TMI Blog2002 (3) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessments" 2. In order to properly appreciate the legal controversy requiring cur adjudication, it is necessary to take a careful look at the undisputed facts of this case as also the developments leading to this litigation before us. During the previous year relevant to the immediately preceding assessment year i.e. assessment year 1991-92, the assessee company incurred a liability to pay custom duty of Rs. 5,77,05,178 but till the due date of filing relevant income-tax return under section 139(1) of the Income Tax Act (hereinafter referred to as 'the Act'), the assessee paid only Rs. 5,17,94,551. The difference between these two amounts i.e. Rs. 59,10,627 represented the customs duty remaining unpaid and liable to be disallowed under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings under section 143(3) of the Act, and made the following observation in the assessment order dated 29-12-1994 Less*: Provision written back disallowed under section 43B in the earlier assessment year Rs. 58,80,502 (*from the Profit as per Profit and loss account) 3. It is this adjustment of Rs. 58,80,502, from the profit as per profit and loss account, which is subject matter of dispute before us and allowance of which, according to the revenue, is a mistake apparent from the records. 4. After more than two years of the assessment order under section 143(3) having been passed, the successor Assessing Officer, vide order dated 4th February, 1997 under section 154 of the Act, withdrew the aforesaid deduction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal before the learned Commissioner (Appeals) who cancelled the above addition by observing as follows: "Submissions are considered. Assessment records-examined. The Supreme Court in CIT v. Hero Cycles (P.) Ltd. 228 ITR 463 laid down that in order to rectify under section 154, mistake must be glaring and obvious and the question should not be debatable. The same view finds support from the decision of the Allahabad High Court in CIT v. Modi Industries, cancelling order under section 154 requiring interest under section 214, as reported in 235 ITR 464. In view of the foregoing, the order of rectification was not proper and addition of custom duty is hereby deleted." 5. Revenue, being aggrieved by the aforesaid order of the learned Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility with respect to the custom duty is taxable in the assessment year 1992-93, under section 41(1) of the Act. It is contended that the assessee itself has taken the cessation of custom duty liability in its income and, therefore, there was no valid reason for excluding the same from taxable income. According to learned DR, Assessing Officer was not at all justified in allowing deduction of Rs. 58,80,502 while computing the assessable income. It was submitted that such a deduction was not allowable under any provisions of the Act. Reliance was placed on the order under section 154 passed by the Assessing Officer. We were thus urged to vacate the order of the CIT(A) and restore that of the Assessing Officer. Learned counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was explained that the aforesaid amount, though credited to profit and loss account, did not constitute taxable income at all. Our attention was invited to the assessee's computation of assessable income for the present assessment year, observations in the assessment order under section 143(3) of the Act for the same, and to the contents of the annual accounts of the company. On the strength of these submissions, it is submitted that there is no mistake in the assessment order, much less a mistake apparent from record. We are thus urged to support the conclusions arrived at by the first appellate authority and to decline to interfere in the matter. 9. It may be useful to reproduce section 41(1) of the Act which provides as follows: Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any year" for loss, expenditure or trading liability in respect of which such remission or cessation has been made. A fortiori, if an expenditure, for whatever reasons, has not been allowed as a deduction in any previous year and the liability in respect of such expenditure ceases in the current previous year, such a cessation of liability, in cur considered view, cannot be brought to tax in the current previous year. We are further of the considered view that the reason of such an expenditure not being allowed as a deduction is not material. Clearly, section 41(1) seeks to reverse the undue benefit of deduction given to the assessee in respect of a liability which eventually turns out to be non-existent but when no such benefit of deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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