CIT, ROHTAK vs. PREM CHAND

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ITR/61/1991HC Punjab & HaryanaPHHC01024538199115 September 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was right in law in its decision. The Court referred to the Supreme Court judgment in Allied Motors (P) Ltd. v. Commissioner of Income-tax (1997) 224 ITR 677. In that case, it was held that a claim for sales tax payment could not be disallowed solely because the liability was met after the end of the accounting year. The Supreme Court had considered the amendment to Section 43B and found it to be retrospective and clarificatory. Therefore, the disallowance of sales tax collected but paid after the accounting year was not sustainable. The question of law was decided against the revenue and in favour of the assessee. The operative direction was to decide the question in favour of the assessee.

What were the facts?

The Assessing Officer (AO) completed the assessment for assessment year 1984-85 under Section 143(1) of the Income-tax Act, 1961 (the Act) in the case of Shri Prem Chand Prop. The AO subsequently issued a notice under Section 154 of the Act to rectify the assessment order. The proposed rectification aimed to disallow Rs. 33,820/- representing sales tax collected but paid after the accounting year, by invoking Section 43B of the Act. The assessee objected, but the AO rejected the objection, holding that deduction would only be allowed on sales tax paid. The AO levied tax, considering an amendment to Section 43B to be prospective. The CIT(A) reversed the AO's view, and this decision was upheld by the Tribunal.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that rectification of an assessment made u/s 143(1) of the I.T. Act, 1961 cannot be made u/s 154, for disallowing of Rs.33,820/- being sales tax collected but paid after the date of the accounting year and by invoking of section 43B of the Act? Assessee's contentions: The judgment does not record specific arguments made by the assessee before the High Court. However, the Tribunal's decision, which was upheld, implies the assessee argued against the rectification under Section 154 for disallowing sales tax paid after the accounting year, and against the invocation of Section 43B in this manner. Revenue's contentions: The revenue contended that the Tribunal was wrong in holding that rectification under Section 154 was impermissible for disallowing sales tax collected but paid after the accounting year, and for invoking Section 43B. The revenue likely argued that the AO correctly identified an error apparent from the record and that Section 43B was applicable to disallow the deduction.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 154,Section 43B

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.R. No.61 of 1991 Date of decision: September ___, 2006 Commissioner of Income Tax, Rohtak. -----Applicant Vs. Shri Prem Chand Prop. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE RAJESH BINDAL Present: Mr. Yogesh Putney, Advocate for the revenue.. -----

ORDER: Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Delhi, arising out of its order dated 27.10.1990 in respect of assessment year 1984-85:- “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that rectification of an assessment made u/s 143(1) of the I.T. Act, 1961 cannot be made u/s 154, for disallowing of Rs.33,820/- being sales tax collected but paid after the date of the accounting year and by invoking of section 43B of the Act?” The facts as noticed in the statement of case are as under:- The assessment in the case of the assessee Shri Prem Chand Prop. was completed under Section 143(1) of the Income-tax Act, 1961 (for short, “the Act”). The Assessing Officer issued a notice under Section 154 of the Act seeking to rectify the order passed under section 143(1) of the Act to the extent of liability

I.T.R. No.61 of 1991 that was allowed under Section 43 of the Act in regard to sales tax. The basis of invoking the section 154 was that the amount of sales-tax was not deposited or paid within the accounting period relevant to the assessment. The objection of the assessee was considered that was rejected by the Assessing Officer on the ground that he was very much clear on the point to allow deduction only on the amount of sales-tax is paid. The assessing authority in the present case levied the tax holding the amendment in Section 43B of the Act to be prospective.

The view taken by the Assessing Officer was reversed by the CIT(A) which order was upheld by the Tribunal.

We find that even on merits about the allowability of the deduction, the issue stands covered in favour of the assessee by the judgment of the Hon’ble Supreme Court in Allied Motors (P) Ltd. v. Commissioner of Income-tax (1997) 224 ITR 677, wherein it was held that claim towards payment of sales tax could not be disallowed only on the ground that the liability was met after the end of the accounting year. The Hon’ble Supreme Court took into account the amendment made to Section 43B of the Act and held that the said amendment was retrospective being clarificatory.

Accordingly, the question raised is decided against the revenue and in favour of the assessee. ( ADARSH KUMAR GOEL ) JUDGE September ___, 2006 ( RAJESH BINDAL ) ashwani JUDGE Pag e

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