9911796707
TMI Blog1998 (2) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... e claimed a provision of Rs. 55,71,620 on account of liability payable to the selling agents. The AO treated this as contingent liability and for that he initially relied upon the report of the auditors, who have mentioned that said liability was contingent one. He also took into consideration the assessment orders of assessee for the asst. yrs. 1984-85 and 1985-86 in which similar claim of the assessee was not allowed. He reproduced some portions from the assessment order of the asst. yr. 1985-86 in which his predecessor had noted that assessee was following mercantile system of accounting and in that process, only those liabilities, which were ascertained and crystallised in the said year, can be allowed while the liability claimed by the assessee was not crystallised nor ascertained as the assessee entered into an agreement with B.K. Agencies and Hardayal Bansilal and agreement was so vague that it will not be making clear the amount of liability to be paid to those distributors. Taking help from these two facts, the AO disallowed the claim of the assessee for Rs. 55,71,620. 4. In the asst. yr. 1987-88 the claim of Rs. 60,75,557 was also disallowed on the same facts and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a later date, the Hon'ble Supreme Court accepted the writ of the assessee holding that the same was not leviable at all as laid down in the case of CIT vs. Tata Chemicals (1986) 52 CTR (Bom) 293 : (1986) 162 ITR 556 (Bom). On the basis of these facts, it was pleaded by the assessee that liability had accrued against the selling agents the moment they effected the sales and that liability was not extinguished by the writ petition or stay order of the Hon'ble High Court. The learned CIT(A) considered all the facts and it found force in the grounds. He concluded that the appellant was following mercantile system of accounts and entries are posted in the books of accounts on the date of transaction, that is why the date on which the rights accrued or liabilities are incurred. In the case in hand, the liability accrues the moment the sales were effected and taxable in the year in which sales transactions took place. He referred to different case laws on this point. He also referred to the agreement cl. (7) in which assessee and selling agents agreed that assessee will reimburse the dealers the amount of sales-tax as per mutually settled terms and on the basis of that the learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be correct, so far as the liability to pay sales-tax by the selling agents is concerned, as it is the selling agents of the assessee, who were supposed to pay the amount of sales-tax under SRO No. 448 of 1982. Undisputedly, the assessee entered into the agreement with its selling agents to reimburse the amount of sales-tax to be paid by them to the J K Government The agreement is an important piece of document and the assessee failed to bring that document on record. Apart from it, we find a short discussion on this point in the order of the CIT(A) at p. 7 where he mentioned that the assessee entered into agreement with dealers whereby the assessee was required to reimburse the dealers the amount of sales-tax as per mutually settled terms. What were the mutually settled terms have also not come on record from the side of the assessee nor the CIT(A) discussed the same as to what actually was settled in between the assessee and its selling agents. Accordingly, non-availability of agreement and absence of mutually settled terms under which the assessee agreed to reimburse the amount of sales-tax to its selling agents makes everything vague and thus liability becomes to be contingent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and necessary explanation of the assessee was called. After considering the same, he was of the opinion that the agricultural income of Rs. 5 lakhs was probable one and he treated the remaining amount of Rs. 1,46,910 as income from undisclosed sources of the assessee, which has since been restricted to Rs. 50,000 and relief of Rs. 96,910 was given. Next year addition was of Rs. 50,730 out of which the CIT(A) gave relief of Rs. 20,730 and in the asst. yr. 1991-92, this relief was Rs. 29,636. The Revenue is in appeal. 9. We have considered the assessment order as well as the order of the learned CIT(A) for all these years. Admittedly, the assessee purchased 36 acres of Hazuri Bagh orchards and in a portion of which vegetables were sown. The assessee had shown the following income for the assessment years: Asst. yr. Income shown . (Rs.) . 1987-88 2,00,350 . 1988-89 6,46,910 (for 19 months) 1989-90 3,50,727 . 1991-92 3,29,636 . The AO after considering all the facts did not accept the contention of the assessee and made the necessary reduction, which had, l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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