1987-VIL-485-BOM-DT

Equivalent Citation: [1987] 168 ITR 375, 35 TAXMANN 153

BOMBAY HIGH COURT

Date: 20.01.1987

RAMESHCHANDRA AND COMPANY

Vs

COMMISSIONER OF INCOME-TAX

BENCH

Judge(s)  : S. P. BHARUCHA., V. A. MEHTA 

JUDGMENT

The judgment of the court was delivered by

S. P. BHARUCHA J.-This is a reference under section 256(1) of the Income-tax Act, 1961, made at the instance of the assessee. The question referred reads thus:

" Whether, on the facts and in the circumstances of the case, the Appellate Assistant Commissioner had jurisdiction to consider the ground of appeal against the addition of Rs. 18,052 relating to alleged suppressed sales of sarki ? "

The assessment year concerned is the assessment year 1970-71. The assessee derived income by trading in oilseeds and other items. It declared in its return, income based on profits shown in its profit and loss account. It had kept in its books of account separate trading accounts with quantitative details in respect of its business in different commodities. In the course of the assessment proceedings, the Income-tax Officer came across a discrepancy in the " sarki " account. He found that the assessee had purchased 477 bags of this commodity but its sales and closing stock amounted only to II 7 bags. The Income-tax Officer, by his letter dated December 11, 1970, called upon the assessee to explain the discrepancy of 360 bags. On December 14, 1970, one Jamnadas Virji, a partner of the assessee, appeared before the Income-tax Officer in response and submitted the following in writing :

"The facts stated in the letter are accepted and I express my inability to reconcile the discrepancies pointed out by the Income-tax Officer. The amount be added to income."

On the same day, the Income-tax Officer recorded the following on his order sheet:

" Partner, Jamnadas Virji, attends and expresses inability to reconcile the discrepancy in sarki account and agrees for the addition of the value of 360 quintals of sarki. Other trading accounts examined. Adjourned to December 19, 1970."

The note made by the Income-tax Officer was then seen by Jamnadas Virji and he signed below it. In his assessment order, the Income-tax Officer referred to what had transpired. He held that 360 bags of " sarki " weighing 198 quintals had been sold by the assessee without recording the sale proceeds in its books and that the sale proceeds thereof would be of the amount of Rs. 18,052. He added this amount as the assessee's suppressed business income.

The assessee filed an appeal to the Appellate Assistant Commissioner. In the grounds of appeal, it did not challenge the addition of the said amount of Rs. 18,052. At the hearing of the appeal, no one appeared on behalf of the taxing authority. At this stage, the assessee's representative raised three additional grounds before the Appellate Assistant Commissioner. One of these grounds was " that the addition of Rs. 18,052 made by the Income-tax Officer is improper and illegal and as such the same be deleted ". The Appellate Assistant Commissioner admitted this ground on the basis that it emerged from the Income-tax Officer's order. He held that the explanation of the assessee for the discrepancy of 198 quintals was acceptable. He agreed with the assessee that " this was case of a misunderstanding ". He, therefore, deleted the addition of the said amount of Rs. 18,052.

The Revenue filed an appeal before the Income-tax Appellate Tribunal and challenged the order of the Appellate Assistant Commissioner, in so far as it deleted the addition made by the Income-tax Officer of the said amount of Rs. 18,052. The Tribunal, basing itself upon the judgment of this court in Jivatlal Purtapshi v. CIT [1967] 65 ITR 261, held that the Appellate Assistant Commissioner was wrong in entertaining the additional ground in respect of the addition of the said amount of Rs. 18,052 and, further, in deleting this addition.

It is out of these facts that, at the instance of the assessee, the question quoted above is referred to us.

It was submitted by Mr. Thakkar, learned counsel for the assessee, that this was a case of a concession made under a mistaken belief of fact and that, therefore, it was open to the Appellate Assistant Commissioner to entertain the appeal and delete the addition of the said amount of Rs. 18,052 regardless of the statement in that behalf made by the partner of the assessee.

The assessee had been asked by the Income-tax Officer to explain the discrepancy of 360 bags in a particular account in its books of account. In response, its partner appeared before the Income-tax Officer and expressed in writing the assessee's " inability to reconcile the discrepancies" and he asked that "the amount be added to income." The note of the Income-tax Officer in the order sheet to that effect was signed by the partner. At no time thereafter was the Income-tax Officer approached to rectify the assessment on the ground that the partner had been under a mistaken belief of fact or otherwise. In the grounds of appeal originally filed before the Appellate Assistant Commissioner, there was not a whisper in regard to the addition of the said amount of Rs. 18,052. It would appear that the additional ground in this behalf was taken at the hearing of the appeal before the Appellate Assistant Commissioner, taking advantage of the fact that no one on behalf of the taxing authority was present to represent it. Even at that stage, the additional ground taken did not say that there was any mistaken belief of fact. All that was said was that the addition was " improper, illegal ".

Having regard to the statement made by the partner of the assessee, there was nothing either improper or illegal in the order of the Income-tax Officer in regard to the addition. While the statement stood, the assessee could not have a grievance in that behalf and was not entitled to appeal there against. Therefore, the Appellate Assistant Commissioner was manifestly in error in entertaining the appeal.

The judgment of this court in Jivatlal Purtapshi's case [1967] 65 ITR 261 was, as the Tribunal held, squarely applicable. It was stated by this court (at p. 266) that " what is voluntarily accepted cannot give rise to a grievance which can be taken further in appeal. In the appeal memo, which was filed by the Department, the only ground taken was that the deletion of the item by the Appellate Assistant Commissioner was erroneous. The said ground was obviously unsustainable, since there could be no error on the part of the Appellate Assistant Commissioner in accepting the concession which was made by the Department before him. In these circumstances, the preliminary contentions, which were raised on behalf of the assessee before the Tribunal, were entitled to succeed and the Tribunal should have held in favour of the assessee that the appeal of the Department in respect of the deletion of the said item was neither competent nor capable of being entertained by the Tribunal."

Mr. Thakkar, learned counsel for the assessee, relied upon the judgment of the Punjab and Haryana High Court in Chhat Mull Aggarwal v. CIT [1979] 116 ITR 694, 696. The court was called upon to decide, inter alia, this question :

" Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, right in holding that in the absence of a rectification application and in the absence of an affidavit of the assessee explaining the circumstances which misled the assessee to give his consent to the addition of Rs. 15,000, no appeal could lie to the Appellate Assistant Commissioner ? "

It said, in answer, that it could not be held as a matter of law that the remedy of appeal under the Act could not be availed of by the assessee without having filed a rectification application before the Income-tax Officer in a case where the order of the Income-tax Officer showed that the assessee had agreed to the addition to the income. There was no provision in the Act wherein the remedy of appeal against the order of the Income-tax Officer or of the Appellate Assistant Commissioner was barred if the impugned order mentioned that the order had been passed on the agreement of the assessee. the provisions of the Act entitled an 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 was a different matter if the Appellate Assistant Commissioner came to the conclusion that the order was passed on the admission of the assessee and the assessee was unable to explain that the admission was wrongly recorded under some mistaken belief of fact and law. In that case, the Appellate Assistant Commissioner could dismiss the appeal on merits but it could not be held as matter of law that no appeal was competent. It was no doubt true that in a case where the admission of the assessee had been wrongly recorded in the assessment order, it was open to the assessee to file a petition for rectification; but if the order was appealable, it was equally open to the assessee to avail of the remedy of appeal and the appellate authority would have to decide the appeal on merits. Nor was it necessary for the assessee to file an affidavit in support of his submissions in all cases. The assessee might choose to file an affidavit in support of his submissions and, if he chose not to file it, the circumstances appearing on the file had to be judged in the light of the material available and if there were sufficient circumstances on the file to come to the conclusion that the admission made by the assessee was not binding on him, he would be entitled to the relief in appeal.

With great respect to the learned judges of the Punjab and Haryana High Court who decided Chhat Mull Aggarwal's case [1979] 116 ITR 694, we are unable to agree. Where an assessee has made a statement of facts, he can have no grievance if the taxing authority taxes him in accordance with that statement. If he can have no grievance, he can file no appeal. Therefore, it is imperative, if the assessee's case is that his statement has been wrongly recorded or that he made it under mistaken belief of fact or law , that he should make an application for rectification to the authority which passed the order based upon the statement. Until rectification is made, an appeal is not competent.

In these circumstances, we are of the view that the Tribunal was right in the conclusion to which it came and we answer the question in the negative and in favour of the Revenue.

The assessee shall pay to the Revenue the costs of the reference.

 

 

 

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