9911796707
TMI Blog1986 (3) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... ss account with a sum of Rs. 2,24,379, which in respect of the credit balance written back. In the statement of income filed by the assessee, this amount had been excluded. The ITO required the details of such write back and the reasons for it exclusion. These were not given. He then pointed out that the very fact that the assessee had credited the balances showed that there was a cessation of liability. He pointed out that the accounts were audited and the very fact that the auditors allowed such amount to be shown to the profit and loss account is a clear case of evidence for cessation of liability. He then made the addition under section 41(1) of the Income-tax, 1961 ('the Act'). 2. The assessee appealed. The Commissioner (Appeals) held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision in the ask of Gannon Dunkerley & Co. Ltd., he pointed out that this has been explained and distinguished by the Allahabad High Court in the case of Indian Motor Transport Co. v. CIT [1978] 114 ITR 677. In that case, the amount was transferred to the provision for taxation account and further the assessee had made payments from such account as and when the creditors made their claim. It was on these facts that the High Court in that case came to a finding that the amount never became the property of the assessee. The Bombay High Court decision in the case of J. K. Chemicals Ltd. has been considered by the Punjab and Haryana High Court in the case of CIT v. Haryana Co-operative Sugar Mills Ltd. [1985] 154 ITR 751 and it held that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding purchasers of machinery which were later adjusted towards the purchase price of the machinery sold. The surplus deposit, if any, was not returned to the customers. Occasionally, the assessee was unable to refund some of the excess deposits. In the accounting year under the consideration before the High Court, some of the deposits not returned were transferred to the profit and loss account. As in this case before us, the assessee claimed that the sums so transferred did not represent taxable receipts. The Tribunal had accepted the assessee's submission. The Bombay High Court pointed out that the excess deposits were not held by the assessee for the benefit of depositors. The deposit was in respect of a specific transaction of sale and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess over the sale price. In the case before us, there is a deficit of advance given. In either case it is a transaction intimately connected with the trade of the assessee. If in the case before the Bombay High Court the excess has got the character of a trading receipt, in the case before us the deficit has also the character of a trading receipt. That is because the purchase price payable by the assessee to the villagers is reduced by that extent. Therefore, it goes to reduce the debits in the trading account and increases the profit. 7. The above finding has been given on the basis of the facts submitted before us at the time of hearing. But it is an admitted position that this fact was not before the ITO nor the Commissioner (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the ITO. 9. More or less a similar view has been expressed by the Punjab & Haryana High Court in the case of Haryana Co-operative Sugar Mills Ltd. There also the assessee was purchasing goods from the suppliers and it had written back an amount of Rs. 37,994. As in the case before us, the assessing authority asked for an explanation regarding the income and such write back and the assessee instead of explanation claimed exemption. At page 754 it was observed 'as the assessing authority mentioned that instead of bringing any material on record, the assessee proceeded to claim exemption regarding the said amount and desired to amend the return. So far as the facts which led to him to forfeit the amount are concerned they are wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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