1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH : NAGPUR Income Tax Appeal No. 82 of 2010 [The Commissioner of Income Tax-I, Nagpur Vs. M/s. Somras Distillery] Office Notes, Office Memoranda of Coram, appearances, Court's orders Court's or Judge's orders or directions and Registrar's orders. Mr. Anand Parchure, Adv., for the appellant. Mr. H.D. Dangre, Adv., for respondent sole. ---- CORAM : B.P. DHARMADHIKARI AND A.P. BHANGALE, JJ. DATE : 21st September, 2011. 1. Heard finally by consent of parties, as we find that a Substantial Question as to correctness of approach of Income Tax Appellate Tribunal [ITAT] in the matter arises for consideration. 2. The Assessment Year is 2001-02 and in response to notice under Section 154 of the Income Tax Act, the appellant claims that a reply was filed on 12 th March, 2004 by the assessee. The notice pointed out that as Sales 2 Tax to the extent of Rs. 2,20,32,707-00 was not paid, it could not have been allowed as deduction under Section 43B of the Income Tax Act. In the reply dated 12 th March, 2004, assessee is claimed to have submitted that he had remitted a sum of Rs.55,00,000-00 before filing of Return of Income and hence correct disallowance under Section 43B has to be the balance amount, i.e., Rs. 1,65,17,944-00 only. The Asstt. Commissioner of Income Tax on 29 th March, 2004 accordingly disallowed this amount and added it back as income. This was then assailed in appeal before Commissioner of Income Tax [Appeals], and Commissioner of Income Tax [Appeals] in his order dated 28 th July, 2006 relied upon very same reply dated 12 th March, 2004 and dismissed the appeal. 3. Assessee then filed further appeal and Income Tax Appellate Tribunal, by impugned order dated 21 st July, 2009, found that as Sales Tax payment was not routed through Profit & Loss Account, a debatable issue was involved and recourse to Section 154 of Income Tax Act was not possible. 4. Mr. Parchure contends that reply dated 12 th March, 2004 and admission therein has not been looked into at all. 5. Mr. Dangre, on behalf of respondent- assessee, submits that there is no such reply 3 dated 12 th March, 2004 submitted by assessee and assessee has not admitted anything. According to him, reliance upon said communication by AO and thereafter by Commissioner of Income Tax [Appeals] is erroneous and Income Tax Appellate Tribunal has correctly found that as debatable issue is involved, recourse to Section 154 is not valid. 6. Question whether recourse to Section 154 of Income Tax Act is valid or not valid depends upon the fact of communication dated 12 th March, 2004. If there is any such communication on record, its impact as considered by AO and thereafter by the Appellate Authority needed evaluation by ITAT. ITAT in the impugned order has not looked into said aspect at all. It only states that as assessee has not routed the amount of sales tax payment through Profit & Loss Account, the application of provisions of Section 43B itself becomes a debatable issue. 7. We find that before ITAT, the assessee has contended that he collected sale tax on sale bills, which was credited separately to Sales Tax Payable Account without claiming the same as an expenditure in Profit & Loss Account. He further emphasized that it was not routed through the Profit & Loss Account. The portion of communication dated 12 th March, 2004 reproduced by Commissioner of Income Tax 4 [Appeals] shows a statement by assessee that as per balance-sheet, sales tax of Rs. 2,20,32,707-00 [for current year] was outstanding as on 31 st March, 2002. He was not aware of the amount of recoveries the Sales Tax Department had directly made and were not given effect in his books. In view of this, he appears to have permitted AO to pass an appropriate order, subject to further corrections in the matter. The portion on which Adv. Mr. Parchure placed reliance in paragraph 2 of the Appeal Memo shows that, that letter also contains a statement that assessee had remitted a sum of Rs. 55,00,000-00 before filing the Return of Income and, therefore, assessee himself pointed that correct disallowance under Section 43B worked out to Rs.1,65,17,944-00 only. 8. In this situation, as Income Tax Appellate Tribunal has not considered the alleged communication dated 12 th March, 2004 and its impact on the controversy, we find that there is an error apparent in exercise of jurisdiction. Accordingly, we quash and set aside said order dated 21 st July, 2009 and remand the matter to Income Tax Appellate Tribunal for taking a fresh decision after giving both sides appropriate opportunity. Needless to mention that we have not concluded the rival contentions and all contentions are open before ITAT. 5 9. Appeal is, thus, partly allowed with no orders as to costs. Judge Judge |Hedau|