting views on the retrospective or prospective nature of the first proviso to section 43B, held that since the sales-tax amount was deposited within the due date, section 43B could not be applied. The ITAT relied on the principle laid down by the Supreme Court in Vegetable Products Ltd. and quashed the CIT's order, ruling in favor of the assessee. 3. The ITAT noted the differing opinions among various High Courts regarding the retrospective or prospective application of the first proviso to section 43B introduced by the Finance Act, 1987. While the Delhi High Court viewed the amendment as prospective, other High Courts considered it clarificatory and retrospective. In the absence of a decision from the jurisdictional High Court of Rajasthan, the ITAT applied the principle favoring the assessee, as per the Supreme Court's ruling in Vegetable Products Ltd. The ITAT concluded that the CIT's order was erroneous, and therefore, allowed the appeal filed by the assessee.
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