TaxTMI 
TaxTMI 
1987 (5) TMI 366
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax liability for the assessment year 1971-72?" 2.. The assessee is a limited company incorporated under the Companies Act, 1956. It carries on the business of manufacture and sale of steel tubes. In respect of sale of tubes for the year 1962-63, it was liable to pay sales tax under the Central Sales Tax Act, 1947. Under the scheme of the sales tax law, a dealer is liable to pay the tax on the turnover of the sale. The rate of tax depends on the nature of sale. A dealer is liable to file the return and along with the return pay the tax admitted to be the liability. If the return figure is accepted by the assessing authority, the assessment is completed. Where the assessing officer requires examination of the accounts for examining the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hority and affirmed the order of the Income-tax Officer in this respect. 3.. There is no dispute that the mercantile method of accounting is employed by the assessee. In this method, entries are posted in the books of account on the date of the transaction, i.e., on the date on which rights accrue or liabilities are incurred, irrespective of the date of payment. See AIR 1964 SC 1843 (Commissioner of Income-tax, Madras v. A. Krishnaswami Mudaliar) and AIR 1986 SC 757 (State Bank of Travancore v. Commissioner of Income-tax, Kerala). Even when the assessee failed to post the entry in its books of account, it would be entitled to the benefits since the same would depend on the provision of law relating thereto and not on the view which the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion was shifted to the stage of first assessment by the Sales Tax Officer even though the same was challenged in higher forums. In that context, it was observed: "........the moment a dealer makes either purchases or sales which are subject to taxation, the obligation to pay the tax arises and taxability is attracted. Although that liability cannot be enforced till the quantification is effected by assessment proceedings, the liability for payment of tax is independent of the assessment. It is significant that in the present case, the liability had even been quantified and a demand had been created............ It is not possible to comprehend how the liability would cease to be one because the assessee had taken proceedings before higher....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ould indicate that their Lordships came to the conclusion that when the assessment order is set aside or the amount of demand is reduced or enhanced, a further demand notice would issue in accordance with the appellate or revisional order." Thus, on the decision in the second appeal by the Sales Tax Tribunal reducing the demand by the Sales Tax Officer, a fresh demand notice is to be given. This attracts the liability of the assessee and in view of the fact that it regularly keeps its books of account adopting the mercantile system, it can claim the deduction under section 37 during the assessment year 1971-72 since the liability was of the year 1970-71. 6.. Reliance has been placed by Mr. B.K. Mohanty, on a decision of the Gauhati Hi....