Income Tax Appellate Tribunal - Rajkot
Pawan Construction vs Ito on 28 April, 2000
Equivalent citations: (2004)90TTJ(RAJKOT)208
ORDER
Behari Lal, A.M.:
This appeal has been directed against the order of Commissioner (Appeals)-II, Rajkot, dated 19-12-1994, for the assessment year 1992-93.
2. The only ground of appeal is regarding the addition of Rs. 1,00,250. It is submitted that the learned Commissioner (Appeals) erred in law in refusing to admit the evidence in the form of conformation which could not be produced during the assessment proceedings due to circumstances beyond the control of the assessee.
3. The assessee is a partnership firm engaged in the business of execution of contracts of the State Government and Semi-Government bodies. The return of income was filed on 6-7-1992, declaring the total income of Rs. 54,859. The assessing officer made an addition of Rs. 1,00,250 to the returned income in his order passed under section 143(3) of the Act. The learned Commissioner (Appeals) confirmed the addition made by the assessing officer had dismissed the appeal.
4. The assessing officer in his order has stated that the assessee-firm took deposits of Rs. 1,82,000 from various persons. The assessee filed the confirmation of the cash credits of Rs. 81,750 only. However, the assessee could not file confirmations of the remaining cash credits of Rs. 1,00,250.
During the course of assessment proceedings, the assessee-firm made the written submissions wherein the assessee has stated as follows :
"Considerable time has elapsed since the beginning of the case. Despite your repeated requests, we are unable to prove the cash credits received from the above 6 persons. Since, we want our case to be completed and to buy mental peace, we hereby offer to add the amount of Rs. 1,00,250 being the sum of amount credited in our books of account in the names of the above six persons referred to herein above."
However, the assessee also stated that the penalty proceedings should not be initiated against the assessee-firm. It is further stated that the assessee agreed for addition of Rs. 1,00,250 to buy peace of mind. The assessing officer, however, initiated the penalty proceedings under section 271(1)(c) of the Act, in the assessment order.
5. The learned Commissioner (Appeals) has stated in her order that the evidence produced before her was not produced at any stage in spite of repeated opportunities given by the assessing officer during the course of assessment proceedings. It is also, stated that the creditors opened the bank accounts to facilitate repayment by cheques to the depositors by the assessee. Therefore, the learned Commissioner (Appeals) did not entertain the evidence produced before her and accordingly confirmed the addition.
6. During the course of hearing, the learned counsel of the assessee contended that the assessee could not produce the confirmations for loans and other details as the creditors had gone away at the relevant time from their native place towards Gujarat because of drought situation in Jamnagar districts and their whereabouts were not known to the assessee. Therefore, with a view to buy peace of mind and get the assessment completed the assessee had offered a sum of Rs. 1,00,250 for taxation with the understanding that no penalty proceedings shall be initiated in respect of such addition. Thus, according to the learned counsel, the surrender of income was subject to an understanding that no penalty proceedings will be initiated as the assessee wanted to get the assessment completed and buy peace of mind. According to the learned counsel, the assessing officer did not adhered to the understanding that no penalty proceedings shall be taken, thus according to him, the assessee was justified in disputing the addition made under section 68 of the Act. He placed his reliance on the decision of Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh (1979) 118 ITR 326 (SC). Regarding the first evidence produced before the Commissioner (Appeals), the learned counsel contended that the same was not produced before the assessing officer because the creditors were not traceable. He invited our attention to the provisions of rule 46A(1) of the IT Rules, 1962, especially to sub-clause (b) & (c) of rule 46A(1) of the Rules, wherein it has been mentioned that the assessee would be entitled to produce before the Commissioner (Appeals) any evidence whether oral or documentary, if the assessee was prevented by sufficient cause from producing the evidence which he, was called upon to produce by the assessing officer or was prevented by sufficient cause from producing before the assessing officer any evidence which is relevant to any ground of appeal. According to the learned counsel, the assessee was prevented by sufficient cause from producing the evidence regarding the credits of Rs. 1,00,250 as the creditors were not available at the relevant time. Therefore, he contended that the learned Commissioner (Appeals) should have admitted the evidence produced before her during the course of appellate proceedings. He relied on the following court cases :
(i) Jute Corpn. of India Ltd. v. CIT (1991) 187 ITR 688 (SC)
(ii) Chhat Mull Aggarwal v. CIT (1979) 116 ITR 694 (P&H)
7. We have heard both the parties. The addition of Rs. 1,00,250 was made by the assessing officer because the assessee could not produce any evidence before him during the course of assessment proceedings regarding the genuineness of such credits. The assessing officer gave sufficient opportunity to prove such cash credits, when the assessee-firm could not produce any evidence regarding the cash credits, it offered for addition the amount of Rs. 1,00,250 for the completion of the assessment and to buy mental peace. The assessee, however, made a request to the assessing officer not to initiate the penalty proceedings. Therefore, the addition offered of Rs. 1,00,250 was not conditional for not initiating the penalty proceedings under section 271(1)(c) of the Act. The addition was offered because the assessee could not produce any evidence regarding the genuineness of such credits and the assessee made only a request not to initiate penalty proceedings under section 271(1)(c) of the Act. The assessing officer, however, turned down the request of the assessee and initiated the penalty proceedings under section 271(1)(c). Therefore, the initiation of penalty proceedings has no effect whatsoever on the addition offered by the assessee voluntarily. From the facts available on records and brought to our notice by the learned counsel during the course of hearing, it is quite obvious that the assessee never made this disclosure as conditional for not initiating the penalty under section 271(1)(c). The contention of the learned counsel that the assessing officer did not adhere to the understanding that no penalty proceedings shall be taken, is without any substance. There was no such understanding by the assessing officer and the addition was agreed upon by the assessee because they could not produce any evidence to prove the genuineness of the cash credits and also with the view to buy peace of mind.
8. In the Income Tax Act, the assessing officer has not been given powers to enter into such understanding with the assessee for making the assessment. The Act has empowered him to make the assessment as per the provisions of law after making the necessary investigations. He was duty bound to find out the genuineness of the credits and for that purpose he gave sufficient opportunity to the assessee to produce the necessary evidence. It was only when the assessee could not produce any evidence, the addition was made on the basis of the offer made by the assessee voluntarily to get its assessment completed and to buy peace of mind. This offer made by the assessee cannot take away the power of the assessing officer for imposing penalty under section 271(1)(c) of the Act. The assessing officer is not empowered to exercise such powers which he is not entitled as per the provisions of law. The Hon'ble Madras High Court in the case of C.G. Krishnaswami Nadu v. CIT (1975) 100 ITR 33 (Mad) has held that there is no estoppel against law. Hence, if the assessee offered the amount for addition as they could not produce any evidence regarding genuineness of credits, this does not stop the assessing officer to proceed against the assessee for initiating the penalty as per the provisions of law. The learned counsel relied upon the decision in the case of Motilal Padampat Sugar Mills Co. Ltd. (supra) wherein the concept of promissory estoppel has been considered. The Hon'ble Supreme Court held that "The ingredients of the concept in short are that if one of the parties agrees to something and the other party acts upon the agreement, the first party cannot dishonour his part of the contract. In income-tax proceedings, the doctrine becomes relevant when for instance the assessee agrees in writing to an addition or a penalty and relying on the assessee's consent, the assessing officer instead of passing a detailed order simply makes the addition or levies the penalty relying upon the assessee's acceptance, the assessee, thereafter cannot taken the stand that the addition made is not proper." This is what exactly has happened in the present case, the assessee made the offer of addition of Rs. 1,00,250 and thereafter, the assessing officer completed the assessment without making any further enquiries. Now the assessee cannot take the stand that the addition has been made without making any enquiry. The assessee cannot dishonour its part of the promise. The assessing officer did not make any promise which he has dishonoured, even if he made any promise, the same is without the sanction of law. He is duty bound to initiate the penalty proceedings under section 271(1)(c) of the Act.
9. In the case of Sterling Machine Tools v. CIT (1980) 123 ITR 181 (All), the Hon'ble High Court held that no appeal lies under section 246(c) against an assessment relating to an addition where the assessment in that regard was made on agreed basis. In the case of Chhat Mull Aggarwal (supra), relied upon by the learned counsel, the Hon'ble Punjab and Haryana High Court observed that "The provisions of section 246(1)(c) of the Income Tax Act, 1961, entitle and assessee to file an appeal against the order of the income tax officer before the Appellate Assistant Commissioner where the assessee denied his liability to be assessed under the Act. It would be a different matter if the Appellate Assistant Commissioner comes to the conclusion that the order was passed on the admission of the assessee and the assessee is unable to explain that the admission was wrongly recorded under some mistaken belief of fact and law. In that case, the Appellate Assistant Commissioner may dismiss the appeal on merits". In the present case the offer was made by the assessee for the completion of his assessment and also to buy peace of mind. Therefore, the question of wrongly recording the admission in the assessment does not arise. The assessee agreed to the addition with fun understanding of the law lost the right of appeal under section 246(1)(c). The Hon'ble Bombay High Court in the case of Rameshchandra & Co. v. CIT (1984) 168 ITR 375 (Bom) held that "Where an assessee had agreed to certain addition on account of certain discrepancy in assessee's accounts which he could not explain, the assessee cannot have grievance if an amount has been taxed in accordance with his statement before the assessing officer. If assessee feels that his statement is wrongly recorded, he must apply for rectification first". In the present case, the assessing officer has not recorded any statement of the assessee, moreover, the assessee made an offer in writing for such addition. Therefore, there was no grievance of the assessee which justified filing an appeal before the learned Commissioner (Appeals).
10. The appeal was also not admissible because the evidence which was produced before the learned Commissioner (Appeals), was not produced before the assessing officer during the course of assessment proceedings. The assessee was not prevented by sufficient cause from producing the evidence which was called upon to produce by the assessing officer. The assessing officer gave sufficient opportunity to the assessee, which has also been admitted by the assessee in writing for producing such evidence. Only when the assessee could not produce the necessary evidence, he came forward and made the offer of addition of Rs. 1,00,250. Therefore, how it can be said that the assessee was prevented by sufficient cause from producing the evidence, Under the circumstances, the provisions of rule 46A(1) of the IT Rules, 1962, are not applicable to the facts of the present case. Under the circumstances and the facts of the case, we are of the considered opinion that no appeal lies against the agreed addition in this case as per the provisions of section 246(c) before amendment and 246(a) as per amended Act. The fresh evidence produced before the Commissioner (Appeals) was not produced before the assessing officer during the course of proceedings. The assessee was also not prevented from producing such evidence before the assessing officer. The learned Commissioner (Appeals) has, therefore, rightly rejected the evidence produced before her for the first time. The order of the learned Commissioner (Appeals) is fully justified and the same does not require any interference.
11. In the result, the appeal is dismissed.