JUDGMENT
M. Katju, J.
1. This is a reference which has come up before this court in pursuance of a reference order under Section 256(1) of the Income-tax Act, 1961, made by the Income-tax Appellate Tribunal, Allahabad. The facts of the case are in a narrow compass. The assessee had claimed deduction of sales tax for the relevant assessment year and it was allowed. Subsequently, it was discovered that, in fact, the assessee had been exempted from sales tax by the sales tax authorities. As such, the Income-tax Officer invoked Section 147(a) of the Income-tax Act and added the amount which had been earlier deducted by invoking Section 41(1) of the Act.
2. The assessee appealed against the order of the Income-tax Officer but the appeal was dismissed. The second appeal to the Income-tax Appellate Tribunal also met with the same fate. On an application under Section 256(1), the following questions have been referred to us :
” 1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the reopening of the assessment under Section 147(a) was justified ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the provisions of subsection (1) of Section 41 applied to sales tax of Rs. 29,060 which was claimed and allowed as a deduction in the assessments for the relevant assessment years and in respect of which the claim of exemption was accepted by the sales tax authorities during the previous year relevant to the assessment year 196970 and on this ground upholding the addition of this amount in the assessee’s total income ?”
3. The present reference relates to only the assessment year 1969-70. In connection with this assessment year, exemption from sales tax had been granted by the sales tax authorities on March 25, 1969, i.e., even before the assessment year started. As such, the assessee was well aware that he was exempt from sales tax but yet he suppressed this information from the Income tax Officer and obtained a deduction towards sales tax liability. This was a clear case of deliberate failure to disclose his correct income and, as such, Section 147(a) was rightly invoked by the Income-tax Officer. Sri Arun Tandon appearing for the assessee argued that it was a case under Section 147(b) and not Section 147(a). We are unable to agree with this submission. As mentioned above, the assessee deliberately concealed the fact that he had been exempted from sales tax by the order of the sales tax authorities dated March 25, 1969. This was, therefore, a case falling within the scope of Section 147(a).
4. Section 41(1) of the Income-tax Act provides :
” 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not.”
5. In view of this provision the income tux authorities rightly added the amount which had earlier been deducted towards sales tax liability.
6. In view of the above, we answer the questions in the affirmative in favour of the Revenue and against the assessor. The Revenue will be entitled to its costs which we assess at Rs. 250.