The Commissioner of Income Tax vs Rane Brake Linings Ltd.

P.D. Dinakaran, J.—The revenue has preferred the above appeal against the order dated 22.11.2002 made in ITA No. 2224/Mds/93 on

the file of the Income Tax Appellate Tribunal, ""C"" Bench, Madras. The appeal is relating to the assessment year 1986-87.

In brief, even though the original assessment for the assessment year 1986-87 was completed by the respondent/ assessee on 23.3.1989, the

Commissioner of Income Tax initiated action u/s 263 of the Income Tax Act (hereinafter referred to as the ''Act''), with reference to the sales tax

paid after the close of the year u/s 43-B of the Act, which deals with certain deductions to be made only on actual payments, and by order dated

26.2.1991 directed the assessment officer to add back a sum of Rs. 7,17,153/-, which is the sales tax debited by the respondent/assessee, but not

paid within the previous year, holding that the same attracts Section 43-B of the Act.

Admittedly, the respondent/assessee did not prefer any appeal against the said order of revision dated 26.2.1991 of the Commissioner of

Income Tax.

The Assessing Officer, thereafter, by exercising the power u/s 143(3) read with Section 263 of the Act gave effect to the directions of the

Commissioner of Income Tax under the order dated 26.2.1991 and accordingly added a sum of Rs. 7,17,153/-, namely amount of sales tax

debited, but not paid within the previous year with the taxable income for the assessment year 1986-87.

Aggrieved by the proposal of the assessment officer, the respondent/assessee preferred an appeal before the Commissioner of Income Tax

(Appeals), who by order dated 28.6.1993 refused to interfere with the order of the Assessing Officer made u/s 143(3) of the Act as the earlier

order of the Commissioner of Income Tax dated 26.2.1991 had become final. Against the said order dated 28.6.1993 of the Commissioner of

Income Tax (Appeals), the respondent/assessee preferred a further appeal before the Tribunal. The Tribunal, without standing on technicalities,

applying the ratio laid down in Allied Motors (P.) Ltd. Vs. Commissioner of Income Tax, Delhi, , allowed the appeal and set aside the order of the

Commissioner of Income Tax (Appeals), referred supra. Hence, the above appeal.

The substantial question of law raised by the appellant/revenue is:

Whether in the facts and circumstances of the case, the Tribunal was right in entertaining the appeal against the consequent order of the assessing

officer giving effect to the order of revision, when the order of revision u/s 263 of the Act was not challenged in appeal at any time?

In our considered opinion, the pertinent issue that raises for our consideration is not whether the respondent/assessee is entitled to challenge the

directions of the assessing officer adding back a sum of Rs. 7,17,153/- representing the sales tax debited but not paid within the previous year as

directed by the Commissioner of Income Tax by order dated 26.2.1991, without challenging the same in appropriate proceedings, but whether, in

the eye of law, the assessing officer is liable to add the said amount namely Rs. 7,17,153/- which represents the sales tax debited but not paid

within the previous year?

The law on the point is now well settled as held by the Apex Court in ALLIED MOTORS (P) LTD. v. C.I.T., referred supra, wherein it is held

that even though sales tax payable by the assessee was collected from the parties and the same was paid after the close of the period of

assessment concerned, but paid before the filing of the return, they are allowable as deductions u/s 43-B of the Act.

In view of the ratio laid down in ALLIED MOTORS (P) LTD. v. C.I.T., referred supra, the directions of the Assessing Officer adding back a

sum of Rs. 7,17,153/- representing the sales tax debited but not paid within the previous year, as directed by the Commissioner of Income Tax by

order dated 26.2.1991 is illegal and therefore, a nullity in the eye of law, even though the same was not challenged in appropriate proceedings. The

non-filing of an appeal against an illegal order or an order which has become a nullity, in our considered opinion, cannot, in any way, either validate

the same or render it enforceable in law.

In the result, the substantial question of law raised by the appellant/revenue is answered against them and this appeal is dismissed.