TaxTMI 
TaxTMI 
2004 (12) TMI 27
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....ssee in the years in which the excess amount was so collected by the assessee?" The reference relates to the assessment years 1978-79 and 1979-80. For the sake of convenience, we have taken the facts in relation to the assessment year 1978-79. The assessee filed a return of income for that year on June 21, 1978 declaring profit of Rs. 10,22,788. Subsequently, he filed a revised return on January 28, 1981, claiming deductions on account of additional liability of sales tax out of the profit. The assessment was completed on June 8, 1981. After some time, the Assessing Officer reopened the assessment and issued notice under section 148 of the Act. He observed that the assessee had collected sales tax and Central sales tax on the sale price of the vanaspati including the amount of excise duty chargeable on vanaspati, but had not paid the same to the State Government and, therefore, the same was liable to be included in the income of the assessee. After considering the reply of the assessee, the Assessing Officer, vide his order dated September 30, 1988, revised the assessment and made an addition of Rs. 1,08,580 representing the amount of sales tax in the income of the assessee. The....
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....llowing the mercantile system of accounting and the Tribunal was in error in holding that there was excess amount of sales tax collected by the assessee without there being corresponding liability and, therefore, it was income liable to tax. Counsel further submitted that the Department has already taken action under section 263 of the Act for the assessment year 1981-82 for which year this has been treated to be the income of the assessee and, therefore, it cannot be said to be income for the years in question, i.e., the assessment years 1978-79 and 1979-80. In support of his arguments, Shri Jain placed reliance on Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC); Chowringhee Sales Bureau P. Ltd. v. CIT [1977] 110 ITR 385 (Cal); Sirsa Industries v. CIT [1989] 178 ITR 437 (P & H) and CIT v. Leader Engineering Works [2004] 269 ITR 432 (P & H). Shri Rajesh Bindal, learned counsel appearing for the Revenue replying to the arguments of learned counsel for the assessee, submitted that proceedings for reassessment were validly initiated under section 147 of the Act. He placed reliance on Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC) and Citibank N. A. v. S.K. Ojha [....
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....ly amount to disclosure within the meaning of this section." An analysis of the above reproduced provisions shows that an Income-tax Officer can take recourse to these provisions if the income chargeable to tax has escaped assessment on account of omission or failure on the part of the assessee to disclose truly and fully all material facts necessary for his assessment. Thus, for invoking section 147(a), two ingredients are required to be satisfied. Firstly, income chargeable to tax which has escaped assessment should be there and secondly it should be as a result of omission or failure on the part of the assessee to disclose truly and fully all material facts necessary for his assessment. The Supreme, Court in the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456, while defining the scope of section 147(a) of the Act, has held as under: "From a combined review of the judgments of this court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, w....
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.... assessment lay embedded in the evidence which the Revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. If there are some primary facts from which a reasonable belief could be formed that there was some non-disclosure or failure to disclose fully and truly all material facts, the Income-tax Officer has jurisdiction to reopen the assessment. If the above noted principles are applied to the facts of the present case, it is not possible to agree with Shri Jain that the assessee had disclosed truly and fully all material facts necessary for the assessment at the time of the original assessment. In this context, we may refer to the observations made by the third member. The same are as under: "... In this context it is found that vide specific query raised marked as Nos. 70(c) and 70(e), the Assessing Officer required the assessee to furnish the following information: '70(c) copies of Central excise, sales tax accounts and when the amount outstanding in these accounts were actually paid to the Department concerned. 70(e) Particulars of amount(s) paid/payable as sales tax, excise duty, customs duty....
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.... held that the assessee was entitled to deduct the liability of sales tax from the profits and gains of its business which arose in sales made by it during the relevant previous year even though the sales tax had not been paid. A Division Bench of this court in Sirsa Industries v. CIT [1989] 178 ITR 437, while reversing the view taken by the learned single judge, held as under: "We have closely read both the decisions of the Supreme Court and are of the opinion that while in Kedarnath's case [1971] 82 ITR 363, the manner of keeping mercantile system of accounting and claim of deduction of sales tax from the profits without making actual payments, was allowed, such a point did not directly arise in Chowringhee Sales Bureau's case [1973] 87 ITR 542 (SC). In Chowringhee Sales Bureau's case [1973] 87 ITR 542 (SC), the sole point for consideration was whether an auctioneer would be a dealer within the meaning of the Bengal Finance (Sales-tax) Act, 1941. In the Sale of Goods Act, 1930, an auctioneer is neither the seller nor the buyer and is merely a commission agent. In an earlier decision (see CIT v. Chowringhee Sales Bureau P. Ltd. [1969] 71 ITR 131), the Calcutta High Court had....