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TMI Blog1982 (9) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the application of the Excise Dept. the petitioner was directed by the court to deposit the excise duty in the court each month and the petitioner complied with the same. The petition was allowed on 12th April, 1973, and s. 5 of the Opium Act and the relevant Rules framed by the Uttar Pradesh Govt. were held to be ultra vires. The petitioner was held not liable to pay any duty imposed under those Rules. After the decision a sum, of Rs. 2,58,983, which the petitioner had deposited in the court, was refunded to it. The petitioner showed that amount in the balance-sheet of the previous year (ended October 25, 1973), relevant to the assessment year 1974-75 on the liabilities side. The petitioner filed a copy of the P L a/c and the balance-sheet along with the return for that year. The assessment was completed on September 17, 1974, wherein the petitioner's return except for some minor additions on account of some inadmissible expenses was accepted and the aforesaid amount of Rs. 2,58,983 was not treated as an item of income. It has further been stated in the writ petition that later on the audit section of the I.T. Dept. raised an objection to the effect that the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is not applicable and that the action taken was without jurisdiction because it was based on an opinion expressed by the audit party which does not constitute an information within the meaning of s. 147(b) of the Act. The petitioner prays for the issue of a writ, order or direction in the nature of certiorari quashing the notices issued under s. 148 of the Act on January 8, 1979, as also the subsequent proceedings taken in pursuance thereof including the proposed draft assessment order and the notice issued by respondent No. 2 dated December 10, 1979. There is also prayer for a writ in the nature of mandamus directing the respondents not to initiate proceedings against the petitioner under s. 271(1)(c) of the Act. A counter-affidavit has been filed on behalf of the respondents in which, inter alia, it has been averred that the assessment for the year 1974-75 had been made under s. 143(1) of the Act and the return had been accepted. That being so, the Explanation to s. 147 was attracted to the case. Apart from this, in para. 13 it has been stated that the monthly payments made to the credit of the High Court were included by the petitioner in the trading account of the poppy h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not. " Section 41 enumerates receipts which are deemed to be the income under the head " Business or profession ". Sub-section (1) provides that where an allowance is granted in any year in respect of any loss, expenditure or trading liability and subsequently during any previous year the assessee receives, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure; or the assessee is benefited by the remission or cessation of the trading liability, the, amount received or the amount of the liability which is extinguished is chargeable as business profits of that previous year. The sub-section speaks of an allowance or deduction in respect of loss, expenditure or trading liability. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 28th August, 1970, and on the basis of the same the ITO disallowed the deduction claimed by the assessee in respect of the current liability and treated the amount of deduction in respect of the past liability as income under s. 41 of the Act and added those two amounts to the income of the assessee. The view taken by the court was that since a Letter's Patent Appeal had been admitted and was pending, there was a likelihood of the decision of the learned single judge to be reversed and hence it could not be said that the liability ceased. Indeed, there may be a further appeal to the Supreme Court. Thus, a decision liable to appeal, may be final until the appeal is not preferred, but once an appeal is filed, the decision looses its character of finality and becomes sub judice, that is, a matter under judicial enquiry. In these circumstances, the ITO was held not competent to invoke the provisions of s. 41(1) of the Act. According to the petitioner it was a case of an allowance or deduction in respect of a trading liability and since that liability has not finally extinguished inasmuch as the appeals are still pending before the Supreme Court "and in pursuance of an interim order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1974-75, therefore, in consequence of information in my possession I have reason to believe that the income chargeable has escaped assessment for the assessment year 1974-75 within the meaning of section 147(b). " It would appear that the ITO was conscious of the fact that both the Govt. of Uttar Pradesh and the Central Govt. had filed appeals by special leave before the Supreme Court, that these appeals were admitted and the court directed the petitioner to furnish security for the sum of Rs. 2,58,984 to the satisfaction of the Registrar of the court and that the assessee complied with that direction. It is not correct on the part of the ITO to state that the High Court allowed the writ petition and directed the State Govt. to refund the excise duty. The excise duty had been deposited by the petitioner in the court itself and that amount was directed to be refunded to it. The amount, therefore, was refunded to the petitioner by the court and not by the State Govt. It is also not correct for the ITO to state that there is no present liability existing against the assessee. It is clear, therefore, that since the assessee followed the mercantile system of accounting, it was allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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