TMI Blog1986 (7) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... over that actually paid, represented income of the assessee liable to be taxed in its hands. 3. The learned Commissioner (Appeals) has erred in law and on the facts of the case in entertaining the appeal against the order having interest under section 215 of the Income-tax Act, 1961. 4. It is, therefore, prayed that the order of the Commissioner (Appeals) may be set aside and that of the ITO restored to that extent." 2. The assessee is a firm and carries on business of commission gents for kirana and also trades in certain commodities. The assessment year is 1984-85 and the relevant previous year in Samvat year 2039. 3. While framing the assessment under section 143(3) of the Income-tax Act, 1961 ('the Act') the ITO had added back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance what the learned counsel of the assessee says. Since the assessee has not claimed Rs. 66,084 as trading liability in the profit and loss account, disallowance of the same under section 43B is not in order. The addition of Rs. 66,084 is, therefore, deleted." Consequently, the Commissioner (Appeals) directed the ITO to recalculate the interest chargeable under section 215 of the Act, after deleting the addition of Rs. 66,084 from the total income of the assessee. 5. Being aggrieved by the order of the Commissioner (Appeals), the revenue has come up in appeal with the grounds already mentioned above. At the outset, the learned counsel for the assessee submitted that since the issue raised in ground No. 2 above does not arise either f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since the issue raised in ground No. 2 above does not arise out of the orders of the income-tax authorities, the same should not be dealt with. In other words, he wanted to impress upon us that the department should not be allowed to make an entirely a different case which was never in the mind of the ITO. In this connection, he invited our attention to the relevant portion of the order of the ITO (reproduced above) and highlighted the fact that the ITO had made addition of Rs. 66,084 by invoking the provisions of section 43B. Thereafter, he submitted that the provisions of section 43B were brought on the statute in order to nullify the ratio laid down by the Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profits and gains of business and profession, the Income-tax Act defines the word 'paid' to mean 'actually paid or incurred' according to the method of accounting on the basis of which the profits or gains are computed. 60. Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty employer's contribution to provident fund, Employees' State Insurance Scheme, etc., for long periods of time, extending sometimes to several years. For the purpose of their income-tax assessments, they claim the liability as deduction on the ground that they maintain accounts on mercantile or accrual basis. On the other hand they dispute the liability and do not discharge the same. For some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case are clearly distinguishable from the facts and circumstances obtaining in that case, the ratio laid down in that case is not at all applicable in the present case. In this connection, he invited our attention to the observation which read as under : "It is apparent from the order of the Appellate Assistant Commissioner and has not been disputed before us in the present case that in the cash memos issued by the appellant to the purchasers in the auction sale it was the appellant who was shown as the seller. The amount realised by the appellant from the purchasers included sales tax. The appellant, however, did not pay the amount of sales tax to the actual owner of the goods auctioned because the statutory liability for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO (reproduced above) that he made addition of Rs. 66,084 by invoking the provisions of section 43B, which are not at all applicable in the instant case. It appears to us that the ITO has failed to comprehend the provisions of section 43B, which were brought on the statute in the relevant assessment year. It is pertinent to note that in the instant case, the assessee has never claimed in the past several years as well as in the year under appeal and in the subsequent years, the deduction on account of payment of sales tax collected on behalf of its principals as a commission agent. Again, the assessee has never challenged that it was not liable to collect sales tax on behalf of its principals. Further, it is not in dispute that under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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