- (1.) THE following question of law has been referred for the opinion of this Court by the Income -tax Appellate Tribunal, Delhi for the asst. yr. 1981 -82 : "Whether, on the facts and in the circumstances of the case and on a correct and true interpretation of s. 41(1) of the IT Act, 1961, the Tribunal erred in law in holding that the balance which remained outstanding in the sales -tax account after the payment of sales -tax assessed did not amount to any allowance or deduction and that they could not be validly brought to tax under s. 41(1) of the IT Act, 1961, and, therefore, the order of the AO could not be set aside by the learned CIT under s. 263 -
(2.) THE assessee was engaged in the sale of vanaspati and during the previous years relevant to the asst. yrs. 1978 -79 and 1979 -80, the assessee collected sales -tax and Central sales -tax and credited the same to a separate account. The amounts so collected were later found to be in excess of the amounts payable towards the sales -tax. The assessee transferred the said amounts to the suspense account but did not credit the same to the P&L a/c. This fact was not taken note of by the AO. The CIT(A) initiated proceedings under s. 263 of the IT Act, 1961 (for short, "the Act"), on the ground that the excess amount in the sales -tax account ought to be treated as income of the assessee. After hearing the assessee, income of the assessee was accordingly enhanced.
(3.) THE Tribunal accepted the claim of the assessee and held that s. 41(1) of the Act was attracted only for loss, expenditure or trading liability of the assessee and not for sales -tax liability. No fresh income was received by the assessee and mere cessation of liability during the previous year when the same was not in respect of any allowance or deduction could not be treated as income under s. 41(1) of the Act. We have heard learned counsel for the Revenue.;