M.B. Sharma, J. - (1.) THIS is an application under Section 256(2) of the Income-tax Act, 1961 (for short, "the Act"), with a prayer that the Income-tax Appellate Tribunal may be asked to state the case and refer the question of law framed in paragraph 5 of the petition to this court for opinion. The question which has been framed and which is sought to be referred is as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in the case of the assessee-company, which is maintaining its books of account on mercantile system, the sum of Rs. 26,08,065 which was written back and credited to the profit and loss account could not be taxed in its hands under Section 41(1) of the Income-tax Act, 1961 ?"
(2.) THE dispute relates to the year of assessment 1981-82. A return showing loss of Rs. 61,58,505 was filed by Jaipur Oil Products (P.) Ltd., the assessee, non-petitioner herein. In response to a notice under Sections 142(1) and 143(2) of the Act, account books were submitted which were examined. In its account books, the assessee had written back the credit of Rs. 26,08,065 in the account of Messrs. Patel Holdings from whom it purchased palm oil from Malaysia and an amount of Rs. 13,882 on other accounts such as Prashant Agencies, Reliable Extraction, etc. So far as the amount of Rs. 13,882 is concerned, it was offered for taxation and the dispute is only in respect of Rs. 26,08,065. After writing off the aforesaid amount, the assessee claimed that the same is not taxable since the decision to write it back was unilateral and the case is pending in the Bombay High Court. THE case of the assessee before the assessing authority was that no tax liability accrues in respect of the aforesaid amount because the liability in respect of the aforesaid amount has not yet been determined and is pending decision in the Bombay High Court. THE assessing authority, in his assessment order, did not accept this contention of the assessee and ordered that the amount shall be added to the total income of the assessee. THE assessee filed an appeal before the Commissioner of Income-tax (Appeals) and the Commissioner, in his order dated March 4, 1985, dealt with this controversy in paragraph 12 onwards. THE Commissioner came to the conclusion that the writing off of the aforesaid amount of liability is a unilateral act of the assessee and as such there is no cessation of liability as contemplated by Section 41(1) of the Act as the creditor, Messrs. Patel Holdings, has not given up its claim and litigation is still pending before the Rajasthan High Court as well as the Bombay High Court before the company judge. THE Revenue preferred an appeal before the Tribunal and the Tribunal, by its order dated November 23, 1987, in agreement with the Commissioner of Income-tax (Appeals), dismissed the appeal. An application was filed before the Tribunal under Section 256(1) of the Act to state the case and to make a reference of the aforesaid question to this court and the Tribunal, by its order dated April 17, 1989, refused to make the reference and the application before it by the Revenue was rejected. We have heard Mr. Singhal, learned counsel for the Revenue, and have gone through the order of the Tribunal and other authorities. There can be no dispute that a dispute is still going on in between the parties, Patel Holdings and the assessee, and a suit for the recovery of the aforesaid amount has also been filed against the assessee which is pending in the Bombay High Court. We are, therefore, of the opinion that no question of law arises in the facts and circumstances of the case and we decline to call for the statement of facts and the application is, therefore, rejected. Anyhow, in future, if the suit is decided in favour of the assessee, the Revenue will be free to include the aforesaid amount as income of the assessee.;