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TMI Blog1987 (10) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... de on account of sales-tax. The nature of this liability as stated before him was that it related to the sales-tax payable in the last quarter of the financial year and the same was paid in the subsequent accounting period. The ITO has noted both these facts in the assessment order. He, however, referred to the observations of the Punjab and Haryana High Court in the case of Sirsa Industries vs. CIT (1983) 36 CTR (P&H) 130 : (1984) 147 ITR 238 (P&H) holding that the sales-tax collected by the dealer and not deposited during, the year was trading receipt of the dealer even though the assessee was following mercantile system. Following that judgment, he made the addition of Rs. 4,534. The assessee's appeal before the AAC against the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as illegal and the High Court after taking note of the decision of the Supreme Court in the case of Chowringhee Sales Bureau P. Ltd. vs. CIT (1973) CTR (SC) 44 : (1973) 87 ITR 542 (SC) upheld the legality of the proceedings started under s. 154 of the Act and dismissed the writ petition. It was further stated that the High Court had to consider the issue in a very narrow compass of the validity of actions started by the ITO under ss. 147 & 157 of the Act and for that purpose examined the ratio of the Supreme Court decision in the case of Chowringhee Sales Bureau P. Ltd. vs. CIT 1973 CTR (SC) 44 : (1973) 87 ITR 542 (SC) and that the question of sales-tax liability accruing under the mercantile system of accounting as such was not gone in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 : (1984) 147 ITR 238 (P&H). 4. We have carefully considered the issue arisen in this case. In Sirsa Industries' case, it is correctly pointed out by the assessee's counsel that the Punjab and Haryana High Court was dealing with a writ matter questioning the legality of ITO 's actions initiated under ss. 147 and 154 of the IT Act. The findings of the High Court start at page 242 and these lend support to the position stated earlier. A careful reading of the judgment will indicate that the High Court was not concerned with the question of sales-tax liability accruing under mercantile system of accounting. The High Court judged the issue from the angle that sales-tax collected by a dealer would form part of his trading receipts as held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant paragraph at pages 390-391: "In these years, however, with which we are concerned, the assessee had not disputed or did not dispute before the Tribunal the liability to pay sales tax. This is of course unpaid sales tax. Reliance was placed by counsel for the Revenue on the observations of the Supreme Court that when the assessee would pay the amount the assessee would be entitled to claim deduction as and when it paid sales-tax amount to the State Government. It must be remembered in the relevant case with which the Supreme Court was concerned in the case of Chowringhee Sales Bureau P. Ltd. vs. CIT (1973) CTR (SC) 44 : (1973) 87 ITR 542 (SC), the Supreme Court was not concerned with the question whether in a mercantile system of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to do, is not relevant in determining accrual of legal liability. It is also clearly established by the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC). If that is the position, in order to determine that liability where the assessee had not paid the amount, it must be according to the Scheme of the ST Act, an estimate of the assessee. In a particular case, however, where there are materials to show that the estimate is either frivolous or false or the estimate is disputed, other considerations might arise. But, in this case, from the contentions raised by the ITO, or before the AAC and the Tribunal, it does not appear that it was ever suggested that this estimate made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncel out each other and there is no scope of an addition as made by the lower authorities. The addition of Rs. 4,534 is deleted. 7. Before parting with this issue, we may also refer to the enactment of a new s. 43B in the IT Act by the Finance Act, 1983 w.e.f. 1st April, 1984. This section provides that notwithstanding anything contained in any other provision of the IT Act, a deduction otherwise allowable under the Act in respect of any sum payable by the assessee by way of tax or duty under any law shall be allowed, irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him, in the previous year in which such sum is actually paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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