Clarificatory tax amendment operates retrospectively, and pre-return payment of sales tax escapes disallowance under section 43B.

Section 263 revision is confined to the disputed unpaid liability where the assessee had already discharged the major part before filing the return. The inserted Explanation 2 to section 43B is treated as clarificatory and therefore operates retrospectively, because it explains the existing law rather than changing it. Sales tax actually paid before the return date cannot be disallowed under section 43B merely because it remained outstanding at year-end, so pre-return payment receives the statutory benefit.

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Issues: (i) Whether the Commissioner's jurisdiction under section 263 of the Income-tax Act, 1961 was validly invoked. (ii) Whether Explanation 2 to section 43B, as inserted by the Finance Act, 1989, applied retrospectively from 1 April 1984. (iii) Whether the amount of sales tax paid before filing the return could be disallowed under section 43B for the assessment year 1985-86.

Issue (i): Whether the Commissioner's jurisdiction under section 263 of the Income-tax Act, 1961 was validly invoked.

Analysis: The assessment record showed that the revisional jurisdiction could not extend to the entire amount in dispute, because the assessee had already paid the major part of the liability before filing the return and only a small balance remained outstanding. The scope of revision was therefore confined to the unpaid portion.

Conclusion: The invocation of section 263 was held to be valid only to the limited extent of Rs. 1,690 and not in respect of Rs. 3,22,791; this issue was decided partly against the assessee and partly in favour of the assessee.

Issue (ii): Whether Explanation 2 to section 43B, as inserted by the Finance Act, 1989, applied retrospectively from 1 April 1984.

Analysis: The binding principle applied was that the proviso and the inserted Explanation were clarificatory in nature and intended to give effect to the true object of section 43B. Such a provision operates retrospectively when it merely explains the existing law.

Conclusion: The Explanation was held to be retrospective in operation, against the assessee and in favour of the Commissioner.

Issue (iii): Whether the amount of sales tax paid before filing the return could be disallowed under section 43B for the assessment year 1985-86.

Analysis: The amount in question had been deposited before the return was filed, bringing it within the benefit of the proviso to section 43B. A liability actually discharged before the return date could not be added back merely because it had remained outstanding at the close of the accounting year.

Conclusion: The amount paid before filing the return could not be disallowed under section 43B; this issue was decided in favour of the assessee.

Final Conclusion: The reference was answered with limited relief on the revisional jurisdiction question, the retrospective applicability of the inserted Explanation was upheld, and the pre-return payment of sales tax was protected from disallowance.

Ratio Decidendi: A clarificatory amendment to section 43B operates retrospectively, and a statutory liability actually paid before filing the return cannot be disallowed under that provision.

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