Y. R. Meena, J. - (1.) On an application under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following questions set out at page 13 of the paper book for our opinion : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Commissioner of Income-tax had jurisdiction to invoke the powers under Section 263 and review the Income-tax Officer's order ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in rejecting the assessee's claim for deduction of the excise and customs duties of Rs. 98,25,833 paid in the year of account and debited in the profit and loss account, on the ground that the crediting of the profit and loss account by the value of the closing stock, which included the aforesaid duties, did not have the effect of wiping out the debit to the profit and loss account ?"
(2.) The applicant-assessee is a resident company engaged in the manufacture and sale of paints. The reference relates to the assessment year 1984-85 corresponding to the previous year ended on December 31, 1983. During this year, the assessee has paid Rs. 5,85,87,181 by way of excise duty and customs duty. This amount was duly debited to the profit and loss account of this year. Out of the said amount Rs. 98,25,833 related to stock remaining unsold at the end of the year and was therefore included in the valuation of the closing stock which was credited to the profit and loss account for the year.
(3.) The return for the year was filed on August 31, 1984, declaring a total income of Rs. 1,33,31,370. During the course of the assessment proceedings of the assessee, on, examination of the accounts it was revealed that Rs. 5,85,87,181 was debited to the profit and loss account. Out of that Rs. 98,25,833 has been credited in the closing stock. Thereby the assesses claimed that net deduction was Rs. 4,87,61,348. Therefore, Rs. 98,25,833 has been credited. That reduced the value of closing stock and, therefore, the assessee wrote a letter dated November 4, 1986, addressed to the Inspecting Assistant Commissioner of Income-tax, with revised the computation of the total income and claiming further deduction of Rs. 98,25,833.;