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Abdul Majid Paramjit Singh Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1985)14ITD27a(Delhi)
AppellantAbdul Majid Paramjit Singh
Respondentincome-tax Officer
Excerpt:
.....lay down that if-any allowance or deduction has been made in respect of any loss or expenditure or trading liability in a previous year and, subsequently,, the assessee has benefited by obtaining any remission or cessation of that liability claimed as a deduction in earlier year or years, the amount of benefit would be liable to tax as deemed profit or gains of business. in the present case, when the assessee did not include the terminal tax collected as a part of its trading receipts, it actually amounted to claiming the deduction on account of terminal tax liability in those years.subsequently, when the trading liability already granted deduction in the earlier years came to be remitted, it became assessable as deemed income under the provisions of section 41(1). while we hold so, we.....
Judgment:
1. Even though a number of grounds have been raised in this appeal by the assessee-firm, the objections are three-fold and these are to the effect (I) that the terminal tax of Rs. 56,910 (Rs. 53,549 collected in the assessment year 1969-70 and Rs. 3,361 collected in the assessment year 1970-71) being integral part of the trading receipts could at the best be assessed as income of the assessment years 1969-70 and 1970-71 and not in the assessment year 1973-74 ; (2) that there had been no remission of liability on the passing of the order of the Addl. Senior Sub-Judge, Delhi, dated 19-7-1971 ; and (3) that since the liability of the terminal tax was never allowed as a deduction in the earlier years, the question of invoking the provisions of Section 41(1) of the Income-tax Act, 1961 ('the Act') and assessing the terminal tax collections in the assessment year 1973-74 did not arise. Apart from highlighting these objections, Shri G.R. Agnihotri, the learned authorised counsel of the assessee, has made a few other points. He has, firstly, contended on the authority of the Supreme Court decision in the case of Laxmipat Singhania v, C77'[1969] 72 ITR 291 that unless expressly provided an income which is assessable in one assessment year cannot be assessed in another assessment year. It is next contended on the authority of another decision of the Supreme Court in the case of CIT v. Brij Lal Lohia & Mahabir Prasad Khemka [1972] 84 ITR 273 that the principle of res judicata does not apply to income-tax proceedings and that in spite of the finding of the Tribunal in the assessment year 1972-73, the amount of Rs. 56,910 could not be assessed in the assessment year 1973-74. It is further contended that the department having failed to identify any allowance of liability in an earlier year, it was not entitled to invoke provisions of Section 41(1) in the assessment year 1973-74 and for this reliance has been placed by him on the decision of the Hon'ble Supreme Court in the case of Tirunelveli Motor Bus Service Co. (P.) Ltd. v. CIT [1970] 78 ITR 55. In support of the contention that terminal tax collected was an integral part of the trading receipts in the accounting period relevant to the assessment years 1969-70 and 1970-71 and could be assessed as the income of these assessment years, reliance has been placed on the three decisions of the Hon'ble Supreme Court in Punjab Distilling Industries Ltd. v. CIT [1959] 35 ITR 519, Chowringhee Sales Bureau (P.) Ltd. v. CIT [1913] 87 ITR 542 and Sinclair Murray & Co. (P.) Ltd. v. CIT [1974] 97 ITR 615.

2. On the other hand, Shri G.L. Khurana, the learned departmental representative, has supported the orders passed by the lower authorities and submitted that the assessment of Rs. 56,910 having been made in the assessment year 1973-74 in accordance with the direction of the Tribunal in the assessee's own case for the assessment year 1972-73 [IT Appeal NO, 753 (Delhi) of 1977-78 dated 22-5-1979], the assessment of the income of Rs. 56,910 was wholly justified. According to him, when the final order of the Senior Sub-Judge dated 19-7-1981 was passed in Appeal No. CR-104 of 1969 holding that the terminal tax was not payable by the assessee to the Municipal Corporation of Delhi (MCD), the liability of Rs. 56,910 came to an end and ceased altogether and that, therefore, the provisions of Section 41(1) were validly applied by the lower authorities.

3. We have carefully considered the rival submissions. We have gone through the impugned orders of the ITO and the AAC. We have also gone through the paper book submitted for and on behalf of the assessee and the order of the Tribunal in the assessee's own case for the assessment year 1972-73. We have also gone through the judgments on which reliance has been placed by the learned representatives of the two sides.

4. Before we adjudicate upon the legal issues arising in this appeal, we may briefly state the facts giving rise to the controversy.

5. The assessee-firm is a partnership firm which carried on business of contractors in Delhi. It had been granted contract for the excavation of sand from the river Yamuna at Okhla, by the Executive Engineer, Agra Canal, Mathura. As a result of the grant of this contract, the assessee started digging and removing the sand from the bed of river Yamuna which had been sold. The Terminal Tax Officer of the MCD demanded the terminal tax from the assessee on the ground that the sand had been dug and removed from the territory which formed part of the State of Uttar Pradesh and since the sand so dug had been brought to the Union territory of Delhi, it was liable to terminal tax. On receipt of the notice from the Terminal Tax Officer of the MCD, the assessee-firm collected terminal tax from its customers but at the same time it declined its liability to pay terminal tax on the ground that sand had been dug and removed by it from the territory of Okhla which formed part of the Union territory of Delhi. A suit was filed before Shri Hira Lal Garg, P.C.S., S.J.I.C., Delhi, asking for permanent injunction against the MCD from imposing or charging any terminal tax from the assessee-firm. As per the order of the Sub-Judge the injunction was granted and the MCD was restrained from collecting any terminal tax from the assessee. The MCD felt aggrieved of the order passed by the first appellate authority and, therefore, an appeal was preferred before the Addl. Senior Sub-Judge, Delhi. The latter upheld the claim of the assessee and dismissed the appeal filed by the MCD vide its order dated 19-7-1971. The accounting year of the assessee for the assessment year 1973-74 was from 1-7-1971 to 30-6-1972. In other words, the order of the Senior Sub-Judge was made in the course of the accounting year for the assessment year 1973-74 but since the copy of the order and the exact date on which the order was made had not been supplied to the ITO, he had assessed the terminal tax liability of Rs. 56,910 in the assessment year 1972-73 on the ground that the remission thereof had taken place in the accounting year of that assessment year.

The assessee appealed against the order passed by the ITO in the assessment year 1972-73 and when the matter came up before the Tribunal, it held in its order in IT Appeal No. 753 (Delhi) of 1977-78 dated 22-5-1979 as follows : As regards the taxability of the above amount, we are inclined to agree with the AAC's reasoning that liability in regard to this item had ceased to exist and that it became the income of the assessee on the cessation of liability. However, the amount was included in this year on the ground that the date regarding the Court's decree in respect of the same was not shown by the assessee. The learned counsel for the assessee has stated that the Court's decision in favour of the assessee by which the assessee's liability in regard to this liability ceased to exist, was announced on 19-7-1971. An affidavit of Shri Mohd. Ibrahim partner had also been sworn and placed before us deposing that the date of the judgment of the Court was duly intimated to the Appellate Assistant Commissioner and that the AAC was wrong in saying in his appellate order that the assessee had not stated the date in this regard. According to the learned counsel for the assessee, as the accounting period of the assessee ended on 30-6-1971, the judgment of the Court which was announced on 19-7-1971 could be taken into consideration only in the next year.

6. As a consequence of the order of the Tribunal, the sum of Rs. 56,910 was assessed by the ITO in the supplementary proceedings started in the assessment year 1973-74 and the remitted liability of Rs. 56,910 had been included in the total income of that assessment year. When the assessee appealed against the order passed by the ITO, the AAC upheld it.

7. It is in the background of the abovementioned facts that the learned counsel of the assessee and the learned departmental representative have made their submissions which have been summed up in the beginning of this order. It appears to us that even though the representation made on behalf of the assesssee that terminal tax collected in the assessment years 1969-70 and 1970-71 formed part of the trading receipts of the assessee of those years in accordance with the decisions given by the Hon'ble Supreme Court in the cases of Chowringhee Sales Bureau (P.) Ltd. (supra) and Sinclair Murray & Co.

(P.) Ltd. (supra) cannot but be accepted, the other relevant facts cannot be lost sight of. The assessee did not account for the terminal tax collection of Rs. 53,549 in the assessment year 1969-70 as a part of its trading receipts. Similarly, it also did not account for the sum of Rs. 3,361 as trading receipts in the assessment year 1970-71. The reason why the receipts or collections of terminal tax had not been shown as trading receipts was that the assessee had to pay the similar sums as its liability of terminal tax which had been demanded by the MCD. The net result of the entries made in the books of account of the assessee was that while on the one hand it reduced the credit side of the trading account by not accounting for the collection of terminal tax amounting to Rs. 56,910 in the two assessment years, it also did not claim to the debit of the profit and loss account the liability towards terminal tax. Whether or not the liability of terminal tax was claimed as a deduction, the fact cannot be denied that the assessee had reduced its trading receipts by the sums of Rs. 53,549 and Rs. 3,361 in the assessment years 1969-70 and 1970-71, respectively; This, according to us, amounted to claiming deduction on account of liability of terminal tax. Since this liability ceased altogether or came to be remitted by the final order dated 19-7-1971 of the Senior Sub-Judge, the provision of Section 41(1) v/ere, according to us, justifiably brought into operation. These provisions lay down that if-any allowance or deduction has been made in respect of any loss or expenditure or trading liability in a previous year and, subsequently,, the assessee has benefited by obtaining any remission or cessation of that liability claimed as a deduction in earlier year or years, the amount of benefit would be liable to tax as deemed profit or gains of business. In the present case, when the assessee did not include the terminal tax collected as a part of its trading receipts, it actually amounted to claiming the deduction on account of terminal tax liability in those years.

Subsequently, when the trading liability already granted deduction in the earlier years came to be remitted, it became assessable as deemed income under the provisions of Section 41(1). While we hold so, we have the support of the decisions of the Hon'ble Gujarat and Kerala High Courts, respectively, in Motilal Ambaidas v. CIT [1977] 108 ITR 136, CIT v. Marikar (Motors) Ltd. [1981] 129 ITR 1.

8. Apart from the above legal position, we find that the matter stands concluded by the finding of the Tribunal in the case of the assessee for the assessment year 1972-73 [IT Appeal No. 753 (Delhi) of 1977-78, dated 22-5-1979]. It is seen from the order of the Tribunal, as extracted above in para No. 5 of this order, that the Tribunal held that there was no doubt about the taxability of the amount of terminal tax liability which had been remitted by the order of the Senior Sub-Judge and that the only question that was to be decided was as to whether it was assessable in the assessment year 1972-73 or a later year. After so holding the Tribunal had set aside the matter with the direction that the amount be assessed in the year in which the order of the Senior Sub-Judge had been received. Since the order of the Senior Sub-Judge was dated 19-7-1971 and since it was received in the accounting year of the assessment year 1973-74, which was from 1-7-1971 to 30-6-1972, the amount had to be taxed in the assessment year 1973-74 in pursuance of the order of the Tribunal.

9. Now we may deal with the other arguments of Shri G.R. Agnihotri.

There can be no scope for disputing the contentions raised by him which are based on the authorities of the Hon'ble Supreme Court in the cases of Laxmipat Singhania (supra), Brij Lal Lohia and Mahabir Prasad Khemka (supra) and Timnelveli Motor Bus Service Co. (P.) Ltd. (supra). What we fail to discern is as to how the ratio and decisions in the abovementioned cases help the assessee. It had been held in the decision of the Hon'ble Supreme Court in the case of Laxmipat Singhania (supra) that the fundamental rule of taxation is that, unless otherwise expressly provided, an income cannot be taxed twice and that it is not open to the ITO to ignore the accrual of income in the year of accrual and thereafter to tax it on the happening of some other event. In the present case, what had happened was that the income by way of terminal tax did accrue in the assessment years 1969-70 and 1970-71 when the terminal tax was collected on sales of sand but at the same time the trading receipts did not ultimately constitute within themselves the terminal tax collection. It is, therefore, not a case which would fall in the ratio and decision in the case of Laxmipat Singhania (supra). It is not a case where the income had actually accrued in one assessment year and where the assessment of the same income is being postponed or deferred. It is a case where after certain accrual of income, the income had been reduced by the accrual of corresponding amount of liability and where the department is bringing into tax under Section 41(1) what had been allowed as a liability or a reduction from trading receipts in the assessment years 1969-70 and 1970-71. Whether the allowance of trading liability of terminal tax was an overt or covert act was wholly immaterial. As long as the assessee got benefit of certain liability in the assessment years 1969-70 and 1970-71, either by debiting the profit and loss account or trading account by some amount of liability or by reducing the trading receipts by that amount, the benefit of deduction had been obtained in those years and, therefore, when that liability came to an end in the accounting year of 1973-74, it was rightly taxed under the provisions of Section 41(1).

Similarly, while we agree that the assessment of Rs. 56,910 in the assessment year 1973-74 cannot be made merely on the basis of a finding of the Tribunal in the assessment year 1972-73 and the assessee would be free to challenge the correctness of that action on the part of the income-tax authorities, we are of the view that there is sufficient legal justification available for the action which has been taken by the authorities for bringing to tax the sum of Rs. 56,910 as deemed income under Section 41(1) in the assessment year 1973-74. The decision of the Hon'ble Supreme Court in the case of Brij Lal Lohia and Mahabir Prasad Khemka (supra) would, therefore, be not applicable on the facts of the present case. In the case of Tirunelveli Motor Bus Service Co.

(P.) Ltd, (supra), it had been held that unless the department was able to identify any particular item as having been already allowed as a deduction in an earlier assessment, the provisions for recoupment of the same amount under the provisions of Section 41(1) in a subsequent year would not apply. In the present case, as we have repeatedly stated in the preceding portions of the order, the assessee had actually obtained the benefit of deduction of terminal tax when it did not account for the collection thereof as a part of its trading receipts.

Having reduced its gross trading receipts by amounts of terminal tax collected, it does not lie in the hands of the assessee to contend that the recoupment of the same liability on its remission or cessation in the assessment year 1973-74 was not permissible under law. The decision in the case of Tirunelveli Motor Bus Service Co. (P.) Ltd. (supra) would, therefore, not apply on the facts and in the circumstances of the present case.

10. In the above view of the matter, we hold that the lower authorities were justified in invoking the provisions of Section 41(1) and in bringing to assessment the remission of liability of terminal tax amounting to Rs. 56,910 in the assessment year 1973-74. The various grounds taken in the petition of appeal and all the arguments raised by the learned counsel of the assessee are found not acceptable in view of the reasons given as above.

11. In conclusion, the appeal filed by the assessee fails and is hereby dismissed.


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