Ajit K.Sengupta, J. - (1.) In this reference under Section 256(2) of the Income-tax Act, 1961, for the assessment year 1978-79, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that excise duty demand of Rs. 2,71,400 even though disputed and not provided in the account, was an allowable expenditure during the year?"
(2.) Shortly stated, the facts are that the assessee claimed Rs. 2,71,400 as excise duty demand in the return though the said demand was not provided in the accounts. On being requested to state the facts in regard to this demand, the assessee filed a copy of the petition of appeal filed before the Appellate Collector of Central Excise, Calcutta, disputing the levy of demand. The Income-tax Officer was of the view that the assessee had not accepted the demand and it had not made any entry in the accounts. Hence, the demand had not yet been quantified. The Income-tax Officer, therefore, did not allow the assessee's claim. He also held that it would be allowed in the year in which it was settled and paid.
(3.) The Commissioner of Income-tax (Appeals), on appeal, by placing reliance on an earlier order the Tribunal, allowed the assessee's claim.;