An assessee who maintains accounts on the mercantile system is entitled to deduction of his estimated liability to sales tax, even though they had not been paid to the sales tax authorities.

Gokal Chand Mital, J.

1. Sirsa Industries, Sirsa, the assesses, follows the mercantile system of accounting. It is engaged in the business of cotton ginning and pressing. In the course of business, it has been collecting central sales tax from its constituents on the sale of bales of cotton in the accounting years relating to the assessment years 1968-69, 1969-70 and 1970-71. The Central sales tax so realized was not paid to the Government and was shown as credited to the Central sales tax account in their books of account, and the same position was reflected in the balance-sheet. The Income-tax Officer did not add the amount of Central sales tax to the total income of the assessee and completed the assessment for all the three years. The assessee went up in appeal against the assessments for the years 1968-69 and 1969-70 in respect of matters other than Central sales tax accounts but did not file an appeal against the assessment for the year 1970-71. Some relief was granted by the appellate court with the result that the order of the Income-tax Officer for non-inclusion of the amount relating to Central sales tax in the total income of the assessee assumed finality.

2. The Income-tax Officer issued notices to the assessee under Sections 154/155 of the Income-tax Act, 1961 (for short "the Act"), for the aforesaid three assessment years to show cause as to why the amounts shown in the Central sales tax accounts be not added to the total income of the respective years in view of the decision of the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. CIT [1973] 87 ITR 542. The assessee represented to the Income-tax Officer, as also to the Central Board of Direct Taxes. The Central Board of Direct Taxes declined to express any opinion and before the Income-tax Officer could finally decide the matter, the notices were challenged by filing CWP No. 883 of 1976.

3. For the three subsequent years 1971-72, 1972-73 and 1973-74, the assessee took up the same position regarding the Central sales tax received by it and the Income-tax Officer did not include that amount in the total income of the assessee and framed the assessment. Thereafter, the Income-tax Officer issued notices under Sections 147 and 148 of the Income-tax Act for the aforesaid three years requiring the assessee to file returns of income within 30 days as he had reason to believe that income has escaped assessment. This action was also initiated in view of the aforesaid decision of the Supreme Court in Chowringhee Sales Bureaus case [1973] 87 ITR 542. Civil Writ Petition No. 2196 of 1976 was filed in this court to impugn the notices.

4. Haryana Cotton Corporation, another assessee, who was carrying on the business of commission agent, used to follow the mercantile system of accounting. This assessee also received Central sales tax on the transactions of sale of cotton bales as commission agent and the amount so received was credited to the Central sales tax in their account books and during the assessment the amount was sought to be excluded from the total income and here we are concerned with the assessment years 1972-73 and 1974-75. The Income-tax Officer while framing the assessment excluded the amount received as Central sales tax from the income of the assessee. However, later on, the Income-tax Officer issued separate notices for both the years under Sections 147 and 148 of the Act and required the assessee to file returns for those years within 30 days as he had reason to believe that income has escaped assessment. Obviously, this was done in view of the aforesaid decision of the Supreme Court in Chowringhee Sales Bureaus case [1973] 87 ITR 542. Separate Writ Petitions Nos. 2367 and 2376 of 1976 were filed to impugn the notices. Since identical questions were involved, all the four writ petitions were clubbed and were heard by an honble single judge of this court, who, vide his judgment dated April 29, 1983, dismissed the same by following the decision of t