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TMI Blog2004 (12) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the circumstances of the case, the Tribunal was right in law in holding that the assessee was merely a trustee in respect of the collections of Central sales tax from its customers?" At the relevant time, the assessee was carrying on the business of purchase and sale of cotton and used to maintain accounts on mercantile basis. During the period from October 18, 1971, to November 4, 1972, the assessee collected Rs. 59,025.04 from the customers on account of Central sales tax but neither deposited the same into the Government exchequer nor refunded it to the customers. By an ex parte order dated June 3, 1975, passed under section 143(2) of the Income-tax Act, 1961 (for short, "the Act"), read with section 144 of the Act, Income-tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the Central Sales tax Act and what we collect from our outside purchasers or effect the Central sales, we credit the Central sales tax collected or provided to a Central sales tax account. From the financial year 1967-68, we are crediting this account according to the collections made or provided on account of the Central sales tax and this account is debited when these payments were made on finalisation of assessments. The Central sales tax collected is our liability today the Government and is not a trading receipt. (3) That the assessee has collected Rs. 59,025.04 paise as Central sales tax and the payments made were as under during this year account as well as previous year's balance: 23.6.1975 Rs. 33,966 14.10.1975 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in relation to the assessment year 1972-73 had been deleted vide order dated November 5, 1977, passed in I.T.A. No. 256 of 1976-77 and there was no tangible reason to take a different view. For the sake of reference, the relevant extract of order dated September 16, 1981, passed by the Tribunal is reproduced below: "For the assessment year 1972-73, the dispute travelled to the Chandigarh Bench of the Tribunal by way of second appeal from the assessee and decided in its. favour vide order November 5, 1977, in I.T.A. No. 256 of 1976-77. Making the said order as the basis, we dismiss the Revenue's appeal though Sh. Mange Lal vehemently contended that the collection by the assessee was not even disputed liability. We have reproduced the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following propositions: "As already noticed, the sales tax amount received by an assessee forms part of the trading receipt and if the assessee is liable to pay tax, the amount will be allowed as a deduction according to the accounting system adopted by the assessee. It is also beyond dispute that if ultimately it is found that an assessee, who has paid the amount and got the deduction, gets the sales tax by way of refund, the amount has to be added as a trading receipt in the relevant accounting year. Similarly, if an assessee who is following the mercantile accounting system and deduction of sales tax is granted on the basis of liability to pay the tax without actual payment and if ultimately it is decided that the whole or a part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sachi Mukharji J. (as his Lordship then was), after considering the judgments of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 and Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542 held as under: "That the amounts collected by the assessee as sales tax formed part of its trading receipts. However, the liability to pay sales tax arises the moment a sale or purchase is effected and an assessee who maintains accounts on the mercantile system is entitled to deduction of his estimated liability to sales tax, even though they had not been paid to the sales tax authorities." In CIT v. Leader Engineering Works [2004] 269 ITR 432, a Division Bench of this court, of which one of us (G.S. Singhvi J.) was a memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise point was not under consideration. Accordingly, following Kedarnath Jute Mfg. Co. Ltd.'s case [1971] 82 ITR 363 (SC) the two decisions of this court and of other High Courts referred to above, it is held that the Income-tax Officer had rightly allowed the deduction in the original assessment framed by him. Once the assessment orders were rightly framed, no case for rectification or for reopening under sections 147/148 and 154/155 of the Act arises and the notices are clearly illegal and without jurisdiction." In our opinion, the proposition of law laid down by the Division Bench in Sirsa Industries v. CIT [1989] 178 ITR 437 (P H) represents the correct law. Therefore, we do not find any valid ground to interfere with the order pass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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