Commissioner of Income Tax vs Kesoram Industries and Cotton Mills Ltd.

Ajit K. Sengupta, J.—In this reference u/s 256(2) of the Income Tax Act, 1961, the following question of law for the assessment year 1980-81 has been referred to this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the excise duty liability arises on the basis of the show-cause notices issued by the Central Excise Department and, in thai view of the matter, the claim for excise duty liability amounting to Rs. 2,04,421 is allowable in assessment ?"

The facts, briefly stated, are as follows :

The assessee claimed an amount of Rs. 2,10,421 on account of demand notices received during the year. But the Income Tax Officer found that the assessee''s claim in respect of Rs. 2,04,421 is based on mere "show-cause notices" and that they did not create an enforceable legal liability during the previous year. As far as the amount of Rs. 6,000 was concerned, the Income Tax Officer had disallowed the same on the ground that it represented penalty imposed on the assessee for infraction of law.

On appeal, the Commissioner of Income Tax (Appeals) agreed with the view of the Income Tax Officer and confirmed the disallowances.

The Tribunal held that the decision of the Calcutta High Court in the case of Commissioner of Income Tax Vs. Century Enka Ltd., clearly applied to the facts of the case. The Tribunal held that the assessee was entitled to deduction of Rs. 13,781 and Rs. 6,376. However, in respect of the amount of Rs. 1,05,513 and Rs. 78,750, the Tribunal restored the matter to the file of the Income Tax Officer with its direction by observing as under :

"We have considered the rival submissions. The lower authorities are not justified in terming the notices as mere show-cause notices. They are ''show-cause-cum-demand notices''. The decision of the Calcutta High Court in the case of Commissioner of Income Tax Vs. Century Enka Ltd., , squarely applies to the facts of the instant case. Thus, we hold that the assessee is entitled to the deduction of Rs. 13,781 and Rs. 6,376 as the notices were dated October 16, 1979, and January 17, 1980, respectively, and were served in the relevant accounting year on the assessee. However, the date of service of notices dated March 14, 1979, demanding Rs. 1,05,514 and Rs. 78,750 could not be furnished by the assessee. Hence, we are unable to decide the matter in respect of these two amounts. In the circumstances, we restore this matter to the file of the Income Tax Officer. If he finds that the notices dated March 14, 1979, demanding these two amounts were served on the assessee during April 1, 1979, to March 31, 1980, he should allow deduction, in the assessment year 1980-81, of those two amounts."

It is not in dispute that a similar question was considered by a Division Bench of this court in the case of Commissioner of Income Tax Vs. Century Enka Ltd., . The parties are agreed that, in view of the aforesaid decision, the question of law referred to this court must be answered in the affirmative and in favour of the assessee. We return our answer accordingly.

There will be no order as to costs.

Shyamal Kumar Sen, J.

I agree.