MEWAR MOTORS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as "the ITAT"), has referred the following question for the opinion of this court which has arisen out of the order of the Tribunal in I. T. A. No. 2322/JP of 1994, dated April 30, 1996, in respect of the assessment year 1987-88 :

(2.) THE brief facts of the case are that the assessee, Mewar Motors, Udaipur, is a partnership firm engaged in purchase and sale of scooters, motor-cycles, cars and accessories. THE assessee filed the return showing total income of Rs. 1,96,045. THE assessment was completed at the returned income. A notice under Section 148 was issued on March 26, 1991, in response to which the assessee-firm submitted a reply. THE assessment was completed on a total income of Rs. 16,29,378. THE assessee had collected sales tax from various constituents for onward deposit with the local Sales Tax Department. THE said amount was credited in a separate account. THE sales tax outstanding as on March 31, 1987, amounted to Rs. 23,59,187. At the time of filing the return, the assessee claimed interest of Rs. 2,77,578 on the unpaid sales tax for which the necessary adjustment in the books of account was made on the mercantile system of accounting and as per the assessee's version the same was allowable under Section 36(1)(iii). During the course of reassessment proceedings the assessee made a further claim for a sum of Rs. 5,80,293. THE Assessing Officer treated the said amount of unpaid interest as part of the sales tax and disallowed the same under Section 43B of the Income-tax Act. THE Commissioner of Income-tax (Appeals) arrived at the conclusion that the order under Section 143(3) read with Section 148 was erroneous and prejudicial to the interests of the Revenue on account of the following mistakes :