Commissioner of Income Tax vs Motor and General Sales Ltd.

In income tax Reference No. 78 of 1985, the income tax Appellate Tribunal, Allahabad, had referred following two questions of law u/s 256(1) of the income tax Act, 1961 ("the Act") for opinion to this Court : 1. Whether there was sufficient material justified the Appellate Tribunal''s finding that there was a corresponding liability in respect of the accretion amount to Rs. 3,09,298 in the contingency Account No. 2"

Whether the Hon''ble Tribunal was in law justified in holding that the accretion in the contingency Account No. 2 could not be brought to tax as a trading receipt in spite of the fact that the actual sales tax liability in respect of completed transaction had been duly provided for any transfer from the aforesaid account?

Whereas in ITR No. 79 of 1985, the income tax Appellate Tribunal, Allahabad has referred following two questions of law u/s 256(1) of the Act for opinion to this Court :

Whether there was no material justifying Tribunal''s finding that there was corresponding liability in respect of accretion in the contingency account No. II amounting to Rs. 2,83,119?

Whether the Tribunal was justified in law in holding that the accretion in contingency account No. II could not be brought to tax as trading receipt in spite of the fact that the actual sales tax liability in respect of completed transactions had been duly provided for by transfer from the aforesaid account?

The reference relates to the assessment year 1980-81 in respect of M/s. Motor and General Sales, Lucknow and 1978-79 in respect of M/s. Motor Sales, Lucknow. The Tribunal has followed its earlier decision for the assessment years 1970-71 and 1972-73 to 1976-77. It may be mentioned here that identical questions were referred to this Court in ITR No. 91 of 1981, ITR No. 92 of 1983 and ITR No. 96 of 1981 which are inter- parties and this Court had answered both the questions in favour of the department and against the assessee. This Court has considered its earlier decision in the case of CIT v. Auto Sales [2000] 246 ITR 494. Respectfully following the aforesaid decision and we answer the question of law referred to us in negative, i.e., in favour of the department and against the assessee. However, there shall be no order as to costs.