ORDER
The Income Tax Appellate Tribunal, New Delhi, has referred the following question of law under section 256(l) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for opinion to this Court:
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was legally justified in holding that the amount not realized by the assessee from the customers cannot be regarded as part of its trading receipts ?”
2. The reference relates to the assessment year 1984-85.
3. Briefly stated the facts giving rise to the present reference are as follows:
The respondent/assessee is a private limited company. The previous year relevant to the assessment year in question ended on 31-3-1984 during course of assessment the assessing officer found that certain amount of taxes has not been paid over to the Government and, therefore, made an addition of Rs. 2,46,174 by invoking the provisions under section 43B of the Act. According to the assessing officer, the sales tax collected by the respondent from its customers was not shown in the profit and loss account, relying upon the decision of the Apex Court in the case of Chowringhee Sales Bureau (P) Ltd. v. CIT ( 1973) 87 ITR 542 (SC). He held that sales tax collection formed part of the assessee’s trading receipt and as it was not paid during the year in question, the entire amount was added under section 43B of the Act. Feeling the billing part. As held by the Apex Court in the cases of Chowringhee Sales Bureau (P) Ltd. (supra) and Sinclair Murray & Co. (P) Ltd. (supra) any amount of sales tax which is realized by the assessee does form part of the trading receipt. If the assessee is following the mercantile system of accounting, it would become part of the trading receipt the moment the bill is issued irrespective of the fact whether the assessee receives the payment of bill or not. However, in case the assessee is following the cash system of accounting the amount of sales tax billed by it shall form part of its trading receipt for the year in which it receives the payment of the bill. Since the Tribunal has not examined the issue from the system of accounting adopted by the respondent/ assessee. We, therefore, return the question referred to us unanswered with the direction to the Tribunal to decide the appeal afresh taking into consideration the system of accounting adopted by the respondent/assessee. However, there shall be no order as to costs.
