Law:

Section:

section 256(2), read with section 271(1)(c), of the income-tax act, 1961-reference-question of fact-assessee-firm withdrew certain amount on last day of accounting year, that is, 31-3-1970, from cash book for meeting sales tax liability but without depositing same in treasury, brought it back in cash book on next day and credited it to next year's sales tax account-ito treated said amount as assessee's income and included it in its income for assessment year 1970-71-subsequently, penalty imposed under section 271(1)(c)-whether since sales tax liability existed on 31-3-1970 and was admissible as deduction, assessee was not guilty of any concealment of income even though it did not debit said liability in its books of account in relevent accounting year-held, on facts, yes-whether any question of law arose from tribunal's order holding that no penalty was imposable under section 271(1)(c)-held, on facts, no Facts The assessee-firm withdrew on 31-3-1970, Rs. 29,735 from the cash book for the purposes of meeting sales tax liability, but on the next day the said amount was again brought back in the cash book and was credited to the sales tax account relevant to the next assessment year, i.e., 1971-72. In the course of the assessment proceedings for the year 1970-71, the ITO, having found that the amount of Rs. 29,735 had not been deposited by the assessee in the treasury as sales tax, drew the inference that the liability of Rs. 29,735 for payment of sales tax was a fictitious liability and by withdrawing the said amount from the cash book, the assessee had reduced its taxable income. He, therefore, treated the said amount as the assessee's income and included the same in its total income, which was upheld by the AAC. Subsequently, the IAC levied a penalty under Explanation to section 271(1)(c). On appeal, the Tribunal, on the strength of the Supreme Court's view in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 , held (i) that the assessee had discharged the onus because it did have statutory liability to pay sales tax, (ii) that when it withdrew Rs. 29,735 for the purpose of meeting that liability it could not be said that the assessee was guilty of fraud…

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