Income Tax Appellate Tribunal - Madras
M. Loganathan vs Income Tax Officer on 19 October, 2005
Equivalent citations: [2006]99ITD246(CHENNAI), (2006)99TTJ(CHENNAI)1224
ORDER
Mahavir Singh, J.M.
1. These three appeals of the assessee are arising out of the order of the CIT(A), Chennai, dt. 30th March, 2000. The relevant assessment years involved in these appeals are 1992-93, 1993-94 and 1996-97. The assessment for asst. yrs. 1992-93 and 1993-94 was framed under Section 143 r/w Section 147 and for the asst. yr. 1996-97 assessment was framed under Section 143(3).
2. The only common issue in all these appeals of the assessee is against the order of the CIT(A) dismissing the appeals as withdrawn. The assessee has raised common and effective ground Nos. 3, 4, 5 and 6, which read as under :
3. The C1T(A) erred in dismissing the appeals as infructuous.
4. The CIT(A) failed to appreciate that application for settling the dispute with the Department for the relevant years was pending before the Hon'hle Settlement Commission and as such the dismrssal of the said appeals is contrary to the relevant provisions of the Act.
5. The CIT(A) failed to appreciate that application before the Hon'ble Commission could be filed only when the proceedings for the relevant years were pending before any of the authorities as contemplated for arriving at the taxable total income under the statute.
6. The CIT(A) erred in wrongly appreciating the letter of adjournment as letter of withdrawal and ought to have appreciated that the dismissal of the appeals are totally opposed to the principles of natural justice.
3. It is seen from the records that these appeals are barred by limrtation as col. 9 in Form No. 36 is not filled. When it was pointed out, the assessee filed an affidavit stating as under :
Hence, I request that 2,9th Nov., 2000 may please be taken as the date of service of the order of the CIT(A)-XII, Chennai. Since the appeals were filed on 29th Jan., 2001, 27th and 28th of January, 2001 being Saturday and Sunday, respectively, it is requested that the appeals filed may be treated as being filed within time.
4. The learned Departmental Representative has not raised any objection to the effect that these appeals filed on 29th Jan., 2001 are barred by limitation or not. He specifically stated that if the date of service is 29th Nov., 2000, then it is within the time. In view of this, we feel that these appeals are within time and accordingly we admit the same.
5. The briefly stated facts relating to the issue of dismissal as withdrawn are that an appeal before the CIT(A) was filed by the assessee to challenge the assessment framed by the AO in all these three years. Before the CIT(A), the assessee vide his letter dt. 23rd March, 2000 made a request, through his counsel, for withdrawal of the appeals as under :
S. Moharned Hassan 11, Annaji Street,
Chartered Accountant Erode- 638 001.
Dt. 23-3-2000
To
The CIT(A),
IT Office, Chennai.
Camp at Income-tax Office, Salem.
Sir,
Sub : Withdrawal of appeal - req. - regarding.
Ref.: M. Loganathan - ITA Nos. 306 & 307 and 324/1999-2000 Asst. yrs.
1996-97, 1992-93 and 1993-94 [GIR No. L/1745/1(1) Erode]
Since the above cases with further assessments for the year 1994-95, 1995-96 and 1997-98 is to be taken up to the Settlement Commission, 1 request your Honour, to allow is to withdraw the above appeals.
Sorry for the inconvenience in this regard.
Thanking you, Chartered Accountant
6. Accordingly, the CIT(A) has permitted to withdraw the appeals by passing the order and the relevant order reads as under :
The above appeals have been filed against assessment orders under Section 143(3)/147 for the asst. yrs. 1992-93 and 1993-94 and against assessment orders under Section 143(3) for asst. yr. 1996-97.
2. As the appellant has requested, vide his letter dt. 23rd March, 2.000 for withdrawal of the above appeals, the appeals are hereby dismissed as infructuous.
7. Aggrieved, the assessee is in second appeal before us against the dismissal of these appeals as withdrawn. Before us, the learned counsel of the assessee argued that in view of the provisions of Section 251, the appeals cannot be dismissed as withdrawn and it should have been decided on merits. The learned counsel further argued that it is well established that assessee once having filed the appeal cannot withdraw it. In other words, he argued that assessee having filed the appeal and brought the machinery of the Act into working, cannot prevent the CIT(A) from ascertaining and setting the real sum to be assessed, by intimation of withdrawal of appeal. For this, the learned counsel of assessee relied on :
(i) Anjaneya Tablemould Bricks v. ITO (2000) 68 TTJ (Bang) 583
(ii) CIT v. Rai Bahadur Hardutroy Motila Chamaria
(iii) Dhaniram Gupta & Co. v. Union of India and Anr.
(iv) Hindustan Metal Works v. STO 15 STC 116 (All)
(v) CST v. Mohanlal Haiprasad 17 STC 1 (MP)
8. On the other hand, the learned Departmental Representative distinguished these case laws and argued that once there is no objection from the Revenue and the assessee wants to withdraw, the withdrawal of appeal can be permitted and once the appeal is withdrawn as not pressed or dismissed as withdrawn, no cause of action remains to the assessee to challenge before the Tribunal. In view of this, the learned Departmental Representative argued that there is no cause of action arising out, of the order of the CIT(A) and hence the same has become final and that should be upheld.
9. We have heard both the sides and considered the case materials produced before us. We have also considered the case laws referred by the learned counsel of the assessee. First of all, we will go through the case law oi CIT v. Rai Bahadur Haidutroy Motilal Chamaria (supra), wherein the Hon'ble apex Court has held at p. 450 as under :
It is also well-established that an assessee having once filed an appeal cannot withdraw it. In other words, the assessee having filed an appeal and brought the machinery of the Act into working cannot prevent the AAC from ascertaining and settling the real sum to be assessed, by intimation of his withdrawal of the appeal. Even if the assessee refuses to appear at the hearing, the AAC can proceed with the enquiry and if he finds that there has been an underassessment, he can enhance the assessment see CIT v. Nawab Shah Nawaz Khan (1938) 6 ITR 370 (Lahore). In this context, reference may be made to the decision of the Court of Appeal in King v. Income-tax Special Comrnrs. (1936) 1 KB 487 (CA) in which the taxpayer sought to withdraw a notice of appeal which had been given on his behalf against an additional assessment under Sch. D. The IRCs were not satisfied that the assessment was adequate. The Special Commrs. then proposed to proceed with the hearing of the appeal in the ordinary way. At that stage the taxpayer sought a writ of prohibition to prohibit the Special Commrs. from hearing the appeal. It was held by the Court of Appeal that notice of appeal having once been given, the Commrs. were bound to proceed in accordance with the IT Acts and determine the true amount of the assessment. At p. 493 of the report, Lord Wright observed as follows :
...In making the assessment and in dealing with the appeals, the Comrnrs. are exercising statutory authority and a statutory duty which they are bound to carry out. They are not in the position of Judges deciding an issue between two particular parties. Their obligation is wider than that. It is to exercise their judgment on such material as comes before them and to obtain any material which they think is necessary and which they ought to have, and on that material to make the assessment or the estimate which the lav/ requires them to make. They are not dealing a case inter paries; they are assessing or estimating the amount on which, in the interests of the country at large, the tax payer ought to be taxed.
In this case, the Hon'ble apex Court has analysed the situation where the other party is aggrieved. Before the Hon'ble apex Court, the Revenue was to enhance the assessment as it was under assessed and there was grievance on the part of the Revenue. Hence, the assessee cannot withdraw the appeal. The facts of the present case are entirely different from the facts of this case. In the present case, we have seen that the Revenue has not objected to the withdrawal.
10. Similarly, in the case of Dhaniram Gupta & Co. v. Union of India and Anr. (supra), the Hon'ble Calcutta High Court has held at p. 291 as under :
Taking into consideration all the facts and circumstances of the case, it appears that not only the petitioner had an alternative remedy but the said remedy was more adequate in the facts and circumstances because the disputed questions of fact have to be determined in this case. The petitioner has indeed taken resort, to the alternative remedy and there is no explanation why now the petitioner should be permitted to abandon that alternative remedy. Taking into consideration all the facts and circumstances of the this case, I am of opinion that the petitioner is not entitled to any reliefs in this application. The application, therefore, fails and is accordingly dismissed. The rule nisi is discharged. There will be no order as to costs.
11. Further, the Hon'ble Allahabad High Court in the case of Hindustan Metal Works v. STO (supra), has held as follows :
I have quoted the passages from the judgment of Lord Wright, M.R. for the reason that though the question of withdrawal of appeal does not arise for consideration directly in the present writ petition but the power of enhancement with which is linked the power of withdrawal by the appellant of an appeal filed by him was undoubtedly a connection with the scope and powers given to the Judge (Appeals) or the AAC of confirming, annulling, enhancing or setting aside the assessment. If the general power of withdrawal which normally exists with an appellant who has filed the appeal is taken away under the special Act for the reason albeit that it would defeat the powers of the appellate Court to enhance the assessment, it would also have a bearing on the power of the appellate Court to dismiss such appeal for default. It would lead to absurd results if the appellant has no power to withdraw the appeal filed by him and yet the appellate Court should have the power to dismiss such the appeal for default. The section must be read 'so that the rights and powers of the appellate Court are not in any way inconsistent with the rights of the appellant who lodges the appeal. If the appellant has no power to withdraw the appeal then it is only logical and consistent to hold that a duty is cast on the appellate Court in the larger public interest to consider every appeal that is filed on its merits, otherwise absurd results might ensue inasmuch as the appellant would have no right to withdraw his appeal and the appellate Court would also have no duty to consider the appeal on its merits and could proceed to dismiss it in default.
12. The Hon'ble Madhya Pradesh High Court in the case of CST v. Mohanlal Harpiasad (supra), has held as follows :
In this case, the Tribunal allowed the assessee to withdraw his appeal and dismissed it as not pressed without passing any order on the application for enhancement of the assessment. It appears that, in so doing, it did not duly advert to the position that it could consider the application for enhancement only so long as the appeal was pending. The consequence was that, with the dismissal of the appeal, the application for enhancement also came to be disposed off without even being considered. In our opinion, that application could not be dealt with in this manner. The Tribunal is empowered to enhance the tax. That power is coupled with the duty imposed on it to ascertain what, the true assessment ought to be and also to enhance the assessment, if the circumstances so require or justify. This is a public duty imposed on it in the interests of the general body of taxpayers and it cannot neglect or decline to perform that duty only because the assessee, realising that if he pursues his appeal it may be the worse for him, has sought leave to withdraw it. The learned counsel for the assessee also fairly concedes that this is so.
13. In all the cases stated by the learned counsel, the distinguishing feature from the present case is that the Revenue is aggrieved on account of enhancement of income. The Courts have not allowed the withdrawal of the appeal where the Revenue has objected. In all these cases, if we read together all the facts of the case, it emerges that the withdrawal is not permissible if any of the party has objected to it. Truly, the appellant cannot as a matter of right claim to withdraw the appeal, but there is nothing illegal in doing so with the permission of the appellate authority to do so and if both parties agreed for withdrawal, then there is nothing wrong. The Hon'ble Bombay High Court in the case of Jagmohandas Gokaldas v. CWT has held as under :
It is indeed true that the appellate powers of the authorities constituted both under the Income-tax as well as the WT Acts are different in nature than the appellate authorities under the general law. The CPC does not provide for any powers to make an order prejudicial to the appellant but here both the AAC and the Tribunal have been given powers not only to grant relief to the assessee but also, if on examination of the case they are satisfied, to enhance the assessment or penalty. But the question that has to be considered is whether it would necessarily follow from the aforesaid nature of the powers that the assessee in no event could be permitted to withdraw an appeal. In our opinion the decisions on which reliance is placed do not go to the extent to which Mr. Joshi wants us to go. On the other hand, the ratio that would follow from these two decisions is that the assessee cannot as of right claim to withdraw the appeal. The question whether to permit withdrawal of the appeal or not would depend on the discretion of the appellate authority.
Facts in CIT v. Nawab Shah Nawaz Khan (1938) 6 ITR 370 (Lahore) were : An assessment was made on the assessee for the year 1933-34. Thereafter an additional assessment was made under Section 34 in respect of a sum of Rs. 8,675.
The assessee appealed against this order to the AAC and during the pendency of the appeal, the AAC came to know that another item of Rs. 89,766 had also escaped assessment and issued a fresh notice in respect of the said sum to the assessee. It is thereafter that the assessee applied for withdrawing the appeal and the question arose whether in the circumstances the assessee could withdraw the appeal. The matter ultimately went to the High Court and, following a decision in Rex v. Special CITs (1935) 20 Tax Cases 381, it was held that it was not open to the assessee, who had preferred an appeal, to withdraw the appeal so as to prevent the AAC from enhancing the assessment. It would be seen that the assessee was seeking to withdraw the appeal after the AAC had issued a notice to him to show cause why the assessment should not be increased on account of the escapement of income amounting to Rs. 89,797 from taxation.
Facts in Rex v. Special CITs (supra) in brief were : Notice of appeal to the Special CITs was given against an additional assessment to income-tax, Sch. D, made upon a taxpayer in an estimated amount for the year 1925-26. In November, 1933, a letter was written on the taxpayer's behalf withdrawing the appeal. The IRCs not being satisfied that the amount of the assessment was adequate, the Special CITs were requested on their behalf to hear and determine the appeal, and the Special CITs listed the appeal for hearing. The taxpayer then applied for and obtained a rule nisi calling upon the Special CITs to show cause why a writ of prohibition should not be awarded to prohibit them from proceeding to hear the appeal. It was held that a notice of appeal having been given, machinery was set in motion under Part VII of the IT Act, 1918, under which the Special CITs were entitled and bound to see that a true assessment of the amount of the taxpayer's liability was arrived at.
Mr. Joshi referred us to the following passage from the judgment of the learned Chief Justice at p. 384 of the report :
The fact that the notice of appeal had been given not merely made it possible but made it obligatory upon the CITs that they should take certain steps, not merely or primarily in the interests of the individual appellant but in the performance of their duties imposed upon them in the interests of the general body of taxpayers, to see what the true assessment ought to be, and that process, a public process directed to public ends, cannot be stopped at the option or the whim of the appellant who after giving notice begins to realise that, if he pursues his appeal it may be the worse for him. The matter has passed out of his hands; he has given rise by his notice of appeal not merely to the opportunity but to the duty of performing a public task which may have an effect entirely opposite to that which he contemplated and desired.
He next referred us to the following observations in the Lord Wright's judgment at p. 393 of the report :
... the conclusion I draw from the code is that the CITs, having set before them the duty of ascertaining and settling according to the best of their judgment the sum on which the taxpayer ought to be assessed, are required to make the assessment in accordance with that judgment, and in view of that I find it quite impossible to accept the argument that the giving of the notice of appeal is merely, as it were, a sort of offer, or is merely an act from which the taxpayer can at his discretion at any time resile, subject to his obeying the precepts and so forth, and that he can at any moment prevent the CITs from ascertaining and settling the sum to be assessed by the simple process of intimating by word or by deed that he withdraws from the appeal, or rather that he withdraws the notice of appeal, and that there is no appeal pending at all.
Lastly, Mr. Joshi referred us to the following observations of Lord Justice Romer at p. 395 :
The question that we have to determine in this case is whether, when a taxpayer lias served a notice of appeal and so brought into effect the machinery designed by Section 133 for the purpose of completing the assessment, he can stop the further working of that machinery either by withdrawing the appeal or by refusing to be present at the hearing of the appeal. If that be right and he can in that, way stop the working of the machinery, then, as it appears to me, he is in a position to prevent any final assessment being made upon him at. all under the Act. That would be an extraordinary intention to impute to the legislature. In my opinion that is not the effect of the Act. In my opinion, the income-tax payer has no more power, after he has served the notice of appeal and so brought into operation the machinery of procedure set up for it in Part VII of the Act, to stop the machinery of procedure than he is in the position to stop the machinery of procedure for the ascertainment of his liability to tax in any other part of the Act.
It would be seen from the facts of this case that there had been an opposition on the part of the Revenue to the withdrawal of the appeal on the ground that the tax levied was not adequate and the assessee was liable to pay tax higher than the one to which he had been assessed. The Revenue, therefore, had made a request to the appellate authority to proceed to hear the appeal. It is in these circumstances that the question considered was whether the assessee can as of right claim the withdrawal of the appeal and it has been held that the taxpayei cannot at his option claim to withdraw the appeal and arrest the process, which is directed towards public end, set in motion by him by giving a notice of appeal. In our view, therefore, the ratio deductible from these two decisions is not that in no event the appeal filed by a taxpayer could be withdrawn but the ratio deductible is that after filing an appeal, the taxpayer cannot at his option or at his discretion withdraw the appeal to the prejudice of the Revenue. We are not here concerned with an appeal which is sought to be withdrawn where a claim is put forward that the assessee has a right to withdraw the appeal. On the other hand, the facts of this case show that the chartered accountant on behalf of the assessee had written a letter to the Registrar of the Tribunal requesting him to obtain permission of the Tribunal to withdraw the appeal and the Tribunal, on a consideration of the application, has granted the assessee permission to withdraw the appeal.
The question, therefore, which we have to consider is whether the Tribunal having permitted the appeal to be withdrawn, it could be said that the order appealed against is the subject of an appeal before the Tribunal. For the reasons stated above, in our opinion, in the circumstances of this case, it cannot be said that the order of the AAC is the subject of an appeal before the Tribunal. We may here state that the order of the Tribunal dismissing the appeal for non-prosecution on granting the permission for withdrawal of the appeal had at, no stage been challenged by the CWT nor has it been stated in the affidavit-in-reply that the withdrawal was not bona fide or the withdrawal of the appeal was with the ulterior objective of avoiding enhancement of the assessment.
The CWT, in our opinion, therefore, in the circumstances of the case, was not justified in dismissing the revision application filed by the petitioner in limino on the ground that it was incompetent since the orders of the WTO and the AAC have been the subject of an appeal before the Tribunal under Section 25(1) of the Act. The order is, therefore, liable to be quashed.
14. In view of these facts, case laws and the intention of the legislature, we are of the view that the appellate authority in tax matters is a watchdog in the general public interest and specifically on behalf of public revenues. The assessee once having filed the appeal before the appellate authority, the same has to be disposed off on merits, because a duty is cast on the appellate authority to consider the case on merits in the interests of the assessee and also in the larger interest to see whether the assessee has not been under assessed and in that event, enhancement of assessment is to be seen. The power to withdrawal is always linked with the power of enhancement and in that eventuality, the withdrawal is not permissible. But it is seen that an appeal can be withdrawn with the permission of the appellate authority, if the other party does not object to the same.
15. Now we will go through the provisions of Section 251(1), which read as under:
251 (1) In disposing of an appeal, the CIT(A) shall have the following powers-
(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or he may set aside the assessment and refer the case back to the AO for making a fresh assessment in accordance with the directions given by the CIT(A) and after making such further inquiry as may be necessary, and the AO shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment;
(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;
(c) in any other case, he may pass such ordeis in the appeal as he thinks fit." In view of this provision, the Clause (c) reads that "in any other case, he may pass such orders in the appeal as he thinks fit." It means that the first appellate authority has to consider whether the assessee is to be allowed to withdraw the appeal. In our view, the assessee cannot as a matter of right, claim to withdraw the appeal, but if the appellate authority allows the withdrawal of appeal without causing harm to the other party and if the other party permits the withdrawal or does not object to such withdrawal, then in our fair and considered opinion, the withdrawal can be permitted.
16. The facts in the present case in hand are very clear. The assessee's counsel, Shri S. Mohamed Hassan, who is a chartered accountant has written a letter to the CIT(A) for withdrawal of appeal, which is reproduced at para 5 hereinabove. Even during the course of hearing, the learned counsel of the assessee filed an affidavit from the chartered accountant who appeared before the CIT(A) that Shri S. Mohamed Hassan has filed an affidavit before the first appellate authority and in the said affidavit before us, it is clearly stated as under :
I am a chartered accountant practising at Erode. I have filed letter dt. 23rd March, 2000 before the CIT(A)-XII, Chennai, during his camp at Salem (copy enclosed), for withdrawal of appeals in the case of Sri M. Loganathan for the appeals in ITA Nos. 324, 306 and 307/1999-2000 for the asst. yrs. 1992-93, 1993-94 and 1996-97, respectively.
Along v.'ith the petition filed before the CIT(A)-XII, Chennai, dt. 27th Sept., 2000 by Sri M. Loganathan, I have enclosed an affidavit signed by me before Notary dt. 19th Sept., 2000 (copy enclosed), explaining as to how I did it.
In the said affidavit, I have clearly stated that I have withdrawn the appeals preferred by Sri M. Loganathan, 141, Kothukarar Thottam, Erode, before CIT(A)-XII, Chennai, and numbered as ITA Nos. 306, 307 and 324/1999-2000 in the asst. yrs. 1996-97, 1992-93 and 1993-94 during his camp at Salem on 23rd March, 2000 by oversight as I was not aware of the other appeals pending before Settlement Commission, Chennai.' In such circumstances, I request that the appeals before Tribunal, Chennai, in the case of Sri M. Loganathan may be remitted back to the CIT(A), for the appellant should not suffer on my oversight.
17. In this case, the assessee as well as his counsel was aware about the pending matter before the Settlement Commission and he knowingly withdrew the appeals and the Revenue has not objected to the same. Even now before us, the learned Departmental Representative has opposed the appeals and objected that the Revenue had no objection for withdrawal of appeal permitted by the CIT(A). It is not the case of the assessee that withdrawal was persuaded or it was taken under coercion or undue influence. The assessee with due diligence has authorized his counsel to withdraw the appeal and the Authorized Representative was given proper power of attorney for withdrawal, as this, the assessee has not controverted. Accordingly, against the impugned order, no cause of action arises to the assessee. In view of these facts and circumstances and the case laws discussed above, we are of the view that the appellate authority can permit the assessee or the Revenue to withdraw the appeal, if the opposite party is not objecting and if the appelate authority is judiciously satisfied. Therefore, respectfully following the case law of the Hon'ble Bombay High Court in the case of Jagmohandas Gokaldas v. CWT cited supra, we dismiss the appeals of the assessee and confirm the oider of the learned CIT(A).
18. In the result, these three appeals of the assessee are dismissed.