TaxTMI 
TaxTMI 
1982 (2) TMI 117
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....cts on the file inasmuch as the learned Commissioner (Appeals) gravely erred in upholding the action of the ITO in bringing to tax a sum of Rs. 2,41,131 under section 41(1) of the Income-tax Act, 1961 even though there was no cessation of liabilities. He failed to appreciate the facts and circumstances of the case and law applicable thereto. In any case, amount of Rs. 2,14,131 was wrongly held to be taxable during assessment year 1978-79." 2. The facts pertaining to the issue are that during the year under consideration, the assessee-firm received a sum of Rs. 1,89,571.73 and Rs. 24,559.53 by way of refund of central excise duty from the Assistant Collector, Central Excise Department, Patiala, but the said two refunds which were allowed ....
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....hat refund had to be returned. As the assessee could not establish the genuineness of the claim with any case law or legal law provision that the assessee was entitled for such exemption, his attention was drawn to some other similar cases wherein such like refunds of central excise duty were received by the firm of Gobindgarh and they declared all such refunds suo motu in the relevant copy of profit and loss account. These cases are Saraswati Steel Rolling Mills, Gobindgarh, Rs. 78,678.76; Surindra Steel Rolling Mills, Gobindgarh, Rs. 48,059.73 ; and Panesar Steel Rolling Mills, Gobindgarh, Rs. 1,08,049.60. Assessments in the first two cases have since been completed. It will not be out of place to mention that Shri Mohan Lal, advocate, is....
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....e to repay the money back, confirmed the finding of the ITO that the amount of Rs. 2,14,131 was clearly taxable under the provisions of section 41(1) of the Income-tax Act, 1961 ('the Act'). 4. It is this action of the Commissioner (Appeals) which is contested by the assessee before us. After narrating the abovestated facts in brief, the learned counsel for the assessee, Sh. Mohan Lal, submitted that perusal of section 41(1) has two important limits pertaining to liability---one being 'remission', and the other being 'cessation'. Though the assessee got the refunds, it no more remained a case of cessation of trading liability, no sooner the show-cause notice dated 23-11-1977 came to be served on the assessee before the accounting year....
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....gued that except show-cause notice there was nothing and that alone could not be that fatal to the revenue's case. 6. The learned counsel for the assessee submitted that reliance of the learned departmental representative in the case of Taj Gas Service is not only misplaced but deserves to be ignored, when we have the Punjab and Haryana High Court judgment available on the issue, which supports the assessee's contention. 7. After taking into consideration the rival submissions, we are unable to confirm the finding of the Commissioner (Appeals). There is no controversy about the following facts : (i) the assessee got the two refunds on 7-5-1977 from the Central Excise Department which amounted to Rs. 2,14,131 ; (ii) the assessee got sh....
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.... has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure, or some benefit in respect of such trading liability by way of remission or cessation thereof. When we apply the above limbs to the instant case, we find there is no dispute about the first part of it. But when we take into consideration the last twelve words, viz., 'in respect of such trading liability by way of remission or cessation thereof', we find that it no more remained a case of cessation of such trading liability, the moment the show-cause notice was served on the assessee. If, for a moment, we ignore section 41(1) and go to allowability of an expenditure in respect of which a demand, rightly or wrongly, was created....
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....e or trading liability in accordance with the Act and the assessee must have received in the subsequent year any amount in respect of such loss or expenditure in order to attract the provisions of section 10(2A). It does not cover a mistaken payment or mistake in calculation. The allowance, which was legally made, to the extent the assessee was able to reimburse himself, was added on to the assessee's income in the years in which the assessee was able to reimburse himself... " In the instant case, undoubtedly the assessee got a refund in respect of the excise duty which was earlier paid by the assessee but there cannot be greater proof in respect of the said refund than that it was a mistaken one in the presence of the show-cause notice ....