Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1984-85, the following question has been referred to this court : " Whether, on the facts and in the circumstances of the case and on a correct interpretation of the provisions of Section 43B of the Income-tax Act, 1961, the Appellate Tribunal was correct in law in modifying the order of the Commissioner of Income-tax passed under Section 263 of the Income-tax Act, 1961, and in directing the Income-tax Officer to make fresh assessment for the assessment year 1984 85 following the decision of the Andhra Pradesh High Court in the case of Srikakollu Subba Rao and Co. [1988] 173 ITR 708?"
(2.) The facts relating to this reference are that the assessment of the assessee-company for the assessment year 1984-85 was completed on February 15, 1985, under Section 143(3). In the balance-sheet of the assessee as on December 31, 1983, a sum of Rs. 3,79,166 had been shown as current liability. The break up of this sum showed that it included, inter alia, three sums of Rs. 21,818, Rs. 61,443 and Rs. 2,06,640 being the liability towards West Bengal sales tax, Central sales tax and sales tax liability for the branches, respectively.
(3.) Obviously, the liability represented realisation of sales tax from the customers. Sales tax realised by the traders from its customers forms part of the sales turnover. The assessee had shown sales turnover of Rs. 4,75,51,840. Obviously the sales turnover stated above did not include realisation towards the sales tax from the customers. Therefore, the three sums of Rs. 21,818, Rs. 61,443 and Rs. 2,06,640 should be added to the sales turnover for finding out the correct profit of the assessee. Similarly, sales tax paid by the assessee should be deducted. The Income-tax Officer did not include this liability stated above in the sales turnover. Therefore, there has been an underassessment. The Commissioner was of the opinion that the assessment was erroneous and prejudicial to the interests of the Revenue. Proceedings under Section 263 were initiated. Overruling the objections filed by the assessee, the Commissioner held that the three sums referred to earlier constituted the income of the assessee and should be assessed as such. In that view, he set aside the assessment of the assessee and directed the Income-tax Officer to make a fresh assessment in accordance with law. Aggrieved by the order of the Commissioner of Income-tax, the assessee preferred an appeal to the Tribunal.;