COMMISSIONER OF INCOME TAX Vs. KABBUR BROTHERS

JUDGEMENT

(1.) THESE two references are made by the Income-tax Appellate Tribunal, the first at the instance of the department and the other at the instance of the assessee, in respect of the assessment for the assessment year 1971-72, the relevant previous year being the one ending October 30, 1970. The question relates to certain amount which had been refunded by the Dy. CCT to the assessee by way of refund of sales tax that had been credited by the assessee which is a registered firm, in respect of certain earlier years on its dealings as a dealer.

(2.) THE question referred at the instance of the department is :

(3.) THE assessee feeling aggrieved by this order, preferred an appeal to the Appellate Tribunal. THE main contentions raised in the appeal were that the amount was not the income of the assessee and in any event was not taxable in the assessment year 1971-72. THE Tribunal held that the method of accounting adopted by the assessee was the mercantile system and it had not been disputed and the only reason given by the Commissioner to reject the contention based upon the method of accounting was the fact that the assessee had credited the amount on the basis of actual receipt and, therefore, the regular method of accounting followed by the assessee cannot be said to be mercantile system. THE Tribunal held that the departure made by the assessee would not destroy the system of accounting regularly followed and the I.T. authorities could not reject the regular method of accounting followed and bring to tax an item which has accrued in one year in a subsequent year merely on the ground that the assessee had entered it in the year relevant to the subsequent assessment year. THE Tribunal, however, rejected the contention of the assessee that the amount was not taxable. THE Tribunal noticing the decision of the Calcutta High Court in Ikrahnandi Coal Co.'s case [1968] 69 ITR 488, observed that the facts in the instant case were similar to the said case and held that the amount of refund was taxable. In view of that finding, it held that it was necessary to consider the applicability of s. 41(1) of the I.T. Act, 1961. In the result, it allowed the appeal filed by the assessee holding that the amount of refund was not assessable for the year 1971-72.