TMI Blog1987 (3) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years in question. As the questions are common for the assessment years in question, the present three references have been heard together and are being disposed of by a common judgment. As it appears from the statement of case as also from the orders of the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal, the assessee is a firm dealing in hosiery goods and ready-made garments and derives income therefrom. The assessee has not maintained any day to day stock account. He has not furnished any distinctive number either of purchases or sales and hence the average margin of profit earned by the assessee was not possible to be checked. The assessee debited the sales tax payment in the profit and loss account. Sales tax received from the customers was included in the sales price. The assessee declared the total turnover of Rs. 11,43,939, Rs. 9,65,647 and Rs. 10,68,682 for the assessment years 1972-73, 1973-74 and 1974-75, respectively, for which gross profits were declared at Rs. 1,72,680, Rs. 1,65,969 and Rs. 1,91,949, which worked out to 15%, 17.2% and 17.9% respectively. The Income-tax Officer adjusted the gross profit and found that the gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1971-72 was also pending before the Tribunal and the Tribunal disposed of the assessee's appeal first covering the assessment years 1971-72 to 1974-75. The Tribunal in the assessee's appeal held that the profit for the assessment year 1972-73 should be worked out by applying the rate of 16%, whereas the profit for the assessment years 1973-74 and 1974-75 should be worked out by adopting the rate of 19%. This was against the rate of 18% applied by the Appellate Assistant Commissioner for the year 1972-73 and 20% in the years 1973-74 and 1974-75. The order of the Tribunal, disposing of the assessee's appeal has been marked as annexure-D to the statement of the case. The, Department, in its appeals, objected to the Appellate Assistant Commissioner's orders not sustaining the entire additions of Rs. 78,033, Rs. 43,493 and Rs. 48,200 made by the Income-tax Officer in the assessment years in question. As the Tribunal reduced the additions maintained by the Appellate Assistant Commissioner, the Tribunal dismissed the departmental appeals. The order of the Tribunal dismissing the departmental appeals has been marked as annexure-C to the statement of the case. Thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effected by it as auctioneer, the appellant realised during the relevant period, in addition to the commission, Rs. 32,986 as sales tax. This amount was credited separately in its account books under the head " sales tax collection account ". The appellant did not pay the amount of sales tax to the actual owner of the goods, nor did it deposit the amount realised by it as sales tax in the State Exchequer, nor refund it to the persons from whom it had been collected. It took the position that the statutory provision creating that liability upon it was not valid. In the cash memos issued by the appellant to the purchasers in the auction sales, the appellant was shown as the seller. The Income-tax Officer held that the sum of Rs. 32,986 realised as sales tax by the appellant was part of the appellant's income of the same nature as was the commission received by it on the auction sales and the amount was added to the appellant's income. The appellant went in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner decided the case in favour of the appellant. The Department thereafter went before the Tribunal and the Tribunal affirmed the Appellate Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Orissa Government on the ground that the sales were inter-State sales. The assessee contended before the Income-tax Officer that the sales tax realised from the purchaser did not form part of the sale price of the jute and as such did not constitute receipt in jute business. The Income-tax Officer rejected the assessee's contention and held that the sales tax formed part of the consideration for the sales and, therefore, the accumulation on that account represented the assessee's income. The Income-tax Officer accordingly added the sales tax amount to the assessee's total income. On appeal by the assessee, the Appellate Assistant Commissioner found that a part of the sales tax amount realised had been paid to the Orissa Government and reduced the assessee's total income. However, the contention of the assessee to the effect that the sales tax realised was not part of the taxable receipt of the assessee was rejected. The assessee then went before the Tribunal and submitted that the purchaser paid the sales tax and the price of goods to the assessee on the understanding that if ultimately no sales tax was exigible on those sales, the amount collected as sales tax would be refunded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the amount of sales tax in the State exchequer did not prevent the applicability of the principles laid down by the Supreme Court in its earlier case, in the case of Chowringhee Sales Bureau (P.) Ltd. [1973] 87 ITR 542 (SC). In my opinion, the facts of this case also are at par with the facts of the instant case and I hold that the principles decided in this case by the Supreme Court also support the submission advanced by the learned senior standing counsel for the Department. Learned counsel for the assessee, on the other hand, in support of his submission , relied upon a Supreme Court case in the case of Kedarnath lute Manufacturing Co. Ltd. v. CIT [1971] 82 ITR 363. At the very outset I wish to note that the principle decided in this case supports the submission advanced by the learned senior standing counsel for the Department and is against the assessee . In this case, the assessee was a public limited company doing the business of jute and manufacturing of jute goods. The method of accounting followed by the assessee was the mercantile system. The assessee claimed a deduction of Rs. 1,49,776 on account of sales tax determined to be payable on the sales made by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity because the assessee had taken proceedings before higher authorities for getting it reduced or wiped out so long as the contention of the assessee did not prevail. Further, the fact that the assessee had failed to debit the liability in its books of account did not debar it from claiming the sum as a deduction either under section 10(1) or under section 10(2)(xv). Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not the view which the assessee might take of his rights ; nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter." Thus, it would appear that this case instead of supporting the submission advanced by the learned counsel for the assessee, fully supports the submission advanced on behalf of the Department. There is no element of profit on the amount of sales tax and hence the application of gross profit (rate) on the amount of sales tax does not arise; rather the surplus or deficit of the sales tax collection and sales tax paid should be taken as income or expenditure separately. The sales tax paid or collected cannot form part of the gros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e method employed is such that in the opinion of the Income-tax Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Income-tax Officer may determine." On the facts and in the circumstances of the case (as detailed above), I further hold that the proviso to section 145(1) of the Act was applicable in the instant case and the Income-tax Officer and the Appellate Assistant Commissioner both correctly applied the proviso to section 145(1) of the Act in the instant case: For the aforesaid reasons, question No. 2 is answered in favour of the Revenue and against the assessee. Thus I hold that, on the facts and in the circumstances of the case, the Tribunal was not justified in holding that the gross profit rate should be applied to gross turnover including the amount of sales tax. As the Department's case and the assessee's case have been dealt with on merits while answering question No. 2, question No. 1 loses its significance and need not be answered. Parties shall bear their own costs. Let a copy of this judgment be transmitted to the Assistant Registrar, income-tax Appellate Tribunal, Patna, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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