1. In these appeals, the assessee is challenging the consolidated order of the Commissioner of Income-tax passed under Section 263 of the Income-tax Act, 1961 (the Act) wherein, she has directed the ITO to modify the assessment orders by withdrawing deduction of excise duty liability of Rs. 14,05,869 in the first year and of Rs. 22,25,485 in the second year under appeal.
2. The assessee is a company engaged in the manufacture of Dry Cell Batteries under the brand name of 'NOVINO'. The assessment years are 1979-80 and 1980-81 and the relevant previous years are the calendar years 1978 and 1979 respectively. The assessee is following mercantile system of accounting.
3. For the years under appeal, the assessee had claimed deduction of excise duty of Rs. 144,34,035 in the first year and of Rs. 223,10,208 in the second year. In the assessments framed Under Section 143(3)/144B of the Act on 24-5-1983 and 2-3-1984, the ITO , had disallowed Rs. 15,20,127. and Rs. 23,75,928 respectively out of the claim made by the assessee.
4. Subsequently, on going through the records of the assessee, the Commissioner of Income-tax was of the view that deduction on account of excise duty allowed by the ITO was incorrect. She, therefore, initiated the proceedings Under Section 263 of the Act, and called upon the assessee to show cause as to why the orders of the ITO should not be set aside or modified in this regard.
5. Vide its letters dated 29-3-1985, 29-5-1985 and 31-7-1985, the assessee resisted the action of the Commissioner of Income-tax on the grounds that (a) since it had filed appeals before the Commissioner (Appeals) against the orders of the ITO wherein, one of the issues involved pertain to the excise duty, no action Under Section 263 of the Act, could be taken, (b) since at the time of assessment proceedings it had disclosed full facts in respect of the excise duty-liability before the ITO and the ITO after considering the assessee's stand as well as printed accounts allowed deduction of the excise duty which included Rs. 14,23,873 in the first year and of Rs. 22,25,485 in the second year under consideration, the orders passed by him were not erroneous, (c) no action Under Section 263 of the Act, could be taken unless the Commissioner of Income-tax, prima facie, finds that the order passed by the ITO was erroneous and was also prejudicial to the interest of the revenue. Reliance was placed on the decision of the Hon'ble Karnataka High Court in the case of V.G. Krishnamurthy v. CIT [1985] 152 ITR 683, (d) even though in the assessment year 1981-82, the ITO had disallowed deduction of excise duty provision of Rs. 39,73,435 on the differential price between ex-factory price and ex-factory price less post manufacturing expenses, the Commissioner (Appeals) was pleased to allow deduction of the said amount in an appeal preferred by the assessee.
Since the amounts involved in the present proceedings were akin to Rs. 39,13,435 deduction allowed by the ITO in the respective years cannot be said to be prima facie erroneous and also prejudicial to the interest of the revenue, (e) the provisions of excise duty of Rs. 14,23,873 and Rs. 22,25,485 in the respective years under consideration were made on the basis of accrued liability quantified in the demand notice dated 24-6-1980 received from the excise authorities for the period from 1-10-1975 to 31-1-1978. In this connection, the assessee had filed before the Commissioner of Income-tax a copy of the demand notice dated 24-6-1980 and a copy of the writ petition filed in the Hon'ble Gujarat High Court against the said demand.
6. The assessee had also filed before the Commissioner of Income-tax, the relevant provisions of Section 4 of the Central Excises and Salt Act, 1944 and Rule 9B of the Central Excise Rules, with a view to impress upon her that the ITO had rightly allowed deduction of the two amounts involved in the present proceedings.
7. In its letter dated 31-7-1985, the assessee had recapitulated the facts as under : 1. Our clients maintain books of account on mercantile system of accounting.
4. Excise duty actually paid is on ex-factory price less certain post-manufacturing expenses.
5. Show-cause notice dt. 11th May, 1976, from Asstt. Collector of Central Excise, Baroda, Dn. II, was received.
6. Demand Notice dt. 24-6-1980 was received for payment of Excise duty of Rs. 44,02,120 for the period from 1-10-1975 to 31-1-1978 on wholesalers' price i.e., ex-factory price (without deducting post-manufacturing expenses) and also including differential value between wholesalers' price and ex-factory price.
7. Provision is made in books of account for differential excise duty payable on ex-factory price less actual excise duty paid after deducting certain post-manufacturing expenses from ex-factory price.
8. Excise department has made provisional assessment. Copy of excise duty payable as per provisional assessment is already filed.
9. Similar provision of excise duty payable of Rs. 39,13,435 for assessment year 1981-82, disallowed by the Income-tax Officer has been allowed by CIT (Appeals), Baroda.
In the said letter, the assessee had also relied on a number of reported cases and culled out the following principles : 1. When books of account are maintained on mercantile system of accounting, excise duty/sales tax liability should be claimed in the year of accrual.
2. In the case of excise duty, it accrues on production/manufacture of goods, though quantification may take place at a later date.
3. Receipt of demand notice is not a pre-condition for accrual of excise duty/sales tax liability.
4. Accrued liability is to be allowed in the year of accrual irrespective of the fact whether it is paid or not.
5. Accrued liability is allowable in the year of accrual even though the same may be disputed by the assessee.
6. Accrued liability is to be allowed even though no provision is made in the books of account. Entries or absence of entries in the books of account is not a determining factor.
7. Unless the claim is frivolous, the accrued liability is allowable though it may be estimated liability. Difficulty in estimation does not convert it into a contingent liability.
8. If there is a difference between the estimated liability and actual liability, the excess can be taxed Under Section 41(1).
8. Apart from the above submissions, the learned counsel for the assessee had also made certain oral submissions before the Commissioner of Income-tax on the following lines : (i) Since the assessments had been framed after seeking the approval of the IAC Under Section 144B of the Act, no action Under Section 263 of the Act, could be taken.
(ii) In view of the decision of the Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, the ITO had rightly allowed deduction of the two amounts in question.
9. The Commissioner of Income tax, however, in her order under appeal, overruled the assessee's stand in the following manner : The contentions of the assessee are examined. As regards the assessee's contention that all the material facts were disclosed at the time of assessment, the action Under Section 263 is to be taken on the basis of the material available on record only this has been confirmed by the ratio laid down by the Calcutta High Court in the case of Ganga Properties, 118 ITR p. 447. Thus with the material available on record if the CIT comes to a conclusion that the order of the ITO was erroneous and prejudicial to the interest of revenue then action Under Section 263 can be taken against the assessee. As regards the contention that the CIT (A) in the subsequent year has already given the decision in favour of the assessee, it is seen that the CIT(A) has not given the decision on merit of the case, but he allowed the claim of assessee basically on the ground that in earlier years i.e., 1979-80 & 1980-81, the ITO had himself allowed the claim of the assessee. The order of the CIT(A) for the subsequent year is dated 30-3-1985 while action for the present asst. years Under Section 263 was initiated on 20-3-1985 by issue of show cause notice. Therefore, finding of CIT(A) in the subsequent year cannot be made a base for the proceedings of the present years.
Moreover, against the order of CIT(A) for the subsequent asst. year the Department has already preferred an appeal before the Tribunal.
Regarding the contention that the order of the ITO was with the approval of the IAC Under Section 144B, thus it was not the order of the ITO but the order of the IAC, the IAC Under Section 144B (as stood at the relevant time) was empowered to issue directions and the directions of the IAC used to merge with the assessment order of the ITO. Therefore the directions themselves do not constitute any order and the order always remained that of the Income-tax Officer.
So the CIT has jurisdiction to revise the order passed by the ITO with the directions of IAC. On facts, it is seen that for the period 1-10-1975 to January, 1978 the Excise Department took a view that the Excise duty was payable, not only on the post manufacturing expenses but also on the wholesellers' margin. Accordingly for the period 1-10-1975 to January 1978 the Excise Department issued the demand notice. The period 1-10-1975 to Jan.' 78 was pertaining to the years preceding the years under consideration. The assessee Company did not accept the liability to the post manufacturing expenses and wholesellers' margin and filed a writ petition before the Gujarat High Court. The Gujarat High Court stayed the said order of Excise Department and together with that the High Court restrained the Excise Department to issue any demand notice on the post-manufacturing expenses and wholesellers' margin for the present assessment years. Though no demand notice in view of Gujarat High Court's stay was issued by the Excise Department to the assessee company for the present years but the assessee company made a provision of excise duty on the post manufacturing expenses and wholesellers' margin, to the extent of Rs. 14,05,869 and Rs. 22,25,485 respectively for both years. The ITO in the assessment allowed the same. This amount is the subject matter of dispute in the present action. The assessee contends that since the Excise Department had taken a view that the excise duty was leviable on the post manufacturing expenses and whole-sellers' margin, with the ratio of various High Courts and specially with the ratio of the decision of the Supreme Court in the case of Kedarnath Jute Mills Ltd. the liability had crystallised during the year of account.
It is worth noting that in the decisions relied upon by the assessee as well as in the decision of Kedar Nath Jute Mills Ltd. of Supreme Court, 82 ITR p. 363, the liability was not denied by the taxpayers but the quantum was disputed before the appellate authorities.
Therefore the courts had held that the liability had crystallised during those years. While in the present case the assessee company is denying the liability of levy of any excise duty on the post manufacturing expenses and whole-sellers' margin. Therefore, the ratio of the decisions relied upon by the assessee company would not be applicable to the facts of the case. Secondly in all the cases, reliance on which, is placed by the assessee, the demand notices were served on the taxpayers, while in the present case no demand notice was served during the years of account, to the assessee company. Thus the excise duty could not be said to have crystallised during the year of account. In this context, reference can be made to discussion on page No. 1176 of Sampath Iyengar's commentry Vol.
II, Discussion in Chaturyedi and Pithisaria Vol. II on page No. 1339 is also noteworthy, which reads as under : ...Thus, it has been held that there can be no liability, either notional or legal unless and until a demand has been made by the appropriate authority, and that a demand in the exercise of a lawful authority imposes a legal liability upon the assessee and it is only at that point of time that he is called upon to incur the expenditure in question . . .
...However, in respect of unadmitted liability for excise duty, an assessee incurs an enforceable legal liability on and from the date on which he receives the Collector's demand for payment (Pope The King Match Factory v. CIT [1963] 50 ITR 495 (Mad.). Also see, T.M. Abdul Rahim Sahib & Co. v. CIT [1963] 50 ITR 508 (Mad.) Similar view was taken by the ITAT, Allahabad Bench in the case of Laxmi & Co. v. ITO 20 TTJ 239.
In view of above mentioned discussion the liability of excise duty to the extent of Rs. 14,05,867 and Rs. 22,25,485 did not crystallise during the years 1979-80 & 1980-81.
I have already held, in the foregoing paragraphs, that the orders of these years were erroneous and prejudicial to the interest of the revenue ITO is therefore directed to modify the orders by withdrawing the deduction of excise duty liability of Rs. 14,05,869 arid Rs. 22,25,485 in the A.Ys. 1979-80 & 1980-81 respectively.
10. Being aggrieved by the order of the Commissioner of Income-tax, the assessee has come up in appeal before the Tribunal. The learned counsel for the assessee attacked the action of the Commissioner of Income-tax in two ways vis., (i) legality of initiating proceedings Under Section 263 of the Act, and (ii) on merits of the deductibility of the amounts in question.
11. As regards the legality of initiating proceeding Under Section 263 of the Act, the learned counsel for the assessee developed has arguments broadly on the following aspects : (d) The orders passed by the ITO were not prejudicial to the interest of the revenue.
12. The learned counsel for the assessee strongly argued that since the assessments were made as per the directions of the IAC Under Section 144B of the Act, the Commissioner of Income-tax could not have taken action Under Section 263 of the Act, as in that case, the Commissioner of Income-tax would be revising the decision of the IAC and not that of the ITO. In this connection, he pointed out that the IAC had in fact given directions to the ITO regarding the deductions claimed by the assessee on account of excise duty liabilities. Thereafter, he referred to Section 263 of the Act, as it stood prior to the insertion of the Explanation to Sub-section (1) of that section with effect from 1-10-1984, by the Taxation Laws (Amendment) Act, 1984 and submitted that since the assessments for years under consideration were framed Under Section 143(3)/144B of the Act, prior to 1-10-1984, the Commissioner of Income-tax could not have initiated the proceedings Under Section 263 of the Act, in the manner she did. Inviting the attention of the Tribunal to the contents of the show cause notice issued by the Commissioner of Income-tax which stated that "the deduction of excise duty was incorrectly allowed", the learned counsel for the assessee argued that since the said notice did not spell out what was in the mind of the Commissioner of Income-tax, the same was bad in law. According to the learned counsel for the assessee, the said notice was vague and not intelligible. He further stated that before an action Under Section 263 of the Act could be initiated, there should be material on record to show that the assessment framed by the ITO was prima facie erroneous and also prejudicial to the interest of the revenue. Since in the instant case allowance of deduction of excise duty liability by the ITO was backed by various reported decisions of the Hon'ble Supreme Court and Hon'ble High Courts, the learned counsel for the assessee went on to urge that the assessments framed by the ITO were quite in order and should not have been disturbed by. the Commissioner of Income-tax by taking action Under Section 263 of the Act. He also emphasised the fact that for the A.Y. 1979-80, the ITO had determined the total income of the assessee at Nil and the total income of the assessee remained Nil even after giving effect to the order of the Commissioner of Income-tax under appeal. In other words, according to the learned counsel for the assessee, since there was no loss to the revenue, the Commissioner of Income-tax was not justified in initiating the proceedings Under Section 263 of the Act, at least for that year.
In support of his various submissions, the learned counsel for the assessee relied on the decisions in the cases of East Coast Marine Products (P.) Ltd. v. ITO [1985] 4 SOT 295 (Hyd.) (SB), Sri Mahalakshmi Finance Corpn. [1986] 19 ITD 494 (Hyd.), Alcobex Metals (P.) Ltd. v.ITO [1985] 22 Taxman 7 (Delhi - Trib.), Shapoorji Pallonji & Co. (P.) Ltd. v. ITO [1986] 27 Taxman 266 (Bom. - Trib.), V.G. Krishnamurthy's case (supra), Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 (Mad.) and Smt. Snehlata Sanghi v. WTO [1986] 18 ITD 409 (Indore).
13. On the merits of the deduction of excise duty liability, the learned counsel for the assessee stated that such duty is a statutory liability and is payable on the manufacture/production of excisable goods. According to him, as per the relevant provisions of the Central Excise and Salt Act, the excise duty is payable by a manufacturer on (i) ex-factory price less certain post-manufacturing expenses, (ii) the difference between the ex-factory price and (0 above, and (iii) the difference between the wholesellers' price and (ii) above. The ITO/IAC have allowed the deduction on account of actual payment of (i) above.
They have also allowed deduction on account of provision made for (ii) above. However, they did not allow deduction on account of provision made for (Hi) above.
14. In this connection, he stated that for the years under consideration, the assessee made provisions in respect of (ii) & (iii) above on the basis of the demand raised by the excise authorities in respect of the period from 1-10-1975 to 31-1-1978. Inviting the attention of the Tribunal to Section 4 of the Central Excise and Salt Act, which deals with "valuation of excisable goods for purposes of charging of duty of excise", the learned counsel for the assessee pointed out that items (ii) & (Hi) above were roped in with effect from 1-10-1975 by appropriate amendments made in the Central Excise and Salt Act. The assessee has challenged the said action of the excise duty authorities as well as the amendment made retrospectively in the Central Excise and Salt Act by filing writ petition before the Hon'ble Gujarat High Court and the Hon'ble High Court was pleased to admit the said petition and issue following directions : It is hereby accordingly ordered that you, your servants and your agents, be and are hereby restrained from acting in pursuance of or in implementation of the impugned order dated 16-4-1980 and 21-4-1980 passed by the Assistant Collector of Central Excise, Division II, Baroda, at Annexure J (colly) to the petition and for impugned demand notice dated 24th June, 1980 issued by the Superintendent Central Excise A.R. IV, Baroda Dn. II at Annexure L to the petition pending admission of the aforesaid Special Civil Application by this Court on condition that the petitioner executes bond in form No. B-13 in respect of future clearances.
15. In view of the aforesaid decision, the assessee made provisions in its books for the years under consideration and had explained the same in Schedule 15 containing "notes on accounts" at item 4(a) in the first year and item 15(e) in the second year under consideration. Since after appreciating the assessee's case in proper perspective the ITO/IAC had allowed deduction of the provision for excise duty liability of Rs. 14,23,873 in the first year and of Rs. 22,25,485 in the second year under appeal, the Commissioner of Income-tax was not justified in holding that the ITO had wrongly allowed the deduction of the said amounts. The learned counsel for the assessee relied on numerous reported decisions which were cited before the Commissioner of Income-tax and after inviting the attention of the Tribunal to the principles culled out from the said decisions (reproduced above), strongly urged that the Commissioner of Income-tax was not justified in holding that the assessee was not entitled to the deduction of the amounts involved in the present appeals. In this connection, he also invited the attention of the Tribunal to pages 81, 450 and 870 of the commentary on Income-tax Law and Practice of M/s. Kanga and Palkhiwala (Seventh Edition) with a view to support his contentions. He also invited the attention of the Tribunal to page 1339 of Volume II (Third Edition) of Income-tax Law by M/s. Chaturvedi & Pithisaria. Finally, relying on the decision of the Hon'ble Calcutta High Court in the case of CIT v. Century Enka Ltd. [1981] 130 ITR 267, he submitted that the assessee would be entitled to claim deduction of the two amounts involved in the present appeals even though no notice of demand had been issued by the excise duty authorities in this regard. He, therefore, urged that the order of the Commissioner of Income-tax should be set aside.
16. The learned representative for the department, on the other hand, supported the action of the Commissioner of Income-tax. He submitted that since the ITO himself had allowed the assessee's claim for deduction of the amounts involved in the present appeals in the draft assessments framed by him, there was no question of seeking the directions of the IAO Under Section 144B of the Act. In other words, he wanted to impress upon the Tribunal that the Commissioner of Income-tax had exercised her revisionary powers to revise the decision of the ITO and not that of the IAC as urged by the assessee. In this connection, he further submitted that since some of the orders of the Tribunal relied on behalf of the assessee pertained to the provisions of Section 263 of the Act, as they stood prior to the amendment made by the Taxation Laws (Amendment) Act, 1984 with effect from 1-10-1984, the same have lost their value. He further submitted that since the Commissioner of Income-tax has taken action Under Section 263 of the Act, on 20-3-1985 i.e. subsequent to 1-10-1984, she was fully empowered to review and revise the assessments framed Under Section 143(3)/14.4B of the Act. According to the learned representative for the department, the provisions of Section 263 of the Act are procedural in nature and therefore, there is no merit in the stand taken on behalf of the assessee that just because the assessments were framed Under Section 143(3)/144B of the Act, the Commissioner of Income-tax could not exercise her revisionary power contained in Section 263 of the Act. He further submitted that just because the total income of the assessee in the assessment year 1979-80 remained Nil both prior and subsequent to giving effect to the order of the Commissioner of Income-tax under appeal, it cannot be presumed that the order passed by the ITO was not erroneous and not prejudicial to the interest of the revenue. In this connection, he highlighted the fact that certain adjustment and carry forward of amounts/deficiencies had been varied after giving effect to the order of the Commissioner of Income-tax under appeal. In other words, he wanted to impress upon the Tribunal that in order to decide whether the action taken by the Commissioner of Income-tax Under Section 263 of the Act, was proper or not, one has to see the overall effect of the assessments framed by the ITO not only in respect of the years under appeal but also in respect of the subsequent years. He, therefore, urged that since by allowing deduction of the two amounts in question, the orders passed by the ITO were erroneous as well as prejudicial to the interest of the revenue, the Commissioner of Income-tax was fully justified in taking action Under Section 263 of the Act. In support of his submissions, the learned representative for the department relied on the decision in the case of Rex Cinema Co-owners v, Sixth ITO [1983] 3 ITD 633 (Bom.) (SB), Third ITO v.Shivaji Park Gymkhana [1983] 4 ITD 462 (Bom.) (SB), Printers House (P.) Ltd. v. ITO [1982] 2 ITD 235 (Indore), Rohtak & Hissar Districts Electric Supply Co. (P.) Ltd. v. CIT [1983] 6 ITD 603 (All.), Torsion Products Ltd. v. ITO [1984] 7 ITD 255 (Hyd.) and Govinddas v. ITO [1976] 103 ITR 123 (SC).
17. As regards the merits of the case, the learned representative for the department submitted that the assessee would not get any help from the decision in the case of Kedarnath Jute Mfg. Co. Ltd. (supra) as in the writ petition filed before the Hon'ble High Court, it had challenged the provisions of section of Central Excise and Salt Act pertaining to excise duty raised by the Excise Duty Authorities in respect of the difference between ex-factory price and ex-factory price less certain post-manufacturing expenses and the difference between the wholesellers' price and the earlier item. While in the case of Kedarnath Jute Mfg. Co. Ltd. (supra) the assessee had challenged the quantum of sales tax levied on it. According to the learned representative for the department, the assessee's case is more akin to the cases of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542 (SC), Sinclair Murray & Co. (P.) Ltd. v. CIT [1974] 97 ITR 615 (SC) and Sirsa Industries v. CIT [1984] 147 ITR 238 (Punj. & Har.). He also stated that the assessee would not be entitled to claim deduction in respect of the past year's liability in view of the decision of the Hon'ble Kerala High Court in the case of L.J. Patel & Co. v. CIT [1974] 97 ITR 152. He also relied on the order of the Commissioner of Income-tax and highlighted the fact that in the instant case, no demand was either raised nor notice was served on the assessee in respect of the amount of the excise duty liability of Rs. 14,05,869 in the first year and of Rs. 22,25,485 in the second year under consideration. He, therefore, urged that the Tribunal should uphold the order of the Commissioner of Income-tax under appeal.
18. We have carefully considered the rival submissions of the parties, the material brought on record to which our attention was drawn and perused various reported decisions cited at the Bar and are of the view that there is considerable force in the submissions made on behalf of the assessee regarding the merits of deductibility of the two amounts involved in the present appeals. In view of our this conclusion, it is not necessary to discuss at length regarding the legality of initiating the proceedings Under Section 263 of the Act. Suffice it to state that after the amendment in Section 263 of the Act, with effect from 1-10-1984, the Commissioner of Income-tax would be empowered to assume jurisdiction under that section even in a case where the assessment is framed Under Section 143(3)/144B of the Act, irrespective of the fact as to when the assessment order was passed. Further, since there is no prescribed condition to assume revisional jurisdiction Under Section 263 of the Act, unlike Section 147 of the Act. The only thing required is that an opportunity of being heard is to be given to the assessee-see CIT v. Electro House [1971] 82 ITR 824 (SC). It could be seen from various letters of the assessee addressed to the Commissioner of Income-tax during the course of the present proceedings that the assessee was fully aware as to what was in the mind of the Commissioner of Income-tax for assuming jurisdiction Under Section 263 of the Act.
Again, from the assessments framed by the ITO both before and after giving effect to the order of the Commissioner of Income-tax under appeal, it can easily be seen that if the view of the Commissioner of Income-tax regarding deductibility of the two amounts involved was correct then, the original orders passed by the ITO were erroneous in so far as they were prejudicial to the interest of the revenue. We would, therefore, uphold the assumption of jurisdiction by the Commissioner of Income-tax Under Section 263 of the Act.
19. However, as stated above, we find considerable force in the stand taken on behalf of the assessee that on the facts and circumstances obtaining in its case, and in view of the legal principles culled out from the reported decisions (mentioned in Para - 7 above), the ITO/IAC had rightly allowed the deduction of the two amounts involved in the appeals, in the assessments framed Under Section 143(3)/144B of the Act, on 24-5-1983 and 2-3-1984 respectively. In this connection, it is pertinent to bear in mind that the assessee is following mercantile system of accounting, that the excise duty is levied on the manufacture/production of the goods, that in view of the retrospective amendment brought in Section 4 of the Central Excise and Salt Act, 1944, and the rule made thereunder, the assessee was liable to pay excise duty on the three categories mentioned in Para-13 above and that in fact, the excise authorities had raised demand of Rs. 44,02,120 for the period from 1-10-1975 to 31-1-1978 in respect of these categories, vide notice dated 24-6-1980. If on the basis of such demand the assessee had made provisions for the years under appeal, we are of the considered opinion that the assessee should not be denied the claim for deduction of such liability. If the assessee does not make such provision and claim for deduction in the years under appeal, it would not be possible for the assessee to claim deduction in this regard in the year in which the writ petition is decided against it, in view of the fact that it follows mercantile system of accounting. Again, the assessee would not be entitled to invoke the provisions of Section 43B of the Act, as the same have been brought on the statute with effect from 1-4-1984 by the Finance Act, 1983. On the other hand, if the writ petition is decided in favour of the assessee, the revenue would be in a position to tax the two amounts involved in the present appeals Under Section 41(1) of the Act, in the year in which the decision of the Hon'ble High Court is pronounced. Further, we are of the view that the reported decisions relied on behalf of the revenue in this regard have no bearing to the point involved in the present appeals. If at all they have to be considered then, in our opinion, they would support the stand taken on behalf of the assessee inasmuch as in those cases sales tax collected by the assessees were brought to tax on accrual basis while in the instant case the assessee is claiming deduction of certain excise duty liability on accrual basis. Further, it is pertinent to note that the assessee had claimed deduction of the provisions made for the years under consideration and not in respect of the prior year's liability as contended on behalf of the revenue. Here, it would not be out of place to mention that these appeals were heard on 19-8-1987. We had an occasion to hear the appeal in respect of the assessment year 1981-82 on 26-8-1987. We find from the assessment order dated 12-10-1984 framed Under Section 143(3) of the Act, that the ITO himself has allowed deduction of Rs. 44,02,120 being the provisions made in the year 1981 in respect of the demand raised by the excise authorities on 24-6-1980 for the period from 1-10-1975 to 31-1-1978 in respect of the categories mentioned in Para-13 above. It is pertinent to note that even though the Commissioner of Income-tax had initiated the proceedings Under Section 263 of the Act, on 20-3-1985 for the years under appeal, she has not thought it fit to revise the order of the ITO for the assessment year 1981-82. It may be mentioned that the Commissioner (Appeals) had disposed of the appeal for the assessment year 1981-82 only on 30-3-1985. We have, therefore, no hesitation in holding that since the ITO/IAC had rightly allowed the excise duty liability of Rs. 14,05,869 in the first year and of Rs. 22,25,485 in the second year under appeal, the Commissioner of Income-tax was not justified in directing the ITO to modify the assessment orders by withdrawing the deduction of the said excise duty liabilities. We would, therefore, set aside the order of the Commissioner of Income-tax on this point.