Income Tax Appellate Tribunal - Bangalore
M/S. Loni Enterprises, Vijayapura vs Income Tax Officer, Ward-1, Vijayapura on 5 June, 2018
ITA.2787/Bang/2017 Page - 1
IN THE INCOME TAX APPELLATE TRIBUNAL
BENGALURU BENCH 'A', BENGALURU
BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER
AND
SHRI. LALIET KUMAR, JUDICIAL MEMBER
I.T.A No.2787/Bang/2017
(Assessment Year : 2014-15)
M/s.Loni Enterprises,
Lion Building, S. S. Front Road,
Gandhi Chawk, Vijayapura .. Appellant
PAN : AAAFL5259L
v.
Income-tax Officer (TDS),
Ward - 1, Vijayapura .. Respondent
Assessee by : Shri. V. K. Gurunathan, Advocate
Revenue by : Shri. D. K. Jha, Addl. CIT
Heard on : 24.05.2018
Pronounced on : 05.06.2018
ORDER
PER LALIET KUMAR, JUDICIAL MEMBER :
The present appeal is filed by the assessee against the order of the CIT (A), Gulbarga, dt.19.10.2017, for the assessment year 2014- 15, on the following effective grounds :
ITA.2787/Bang/2017 Page - 2
02. At the outset, it was submitted by the Ld. AR that the CIT (A) in his order has not adjudicated the issues on merit and has simply dismissed the appeal of the assessee holding that no appeal lies against the addition which were agreed by the assessee before the AO. It was submitted by the Ld. AR that the AO has dealt with the issues raised by the assessee in detail and therefore it is incumbent upon the CIT(A) to decide the issues on merit instead of refusing to entertaining the appeal based on the authorised representative's agreement. For this, the Ld. AR relies upon the decision of the SMC Bench of the Tribunal in the matter of R. T. Balasubramian V. ITO [1994) 50 ITD 513]. Our attention was drawn to paras 8 and 9 of the order, to the following effect :
ITA.2787/Bang/2017 Page - 3
8. I have considered the rival submissions and perused the papers filed before me. The Dy. Commissioner (Appeals) noticed that the assessee's authorised representative, Shri V. Ramachandran, B. Com., Auditor, Tirupur had agreed for additions for all the four assessment years under consideration on behalf of the assessee and that he had also signed in the order sheets of the relevant assessment years for having agreed for the additions proposed by the Assessing Officer. He observed that as per section 246(1) any assessee aggrieved by the order of the Assessing Officer may appeal to the first appellate authority. In that view of the matter, he held that It could not be said that the assessee was aggrieved in this case as the additions made by the ITO were made as agreed to by the authorised representative of the assessee. In the circumstances, he dismissed the appeals filed by the assessee. The Departmental Representative filed a paper- book containing photostat copies of the authorisations issued by the assessee in favour of Shri V. Ramachandran, authorised representative and also the order-sheet entries for the assessment years under consideration. The admitted fact is that the assessee's authorised representative, Shri V. Ramachandran had signed in the order-sheets for the assessment years now under consideration in token of his having agreed for the additions proposed by the Assessing Officer. In this context the question that comes up for consideration is whether this agreement by the assessee's authorised representative before the Assessing Officer for making the additions would debar the assessee from preferring an appeal to the appellate authority. In the decision of the Madras High Court in the case of Ramanlal Kamdar (supra) their Lordships inter alia observed as under :--
"... Once the assessee had stated that it had no objection to the proposed revision and the Income-tax Officer had also revised the original assessment as proposed by him, the assessee could not be said to have been aggrieved by the order of the Income- tax Officer. Only if the assessee was aggrieved by the order of the Income-tax Officer, he had the right to file an appeal before the Appellate Assistant Commissioner and once the assessee could not have had any grievance in view of the statement made by the partner. the appeal to the Appellate Assistant Commissioner was incompetent and equally the appeal to the. Tribunal was incompetent..."
ITA.2787/Bang/2017 Page - 4 From the aforementioned decision It may be seen that the assessee would not normally have any grievance against an assessment order if the same was made on the basis of an agreement made by himself in the instant case the agreement with regard to the additions was not made by the assessee himself but by his authorised representative. As such, it cannot be said that no appeal lies against the order of assessment made by the Assessing Officer on the basis of an agreement made by the assessee's authorised representative, even if such an assessment order had caused grievance to the assessee.
In the case of Jayasree Chit Funds & Services (P.) Ltd. (supra) the Kerala High Court has inter alia laid down that if the assessee's authorised representative agrees to disallowance of a claim for deduction as a business expenditure, and if such a representation was made voluntarily and not made on any misapprehension of facts or mistaken belief, then the statement made by the representative was in the course of and Incidental to assessment proceedings.
From the aforementioned observation of the Kerala. High Court, it may be seen that normally if the assessee's representative agrees to disallowance of a claim voluntarily, then it should not be open to the assessee to retract from such an agreement. However, It may be seen that if the assessee's authorised representative agrees to disallowance of a claim for deduction as business expenditure on any misapprehension of facts or mistaken belief, then the same would not bar the assessee from vindicating his grievance by preferring an appeal.
The Bombay High Court in the case of Dayaram Vasudeo (supra) has, while dealing with a similar issue, inter alia observed that if the assessee agrees to addition to income and subsequently the Chartered Accountant furnishes an affidavit showing that the admission by the assessee was made erroneously, then the Tribunal is justified in deleting the addition.
In the instant case, it is no doubt true that the authorised representative of the assessee had agreed before the Assessing Officer for the impugned additions to be made. However, on facts it is seen that the agreement made by the authorised ITA.2787/Bang/2017 Page - 5 representative is erroneous. This being so, it cannot be said that the assessee is not aggrieved by the orders of assessment made by the Assessing Officer on the basis of the agreement made by the authorised representative and consequently he cannot be denied the right of vindicating his grievance before a higher forum.
Apart from the above, the Punjab & Haryana High Court in the case of Chhat Mull Aggarwal v. CIT [1979] 116 ITR 694 has inter alia laid down that there is no provision in the IT Act whereby the remedy of appeal against the order of the AAC is barred if the impugned orders mention that they had been passed on the admission of the assessee.
In the case of Indian Express (Madurai) P. Ltd. (supra) the Madras High Court while considering the scope of the appellate powers and jurisdiction of the Tribunal, hasinter alia observed:--
"... The primary purpose of the statute is to levy and collect the income- tax. This is based on the cardinal principle, which has been incorporated as a veritable constitutional provision, that no tax can be levied or collected save under authority of law. The task of an appellate authority under the taxing statute, especially a non-departmental authority like the Tribunal, is to address its mind to the factual and legal basis of an assessment for the purpose of properly adjusting the taxpayer's liability to make it accord with the legal provisions governing his assessment. Since the be-all and end-all of the statutory provisions, especially those relating to the administration and management of income-tax, is to ascertain the taxpayer's liability correctly, to the last pie, if it were possible, the various provisions relating to appeal, second appeal, reference and the like can hardly be equated to a lis or dispute as arises between the two parties in a civil litigation. Although the income-tax statute makes the Department or its officers figure as parties in appeal proceedings, they are not in the strict sense what are called by American writers as parties to adversary proceedings. This is so, because the very object of the appeal is not to decide a point raised as a dispute, but any point which goes Into the adjustment of the taxpayer's liability. In that sense, a view prevails. even is England, that the authorities ITA.2787/Bang/2017 Page - 6 sitting in appeal in a tax case, cannot be regarded as deciding alls, but they are only engaged in an administrative act of adjusting the taxpayer's liability. Under our fiscal jurisprudence, we may regard the appellate authorities as exercising quasi- judicial functions in the same sense as a taxing officer does. But, even so, the proceedings before them lack the basic elements of adversary proceedings. It, therefore, follows that the discussion and the scope of the appellate jurisdiction of the Tribunal and other authorities under the tax code cannot be pursued by drawing a parallel to civil litigation with particular reference to appeals from decrees, and the like. The insistence on one party to the appeal being entitled to the fruits of finality, as it is called, and the appellate authority being confined to the subject-matter of the appeal are all ideas which might have relevance if the discussion centres on purely civil litigation and such like adversary proceedings as in an industrial dispute. But in a case where the Revenue is all the while a party, in a manner of speaking, and is also at the same time, an authority vested with the responsibilities of drawing up the assessment and laying down the correct liability, it would not be in accord with the scheme of the Act to impose restrictions on the ambit and the power of the Tribunal by such like notions as finality, subject- matter of the appeal, and the like. . . ."
9. From the aforementioned facts, it is clear that there is no lis in the strict sense of the term as such between the assessee and the Revenue under the various provisions relating to the second appeal, reference, etc. It is also seen that the parties in appeal proceedings are not parties to adversary proceedings. On the other hand, the main object of the administration and management of income-tax is to ascertain the tax payer's liability correctly. In the instant case, as already stated, the assessee's authorised representative had admitted before the Assessing Officer that the subject additions may be made to the total income of the assessee. His agreement for the impugned additions is based upon misapprehension of facts and mistaken belief. Consequently the assessments were made by the Assessing Officer on the basis of such agreement made by the authorised representative of the assessee. It cannot therefore, be said that the assessee was not aggrieved by the orders of the Assessing Officer. Therefore, I am of the considered view that an appeal lies to the appellate forum from the orders of the assessment so ITA.2787/Bang/2017 Page - 7 made especially keeping in view the Madras High Court's judgment in the case of Indian Express (Madurai) P. Ltd. (supra), wherein it was highlighted that an assessment is nothing but an ascertainment of the tax liability of the assessee correctly.
03. On the other hand the Ld. DR relied upon the order passed by the authorities below.
04. We have heard the rival contentions and perused the record. In our considered opinion, the proposition canvassed by the assessee that the admission made by the authorised representative is not binding on the assessee, is not absolute and correct proposition of law . The authorised representative is empowered and authorised in law to represent in place of the assessee and further the authorised representative, is empowered to make the statement for and on behalf of the assessee. The AO, while adjudicating the issue had given the findings in detail and decided the issues on merit rather than merely relying on the basis of the admission made by the authorised representative of the assessee.
Though in law, we do not agree with the proposition canvassed before us that the admission made in the assessment proceedings is not binding, as it is for the assessee to satisfy the first appellate authority under what circumstances the said admission were made and why the admissions are not binding on the assessee . In the considered opinion of the bench the said submissions (non binding of admission) should be supported by an affidavit of the authorised representative in the assessment proceedings. In that eventuality, the first appellate authority shall be deciding on non ITA.2787/Bang/2017 Page - 8 binding effect of admission made by the authorised representative. It is a settled proposition of law that the procedure of the Tribunal or the assessment proceedings are akin to civil proceedings and for that purposes not only the principle of natural justice but also the procedure as provided under the Civil Procedure Code can be resorted to. Though it is correct that the purpose of adjudication by the AO / CIT (A) or per se, the Tribunal is to determine the tax payer's liability correctly, but on the other hand if the assessee or the authorised representative agrees to pay the taxes either during the assessment proceedings or subsequently then, this defence of non adjudication by the authorities on merit would not be available to the assessee as assessee is responsible for non adjudication .
05. The CIT (A) relies upon the various decisions rendered by various courts mentioned herein above and also the Hon'ble Supreme Court. More particularly, R. T. Balasubramaniam (supra) and of the Hon'ble Kerala High Court in Mahesh & Shah [238 ITR 130].
We are of the opinion that the strict rules of common law, namely, Civil Procedure Code, Evidence Act or Criminal Procedure Code are not applicable, but in the opinion of the bench, Section 18 of the Evidence Act, provides the effect of admission made by the assessee in any proceedings or by his agent. Section 18 of the Evidence Act, provides as under :
18. Admission by party to proceeding or his agent.--Statements made by a party to the proceeding, or by an agent to any such party, whom the Court regards, under the circumstances of the case, as expressly or impliedly authorized by him to make them, ITA.2787/Bang/2017 Page - 9 are admissions. by suitor in representative character.--
Statements made by parties to suits, suing or sued in a representative character, are not admissions, unless they were made while the party making them held that character. Statements made by--
(1) party interested in subject-matter.--persons who have any proprietary or pecuniary interest in the subject-matter of the proceeding, and who make the statement in their character of persons so interested, or (2) person from whom interest derived.--persons from whom the parties to the suit have derived their interest in the subject-matter of the suit, are admissions, if they are made during the continuance of the interest of the persons making the statements.
From a perusal of the above, it is clear that the admission made by the authorised representative in the proceedings having expressly or implied authority binds the assessee and therefore we have no iota of doubt that the statement made by the authorised representative binds the assessee. Further, in our view, the jurist entity like the assessee before us, shall always be represented either through the Director or the MD or the Company Secretary or by any other person including the authorised person through a Board Resolution. If we hold that the Act of the representative does not bind the assessee, the very basis of working of the judicial system would collapse. Accordingly the judgment relied upon by the assessee is not binding. Respectfully following the judgment of the Hon'ble Supreme Court relied upon by the CIT(A) , We hold that the statement made by the authorised representative, who has been expressly authorised by the assessee, binds the assessee.
06 Having said so, if we look into the facts of the present case, the CIT (A), despite having adjudication, by the AO, on merit albeit reordering admission, has not adjudicated the grounds on ITA.2787/Bang/2017 Page - 10 merit and has decided the appeal merely on the basis of the admission made by the authorised representative. In the fitness of present case and peculiar facts of the case, we are of the opinion that the matter is required to be re-examined by the CIT (A) on merit as AO had decided the issues on merit and thereafter had recorded admission . Therefore we remand the matter back to the file of the CIT (A) for de-novo decision on all the grounds . Needless to say it will be done after following the due procedure and affording opportunity to the assessee.
06. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 5th day of June, 2018.
Sd/- Sd/-
(A. K. GARODIA) (LALIET KUMAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Bengaluru
Dated : 05.06.2018
MCN*
Copy to:
1. The assessee
2. The Assessing Officer
3. The Commissioner of Income-tax
4. Commissioner of Income-tax(A)
5. DR
6. GF, ITAT, Bangalore
By order
Senior Private Secretary,
Income Tax Appellate Tribunal,
Bangalore.