1987 (5) TMI 14

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....lity for the assessment year 1971-72 ? " 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 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 returned figure is accepted by the assessing authority, the assessment is completed. Where the assessing officer requires examination of the accounts for examining the correctness of the....

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....ed the order of the Income-tax Officer in this respect. 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 transaction, i.e., on the date on which rights accrue or liabilities are incurred, irrespective of the date of payment. (See CIT v. A. Krishnaswami Mudaliar [1964] 53 ITR 122 (SC) and State Bank of Travancore v. CIT [1986] 158 ITR 102 (SC) ). 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 assessee might take of his rights since the existence or absence of entries....

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....t 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 bad 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 authorities for getting it reduced or wiped out so long as the contention of the assessee did not prevail with regard to the quantum of liability, etc. An assessee who follows the mercantile system of accounting is entitled to deduct from the profits....