COMMISSIONER OF INCOME TAX Vs. ALEXANDER O T

JUDGEMENT

(1.) AT the instance, of the Revenue, the Income-tax Appellate Tribunal has referred the following question of law for the decision of this court:

(2.) THE respondent, an individual, is an assessee under the Income-tax Act. We are concerned with the assessment year 1981-82. Annexure-A assessment order dated September 13, 1984, for the year 1981-82, sent along with the statement of the case, shows that the accounting period ended on December 31, 1980. So, the previous year for the assessment year 1981-82 should be January 1, 1980 to December 31, 1980. THE assessee pleaded that he is entitled to make a provision in the sum of Rs. 3,21,256 towards purchase tax liability for the year. It was allowed by the Income-tax Officer. In proceedings under Section 263 of the Income-tax Act (suo motu revision) by the Commissioner of Income-tax it was noticed that a provisional sales tax assessment order was passed on June 26, 1979, by the Sales Tax Officer requiring the assessee to pay purchase tax. It is seen that this order was affirmed in appeal by the Appellate Assistant Commissioner (Sales Tax), by order dated November 6, 1979. It is for the said liability that arose or accrued as a result of the above provisional assessment order that the assessee claimed that he is entitled to make a provision in the sum of Rs. 3,21,256. THE Commissioner of Income-tax, Cochin, in his revisional order under Section 263 of the Act dated October 23, 1986, found that, in the final assessment order passed in 1983, the sales tax authorities had held that the assessee is entitled to exemption under Section 5(3) of the Central Sales Tax Act and so, as. per the final assessment order for the year, no liability for purchase tax even arose and so the provision made in the sum of Rs. 3,21,256 for which credit was given by the Income-tax Officer should be added back to the income. THE Income-tax Officer was directed to recompute the tax on this basis. THE assessee carried the matter by way of appeal before the Income-tax Appellate Tribunal. THE Income-tax Appellate Tribunal held that the sales tax authorities, by the provisional assessment order dated June 26, 1979, held that the assessee is liable to pay purchase tax in respect of sea foods purchased for the purpose of export. It was confirmed by the Appellate Assistant Commissioner, by order dated November 6, 1979. So, at the end of the accounting year, namely, December 31, 1980, the liability to pay purchase tax was quantified and demanded from the assessee. THE liability to pay purchase tax existed during the relevant accounting year. THE said liability to pay purchase tax was wiped out only by the final assessment order passed on August 10, 1983. But, the fact that the assessee was held liable to pay purchase tax as per the provisional order of assessment cannot be ignored and it cannot be said that no purchase tax was payable by the assessee for the purchases effected during the relevant accounting year, and so the direction given by the Commissioner of Income-tax to add back a sum of Rs. 3,21,256, the provision made towards purchase tax liability, in the income assessed, is a clear error. THE Tribunal allowed the appeal filed by the assessee. It is thereafter at the instance of the Revenue that the question of law formulated hereinabove has been referred for the decision of this court.

(3.) THE reference is disposed of as above.