BABY MARINE EXPORTS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE income-tax references under Section 256(1) of the Income-tax Act, 1961 (hereinafter called "the Act"), are coming up at the instance of the assessee, Baby Marine Exports, Quilon. The assessment years involved in these references are 1980-81, 1981-82 and 1982-83. The assessee is a partnership firm engaged in the business of export of sea foods. For the accounting years relevant to the assessment years 1980-81, 1981-82 and 1982-83, the assessee had purchased prawns and it had to pay purchase tax under the Kerala General Sales Tax Act. Therefore, the assessee-firm made a provision for Rs. 25,19,758, Rs. 24,44,046 and Rs. 36,51,036, respectively, for the aforesaid assessment years. The original assessments were completed by the Income-tax Officer respectively on October 18, 1982, December 31, 1982, and March 17, 1983, treating these provisions as allowable-deductions, However, on August 20, 1981, this court in Deputy CST v. Neroth Oil Mills Co. Ltd. [1982] 49 STC 249, held that prawns and fish purchased and exported after processing are one and the same commodity and that therefore the assessee could get exemption from purchase tax under Section 5(3) of the Central Sales Tax Act, 1956. The above decision was brought to the notice of the Income-tax Officer by the audit department after the original assessments were completed. In that background, the officer reopened those assessments under Section 147(b) of the Act and withdrew the deductions already allowed. The reassessments passed by the officer were confirmed by the Commissioner of Income-tax (Appeals). Being aggrieved by the said assessments, the assessee filed appeals before the Income-tax Appellate Tribunal. Two contentions were mainly canvassed by the assessee before the Tribunal. The first contention was that the reopening was bad inasmuch as no information had been received subsequent to the assessment. Secondly, it was urged that since sales tax assessments are still pending the liability to pay purchase tax continues to exist. As far as the first contention is concerned, the Tribunal observed that it was concluded against the assessee in view of the decision of the Supreme Court in A. L. A Firm v. CIT [1991] 189 ITR 285. As far as the second contention is concerned, the Tribunal held that there was no reason to believe that the Sales Tax Officer would refuse exemption and that there was no valid purchase tax liability during the relevant accounting years. Being aggrieved by the decision of the Tribunal, two questions of law were sought to be referred to this court by the assessee. Inasmuch as the validity of the reopening of the assessment was concluded as aforesaid the Tribunal found that the said question need not be referred.

(2.) THE question the Bench marked to this court for decision is as follows :

(3.) IT cannot be said that there is no obligation to file the returns when the turnover is exempted generally or under specified circumstances. In other words, the liability to pay the tax subsists even in such circumstances till such time it is finally wiped out in the process known to the statute under the provisions of which the obligation to file the return arose.