DHARIWAL SALES ENTERPRISES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Nagpur Bench, Nagpur, has referred the following question to this Court for opinion under S. 256(1) of the INCOME TAX ACT, 1961 (hereinafter referred to as " the Act ").

(2.) THE facts in a nutshell necessary for answering the aforesaid question are that the assessee, being a dealer in grains and grocery, was under an obligation to pay mandi tax in accordance with the provisions of the M. P. Krishi Upaj Mandi Adhiniyam in respect of the goods sold in the mandi compound or in respect of goods brought within the jurisdiction of the Krishi Upaj Mandi Samiti. The assessee recouped the tax liability from its customers amounting to Rs. 27,171 during the year in question and credited the same directly to the balance -sheet through the Krishi Upaj Mandi account. A sum of Rs. 27,006 for the year under consideration was shown as credit balance in the balance -sheet after deducting a sum of Rs. 165 being the licence fee. It is in this background that this question arose as to whether the sum of Rs. 27,006 could be added during the year in question.

(3.) IN this connection, it may be pointed out that the ITO in the order of assessment has held that the assessee was following a mixed system of accounting which was evident from the computation sheet furnished in the return of income. This observation of the ITO does not seem to have been specifically challenged before the Tribunal by asserting that the computation sheet furnished in the return of income did not indicate that the assessee was following a mixed system of accounting. On the facts and circumstances of the instant case, therefore, we have to proceed on the basis that the assessee was not following the mercantile system of accounting.