9911796707
TMI Blog1991 (11) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... a final decision was pending. He further observed that the company had not paid this demand nor had made any provisions in the accounts for the year under consideration or even in the subsequent year. In 144B proceedings, the IAC allowed the claim of the assessee, after taking note of various decisions in Shrikant Textiles v. CIT [1971] 81 ITR 222 (Bom.), [1974] 97 ITR 162 (sic), J.K. Synthetics Ltd. v. O.S. Bajpai, ITO [1976] 105 ITR 864 (All.), CIT v. Century Enka Ltd. [1981] 130 ITR 267 1/ (Cal.) and CIT v. United India Woollen Mills [1981] 132 ITR 457 (Punj. Har.). He, however, directed the ITO to tax the refund of excise duty as per High Court s decision in the assessment year in which it was struck down. In view of the directions of the IAC in 144B proceedings, no addition was made in the final order of assessment. 6. In the appeal proceedings, the CIT(Appeals), however, observed that the excise authorities had merely issued show-cause notices to the assessee and as the assessee had objected to the levy of the above said additional excise duty, no adjudication had been made by the Assistant Collector of Central Excise during the accounting year and it appeared prima fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person in whose favour the demand had been raised. He further held that it could never be said to embrace provisional, notional or contingent payments which the assessee considered that he might ultimately be called upon to pay and for this proposition, he referred to the judgment of the Allahabad High Court in the case of New Victoria Mills Co. Ltd. v. CIT [1966] 61 ITR 395. He has also referred to the following observations of the Supreme Court in the case of Kesoram Industries Cotton Mills Ltd. v. CWT [1966] 59 ITR 767: ......This court has on more than one occasion emphasised the fact that the real income of the assessee has to be ascertained on commercial principles subject to the provisions of the Income-tax Act ........ According to him, Their Lordships held that a distinction must be made between the case where there was an existing debt, payment whereof was deferred and a case where both debt and its payment rested in future. According to him, in the former case there was an attachable debt and in the latter case there was not. According to the CIT (Appeals), in the present case, the Assistant Collector, Central Excise did not adjudicate in pursuance of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of ₹ 12,32,881 and to enhance the income by the said amount. 9. The assessee is aggrieved by the enhancement of the income by withdrawing these two claims, which had been allowed by the ITO in pursuance of the directions issued by the Inspecting Assistant Commissioner of Income-tax (IAC) under section 144B of the Act. Two objections are raised before us - (i) that the CIT(Appeals) had no power to enhance the assessment as this very point had been the subject-matter of discussion under 144B proceedings; and (ii) that on merits, the claim was allowable and wrongly withdrawn. On the first point, the learned counsel for the assessee referred to the judgments of the Supreme Court in the case of CIT v. McMillan Co. [1958] 33 ITR 182 ; and CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 ; and submitted that the powers of the CIT(Appeals) are co-terminus to that of the ITO; he could do what the ITO could do; and vice-versa it meant that he could not do what the ITO could not have done. The order of the IAC under section 144B was binding on the ITO and, therefore, it was binding on the CIT(Appeals) as well. He also referred to the decision of the Bombay High Court in Loke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued under section 11A(1) of the Act. A valid and enforceable demand arises against the assessee nor before and only on adjudication of the matter by the Assistant Collector/Collector under section 11A(2) and since in this case, no adjudication had taken place and the said show-cause notices were quashed by the High Court before adjudication, no demand was even raised against the assessee which could be allowed to it. He further submitted that the liability, if there was any, was quashed by the order of the Bombay High Court dated 1-9-1981 and, therefore, there existed no ultimate liability on the assessee; much less an enforceable one. He relied on the decisions of the Supreme Court in the cases of Indian Molasses Co. (P.) Ltd. v. CIT [1959] 37 ITR 66 and Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585 2. 12. We have heard the parties and considered their rival submissions. We shall first take up the assessee s objection raised on the powers of the CIT(Appeals) to enchance the income. Ordinarily, an assessment is made by the ITO himself as per the procedure laid down under the Income-tax Act. If the variation in the assessment and the income as per the return is more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the points which were the subject matter of discussion and directions by the IAC in proceedings under section 144B of the Act. The powers of the CIT(Appeals) are independent of and not subject to the provisions of section 144B of the Act. Even otherwise, the CIT(Appeals) being an authority higher in hierarchy of the Income-tax authorities, besides an appellate authority established to hear the appeals against an order under section 143(3) made in pursuance of the directions of the IAC issued under section 144B of the Act, could not be said to be bound by the directions of the lower authority. The powers of the CIT [Appeals) as stated above are that in an appeal against an order of assessment, he may confirm, reduce, enhance, or annul the assessment and so on. Nowhere these powers are made subject to the directions given by the IAC under section 144B of the Act. The first objection of the assessee, in our opinion, thus has no force and it is accordingly rejected. 14. We shall now deal with the assessee s case on merits. The liability that is claimed by the assessee is that arising under section 3 of the Central Excise and Salt Act, 1944 is a charging section. It provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued under section 11A(1) of the Central Excise and Salt Act, calling upon the assessee to file objections, if any, so that its case can be adjudicated by the Assistant Collector/Collector under section 11A(2) of the said Act, who shall thereupon determine the amount payable by the assessee, not exceeding the amount stated in the show-cause notices issued under section 11A(1) of the said Act, which have been reproduced above. 16. On a careful reading of these two provisions, we are of the opinion that the charge is created for the duty, the moment the assessee manufactured/ produced the goods. Taxable event is the manufacture or production. Where, however, the assessee does not pay excise duty in the year of manufacture or production as per the procedure laid down in that Act, for any reason whatsoever and the excise authorities are of the view that was liable to pay the duty, they can levy and collect the same as per the provisions of section 11A of the said Act. 17. The liability of excise duty arises against the assessee in the year in which chargeable goods were produce d/manufactured. No quantification in an assessment thereof by any authority, nor any demand notice, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as Bombay Benches of the Tribunal are concerned, the view of the jurisdictional High Court is binding and is to be given effect to. We, therefore, proceed to examine the assessee s case as to whether a demand was made by the authorities and deduction can be allowed on that ground. 19. The deduction for the two amounts is claimed on the basis of various notices under section 11A of the Act. According to the assessee, as all the show-cause notices were issued during the previous year, therefore, a demand was created against it and the same should be allowed as a deduction. Here also, we do not find any force in assessee s contention. As per the provisions of the Central Excise and Salt Act contained in section 11A, demand is not created by the issue of show-cause notice alone and it arises only on and after adjudication has taken place. As provided in the section itself, a notice is issued at the first instance, calling upon the assessee to show cause within thirty days as to why the duty be not levied and collected from him. After hearing the objections of the assessee, the Assistant Collector/Collector determines the amount of duty payable by the assessee under section 11A(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand which continued up to the end of the accounting year. In that case, an offer to levy excise duty at a different rate was made to the assessee on the express condition that the assessee should agree to pay duty calculated on the basis of that different system and since this condition was not accepted, the court held that liability remained and was an ascertained liability and the assessee was entitled to deduction. There is no such statement in this case. In this case, it was only a show-cause notice yet to be converted into a demand upon adjudication. In Central Provinces Manganese Ore Co. Ltd. s case (supra), there was no dispute before the Bombay High Court that the liability arose in the year under consideration and, therefore, that case does not help the assessee. In Kedarnath Jute Mfg. Co. Ltd. s case (supra), the claims were in the year of taxable event, i.e., in the year of sale for sales-tax liability and, further-more, there was a demand notice issued in that ear and there was no question of show-cause notice. In Pope The King Match Factory s case (supra), the Madras High Court dealt with a situation where demand was raised on the basis of the order of the Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X
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