Commissioner of Income Tax vs S.R.A. Reddiar and Sons

K.S. Paripoornan, J.—At the instance of the Revenue, the Income Tax Appellate Tribunal has referred the following question of law for the decision of this court :

"Whether, on the facts and in the circumstances of the case and also on an interpretation of Section 43B of the Income Tax Act, 1961,--

(i) Section 43B cannot be applied to the assessee''s case ;

(ii) the impugned amount cannot be brought to tax in the hands of the assessee for the assessment year under consideration ?"

The respondent/firm is an assessee to Income Tax. We are concerned with the assessment year 1984-85, the accounting period being 1158 M.E. The Income Tax Officer noticed that, out of the sales tax collections made during the accounting year, a sum of Rs. 38,061 was not paid in that year. He invoked the provisions of Section 43B of the Income Tax Act and added the same to the income of the assessee. In appeal, the Commissioner of Income Tax (Appeals) held that Section 43B of the Act is inapplicable. He deleted the disallowance. The matter was taken up in appeal before the Income Tax Appellate Tribunal by the Revenue as I.T.A. No. 36/(Coch) of 1986. I.T.A. No. 26/(Coch) of 1986 was an appeal filed by the Revenue against Messrs. R. Janardhanan Pillai. I.T.A. No. 31/(Coch) of 1986 was an appeal filed by the Revenue against Mr. R. Ponnuranga Reddiar. The above appeals were considered by the Income Tax Appellate Tribunal together and a common order dated July 31, 1986, was passed. The Appellate Tribunal upheld the decision of the Commissioner of Income Tax (Appeals). It was held that Section 43B of the Act will come into play only when the tax has accrued and became due for payment in the accounting year and the assessee had not paid the same within the accounting period. It will not have any application in cases where the time for the discharge of the tax was not over by the end of the accounting year. Section 43B of the Act was held inapplicable in all the three cases and the impugned amount was held not includible in the hands of the assessee for tax. I.T.A. No. 26/ (Coch) of 1986 and I.T.A. No. 31/(Coch) of 1986 came up before this court in Income Tax References Nos. 212 and 213 of 1987. They were considered along with Income Tax Reference No. 211 of 1987, wherein the assessee was one Govindaraja Reddiar, the assessee/respondent before the Tribunal in I.T.A. No. 20/(Coch) of 1986. It was following Govindaraja Reddiar''s case in I.T.A. No. 20/(Coch) of 1986, that the Appellate Tribunal rendered the common order in I.T.A. No. 26/(Coch) of 1986, I.T.A. No. 26/(Coch) of 1986 and I.T.A. No. 31/(Coch) of 1986 dated July 31, 1986. In rendering the common judgment in Income Tax References Nos. 211 to 213 of 1987 ( Commissioner of Income Tax Vs. Govindaraja Reddiar, ), by judgment dated September 17, 1990, a Bench of this court held thus (at page 420) :

"In these cases, when the Appellate Tribunal rendered its decision in the appeals on July 31, 1986, it construed the provisions of Section 43B of the Act as it stood then, unhampered by the amendments effected in the statute by the Direct Tax Laws (Amendment) Act, 1987, the Finance Act, 1988, and the Finance Act, 1989. The amendments so introduced later in Section 43B of the Act have made great inroads. In particular, the Finance Act, 1989, has inserted Explanation 2 with effect from April 1, 1984, and the said Explanation is applicable to the three cases on hand. The effect of these amendments, and, in particular, the change effected by the Finance Act of 1989, is virtually to supersede the earlier legal position. The Appellate Tribunal had no opportunity to consider the proper law applicable in these cases, for the assessment year 1984-85, since the later amendments, with retrospective effect, were not available at the time when the decision in the appeals was rendered.

In all the circumstances of the case, we are of the view that Section 43B of the Act, after the amendment by the Direct Tax Laws (Amendment) Act, 1987, the Finance Act, 1988, and the Finance Act, 1989, and Explanation 2 to the section which took effect from April 1, 1984, should be considered to give effect to the proper provisions of law applicable in the instant cases. It should be so done by the Appellate Tribunal, the final fact-finding authority, on the basis of the facts available before it. Therefore, we decline to answer the question referred to this court in the above three cases. At the same time, we direct the Income Tax Appellate Tribunal to restore the three appeals (I.T.A. Nos. 20, 26 and 51/(Coch) of 1986), to file and decide the matter afresh in accordance with law."

This case is also governed by the common order of the Tribunal dated July 31, 1986, which was answered on the above lines by this court as early as September 17, 1990, in Income Tax References Nos. 211 to 213 of 1987 (see Commissioner of Income Tax Vs. Govindaraja Reddiar, ). We are of the view that the reasoning and conclusion in Income Tax References Nos. 211 to 213 of 1987, contained in paragraphs 5 and 6 of the judgment, which we have extracted hereinabove, should apply in this case also.

Wo decline to answer the question referred to this court ; but, at the same time, we direct the Income Tax Appellate Tribunal to restore the appeal to file and decide the matter afresh in accordance with law.

The reference is disposed of as above.

A copy of this judgment under the seal of this court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.