SIRSA INDUSTRIES Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) SIRSA Industries, Sirsa, the assesses, follows the mercantile system of accounting. It is engaged in the business of cotton ginning and pressing. In the course of business, it has been collecting central sales tax from its constituents on the sale of bales of cotton in the accounting years relating to the assessment years 1968-69, 1969-70 and 1970-71. The Central sales tax so realized was not paid to the Government and was shown as credited to the Central sales tax account in their books of account, and the same position was reflected in the balance-sheet. The Income-tax Officer did not add the amount of Central sales tax to the total income of the assessee and completed the assessment for all the three years. The assessee went up in appeal against the assessments for the years 1968-69 and 1969-70 in respect of matters other than Central sales tax accounts but did not file an appeal against the assessment for the year 1970-71. Some relief was granted by the appellate court with the result that the order of the Income-tax Officer for non-inclusion of the amount relating to Central sales tax in the total income of the assessee assumed finality.

(2.) THE Income-tax Officer issued notices to the assessee under Sections 154/155 of the Income-tax Act, 1961 (for short "the Act"), for the aforesaid three assessment years to show cause as to why the amounts shown in the Central sales tax accounts be not added to the total income of the respective years in view of the decision of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542. The assessee represented to the Income-tax Officer, as also to the Central Board of Direct Taxes. The Central Board of Direct Taxes declined to express any opinion and before the Income-tax Officer could finally decide the matter, the notices were challenged by filing CWP No. 883 of 1976.

(3.) FOR the three subsequent years 1971-72, 1972-73 and 1973-74, the assessee took up the same position regarding the Central sales tax received by it and the Income-tax Officer did not include that amount in the total income of the assessee and framed the assessment. Thereafter, the Income-tax Officer issued notices under Sections 147 and 148 of the Income-tax Act for the aforesaid three years requiring the assessee to file returns of income within 30 days as he had reason to believe that income has escaped assessment. This action was also initiated in view of the aforesaid decision of the Supreme Court in Chowringhee Sales Bureau's case [1973] 87 ITR 542. Civil Writ Petition No. 2196 of 1976 was filed in this court to impugn the notices.