TMI Blog1998 (1) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... th of receipt of a show cause notice from the excise department ?" The assessee is a public limited company engaged in the manufacture of ingots, billets and castings. The assessee was liable to pay excise duty on the manufacture of ingots and billets, which it was paying regularly. The accounting year of the assessee is the calendar year. This reference pertains to the assessment year 1980-81, the relevant previous year being the calendar year 1979. In this year, the excise authorities felt that the excise duty paid by the assessee had not been correctly calculated. Accordingly, two show-cause notices were issued asking the assessee to show cause as to why demand should not be made for payment of a further sum of Rs. 66,80,096 by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of proceedings for raising additional demand. He was of the opinion that no liability had accrued by the issue of the show-cause notices. The Commissioner (Appeals ) took note of the fact that the cause shown by the assessee was later accepted and the proceedings initiated pursuant thereto were dropped by the excise authorities. He also observed that there was no demand in this case at any point of time. In view of the above, he not only rejected the assessee's claim for deduction of Rs. 23,42,687, but also enhanced the assessment by the amount allowed by the Income-tax Officer, i.e., Rs. 66,80,687. The assessee appealed to the Income-tax Appellate Tribunal against the order of the Commissioner of Income-tax (Appeals). The Tribunal held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion and denied any liability, it also made a provision for the amounts mentioned in the show-cause notices. Learned counsel submits that according to the assessee it was a liability which was deductible in the computation of its income. Reliance is placed in support of this contention on the decision of this court in Shrikant Textiles v. CIT [1971] 81 ITR 222. Mr. Mehta, however, does not dispute that the cause shown by the assessee was accepted by the excise authorities and in December, 1982, the proceedings initiated by issuance of the show-cause notices were dropped. He also did not dispute the fact that no demand had been raised against the assessee pursuant to the show-cause notices at any point of time. He, however, pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the actual liability in praesenti and a liability de futuro which, for the time being, is only contingent. The former is deductible but not the latter." It was further observed : "The question to be decided in each case, therefore, is whether any present liability has accrued against the assessee which has to be decided by taking into account all the circumstances of the case. There may also be cases where the liability clearly exists under a statute. In such a case, as held by the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, deduction cannot be denied on the ground that the assessee is disputing the liability. Similarly, where a demand of tax or duty is served on the assessee maintaining the mercantile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admit any liability and showed cause refuting the allegations made in the show-cause notices. In fact, in the instant case, the cause shown by the assessee was accepted by the excise authorities and proceedings initiated by the show-cause notices were dropped. It is thus clear that the liability claimed by the assessee as a liability on account of excise duty was merely a contingent liability which cannot constitute expenditure for the purposes of income-tax. Mr. Mehta, learned counsel for the assessee, referred to the decision of this court in Shrikant Textiles v. CIT [1971] 81 ITR 222. We have carefully considered the above decision. In that case, a demand notice was issued by the officers of the Central Excise Department under rule 9(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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