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TMI Blog1995 (7) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a further appeal against the said order under section 154 by the CIT(A) before us and that appeal is marked as ITA No. 1363/Ahd/1991. 3. We will first deal with the assessee's appeal [ITA No. 4339/Ahd/ 1990] and the Revenue's appeal against the order under section 154 passed by the CIT(A) being ITA No. 1363 /Ahd/ 1991 in which the main point requiring our consideration relates to an addition of Rs. 26,04,372 made by the ITO under section 41(1) in respect of cessation of liability for repaying the refund of custom duty received by the assessee. 4. The facts relating to the aforesaid matter are briefly as under : (A) The assessee exported some consignments of wool describing it as Indian Scoured Wool during the year 1973-74 and paid under protest export duty under Tariff Item No. 12--Raw Wool--of Second Schedule to the Act, 1934. The amount of duty including cess paid under protest amounted to Rs. 26,04,372. (B) Thereafter the assessee applied for refund of the aforesaid duty to the Assistant Collector, Jamnagar who passed refund orders in the months of August, September and November 1974. (C) Thereafter the Superintendent of Customs, Jamnagar issued notices/demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1498 of 1974 on 8-12-1975, the High Court quashed the notices of demands issued by the Superintendent of Customs, Jamnagar. By this show-cause notice issued under section 130 the assessee was required to show cause why the abovereferred orders of refund of Assistant Collector of Customs, Jamnagar should not be set aside and why an appropriate order in review should not be passed directing recovery of Rs. 26,04,372 which appears to have been erroneously refunded. (I) The Collector, Customs and Central Excise vide order dated 20-7 1976 set aside the aforesaid improper and erroneous orders of refund passed by the Asstt. Collector of Customs, Jamnagar and directed the assessee-exporter to pay back forthwith the aforesaid amount of Rs. 26,04,372 which was refunded by the Asstt. Collector of Customs, Jamnagar. (J) Against this order passed under section 130 of the Customs Act, 1962, the assessee submitted revision application under section 131 before the Commissioner (Revision Applications) (Ministry of Finance) (Deptt. of Revenue Banking), Government of India, New Delhi. (K) The order dated 16-9-78 was passed by the Additional Secretary to the Govt. of India, Ministry of Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce order under section 130 was passed on 4-6-1985 (correct date should be 30-5-1985) which falls in the accounting year relevant to assessment year 1986-87, the refund in question of Rs. 26,04,372 has become final and as such the provisions of section 41(1) are clearly attracted to the facts of the case. He accordingly confirmed the order of the Assessing Officer in which the aforesaid amount was added as income under section 41 (1) of the Act. 6. It will be worthwhile to state that Shri KC. Patel, Advocate, Shri R.M. Sanghvi, Shri J.K Anjaria and Shri Ajay Anjaria were present on behalf of the assessee during the course of hearing of appeal which was decided vide order dated 13-9-1990. The written submissions were also submitted prior to decision of the said appeal. 7. Thereafter, the assessee presented some Misc. Petition presumably under section 154 of the Act before the same CIT(A) Shri K. Subba Rao, who originally decided the matter vide his order dated 13-9-1990. The CIT(A) passed order under section 154 on 10-12-1990 i.e., about three months of the original appellate order passed by him. In the opening para of order under section 154 passed by the CIT(A) on 10-12-1990 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the Customs Department submitted Special C.A. before the Supreme Court and such leave was granted by the Supreme Court. Therefore the proceedings initiated under section 28 were still pending in assessment year 1986-87. The Supreme Court finally decided the matter vide judgment dated 10-1-1991 and therefore the liability finally ceased to exist only when the Supreme Court had finally decided the said matter which falls in assessment year 1991-92. The department has included the aforesaid amount of Rs. 26,04,372 as liable to tax in assessment year 1991-92. However, such addition in assessment year 1991-92 was made without prejudice to the stand of the department taken in assessment year 1986-87. The learned counsel submitted that the liability did not cease to exist in the assessment year 1986-87 in view of the pendency of the said matter before the Supreme Court in that year. 9.1 In the alternative it was submitted that even if these impugned notices are held to be mere show-cause notices, the appellant company which maintains its accounts on mercantile basis is entitled to claim deduction for the said liability in view of the following judgments : (i) CIT v. Centur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs found that the notices dated 4-2-1976 under section 130 were beyond the time limit of six months laid down in section 28. The learned counsel thus strongly submitted that the original appellate order passed by the CIT(A) confirming the addition in question was patently wrong and suffered from glaring mistakes and further submitted that the subsequent order passed by the CIT(A) under section 154 deleting the said addition is perfectly valid and justified. 10. The learned DR submitted that the liability for repaying back of refund of duty received by the assessee finally ceased to exist when the proceedings initiated under section 130 were dropped in the year under consideration. He placed heavy reliance on the elaborate reasons mentioned in the assessment order and as well as in the original appellate order passed by the CIT(A). It was pointed out that the amount in question has been added in assessment year 1991-92 on a protective basis. It has been clearly mentioned in the assessment order for assessment year 1991-92 that the said addition is being made without prejudice to the stand taken by the department that the said amount is rightly assessable as income under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng instance of rectification order passed in flagrant and deliberate disregard of the provisions of law. We are therefore of the considered opinion that the order passed by the CIT(A) under section 154 deleting the addition of Rs. 26,04,372 is patently invalid and deserves to be quashed. We accordingly set aside and cancel the said order passed by the CIT(A) under section 154 on 10-12-1990. 12. We will now consider the assessee's appeal against the original appellate order passed by the CIT(A) on 13-9-1990 in which the addition of Rs. 26,04,372 made under section 41(1) of the Act was confirmed. 13. The amount of duty on export paid by the assessee on export of wool and describing it as Indian Scoured Wool paid under protest in the financial year 1973-74 was refunded to the assessee in the months of August, September and November 1974 which falls in assessment year 1976-77. The previous year adopted by the assessee ended on 31-8-1985 relating to assessment year 1986-87. It is therefore clear that the assessee's accounting year ended on 31st day of August every year. 13.1 This refund received in previous year relevant to assessment year 1976-77 was not accounted for by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under section 28 by the Gujarat High Court vide order dated 8-12-1975 considering further proceedings to be taken before the Supreme Court as a real and substantial nature of proceedings or they merely wanted to keep the matter alive by persuading the matter relating to Special leave to appeal and in the meantime they wanted to examine as to under which other provisions of the Customs Act, the department can take more effective proceedings for ensuring recovery of the amount alleged to have been erroneously refunded to the assessee. With these observations the department issued a show-cause notice under section 130 on 4-2-1976. It will be worthwhile to reproduce paras 7 to 10 of the said show-cause notice dated 4-2-1976 : "(7) And whereas it appears that proper procedure was not followed by Superintendent, Customs, Jamnagar in demanding repayment of the duties erroneously refunded as aforesaid and therefore on their filing a writ petition in the Gujarat High Court in the matter Spl. C.A. No. 1498/75 of 15-9-1975, the High Court quashed the notices of demands issued by the Superintendent, Customs, Jamnagar. (8) And whereas it appears that M/s. Walker Anjaria Sons (P.) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al appellate order passed by the CIT(A) in para 4 of his order. At page 527 of the report it has been observed as under : "Indeed, the dispute was regarded by the court as real and substantial, because the assessee was not permitted to withdraw the sum of Rs. 7,36,691 deposited by the State Government on April 25, 1956, without furnishing a security, bond for refunding the amount in the event of the appeal being allowed. There was no absolute right to receive the amount at that stage." The fact that the Gujarat High Court had quashed the demand notices issued under section 28 vide judgment dated 8-12-1975 coupled with the fact that while admitting SLP of the Customs Department, the Supreme Court did not require the assessee to furnish any security, bond, guarantee or any type of undertaking to repay the amount of refund alleged to have been erroneously refunded to the assessee, the Supreme Court finally dismissed the appeal with costs, and the fact that the Customs department itself in the aforesaid so-called notices under section 130 on 4-2-1976 regarded the demand notices as improper and wrong proceedings taken by the department, prove beyond doubt that the pendency of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of sales tax liability in view of section 43B. The CIT(A) vide para 7 of the original appellate order directed the Assessing Officer to verify the payments in respect of last quarter of the accounting year under consideration and recompute the amount of disallowance of sales tax liability under section 43B. We hold that restoring back this issue to the Assessing Officer would be incomplete without clearly stating that in case payments of outstanding sales tax liability have been made in the next year before the time prescribed under section 139(1), no disallowance should be made. We therefore direct the Assessing Officer to decide the issue afresh according to the decision of the Gujarat High Court in the case of CIT v. Chandulal Venichand [1994] 209 ITR 7. 19. The last ground (Ground No. III) in assessee's appeal relates to addition of Rs. 3,82,387. The CIT(A) has set aside the order and restored back the issue to the ITO for deciding the same in accordance with the guidelines given by him and in accordance with the provisions of law. 19.1 No submissions were made on behalf of the assessee in relation to this ground at the time of hearing. After perusal of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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