Shambhoo Saran Sanjeev Kumar vs Commissioner of Income Tax

The Income Tax Appellate Tribunal, Delhi, has referred the following question of law u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion of this court.

Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that a disallowance u/s 43B of the Income Tax Act, 1961, of Rs. 2,16,007 should be made?

2.1 The reference relates to the assessment year 1986-87.

2.2 Briefly stated the facts giving rise to the present reference are as follows:

The assessee had realised a sum of Rs. 2,16,007 on account of excise duty from the customers but did not deposit the same in the Government treasury and challenged his liability to pay excise duty before this Court and got a stay till the disposal of the writ petition. The Assessing Officer while framing the assessment did not allow deduction of the said excise duty under that section and added the same towards the income. In appeal, the Commissioner of Income Tax (Appeals) deleted the said addition relying on his own order in the case of this very assessee for an earlier year. The Department, being aggrieved came in appeal before the Tribunal. The Tribunal allowed the appeal of the Department by stating that Section 43B of the Act introduced from April 1, 1984, clearly provides that any duty realised, but not deposited in the Government treasury during the year will not be allowed as deduction and this section was introduced only to meet the contingencies such as, this one, i.e., the duty realised and not paid to the Government on the basis of stay order obtained from the court of law.

We have heard Sri A.P. Mathur, learned Counsel appearing for the assessee, and Sri A.N. Mahajan, learned standing counsel appearing for the Revenue.

Learned Counsel for the assessee submitted that the amount in question was realised by the applicant-assessee in the year 1978 did not pertain to the realisation, if any, made during the previous year relevant to the assessment year in question and, therefore, when the amount was realised in the year 1978, the applicability of the provisions of Section 43B of the Act which was introduced from April 1, 1984, was not in the statute book did not arise. The submission is wholly misconceived.

The applicant either before the assessing authority or the first appellate authority or the Tribunal did not take this plea. On the other hand, the finding recorded by the Assessing Officer in paragraph 3 of the assessment order specifically mentions that on an examination of the account it was found that in the account of bank guarantee khata the assessee has credited a sum of Rs. 2,16,007 on account of excise duty realised by the assessee from the customers and a sum of Rs. 2,50,042.38 have been debited in this account which is on account of purchasing the fixed deposit receipts. It has further been stated therein that the account clearly shows that the assessee did not deposit the amount of excise duty, which he realised during the previous year but invested in the purchase of fixed deposit receipts.

It is well-settled that the amount of excise duty which has been realised by a person forms part of its trading receipt as held by the apex court in the cases of Chowringhee Sales Bureau (P) Ltd. Vs. Commissioner of Income Tax , West Bengal, and Sinclaire Murray and Co. (P) Ltd. Vs. The Commissioner of Income Tax, Calcutta, . Thus, the excise duty, which the applicant has realised during the previous year, forms part of the trading receipt. The Assessing Officer had checked the account books for the assessment year 1986-87 and directed that as the amount of excise duty has not been paid over to the concerned Department, u/s 43B of the Act deduction was not admissible at all.

We, accordingly, answer the question referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee. There will be no order as to costs.