Legal issues involved in assessments

[TS-6073-ITAT-2015(Chandigarh)-O]:An addition made on agreed basis cannot be disputed; Non-charging of partners' expenses results in extra-ordinary profits u/s 80IA(10), restricts tax holiday; ITAT refers to assessee’s letter to Assessing Officer and notes that assessee had suo moto accepted the discrepancies and there was no allegation on behalf of the assessee that it was compelled to agree to the addition; Further, ITAT dismisses assessee's appeal, upholds invoking of Sec 80IA(10) [which empowers AO to recompute reasonable profits & restrict the tax holiday] with respect to profits declared by assessee (a partnership firm) while claiming Sec 80IC deduction; Observes that assessee did not debit expenses for goodwill / technical know-how or partner's remuneration in P&L account;

[TS-5917-HC-1978(PUNJAB & HARYANA)-O]: Remedy of appeal u/s 246(1)(c) can be availed of by assessee without having to file a rectification application before ITO even in a case where the order shows that the assessee agreed to the addition in the income - HC rules in favour of assessee; Holds that there is no provision in the IT Act, wherein the remedy of appeal against the order of the ITO or the Appellate Commissioner (AAC)is barred if the orders make a mention that additions had been made based on the agreement of the assessee;                

Concession by a Partner for an addition during assessment:

[TS-5047-HC-1987(BOMBAY)-O] - Where an assessee has made a statement of facts, he can have no grievance if the income tax authority taxes him in accordance with that statement - HC rules in favour of Revenue; Holds that having regard to the statement made by the partner of the assessee, there was nothing either improper or illegal in the order of the ITO; Holds that it is imperative that assessee should make an application for rectification to the authority which passed the order based upon the statement, if the assessee's case is that his statement has been wrongly recorded or that he made it under a mistaken belief of fact or law; Follows decision of Bombay HC in Jivatlal Purtapshi wherein it was held that "what is voluntarily accepted cannot give rise to a grievance which can be taken further in appeal.”;

Editorial Note : Orissa HC in the case of Sahu Co [TS-5296-HC-1981(Orissa)-O] had on a similar issue held that having once agreed to have a matter disposed of in a particular way, the assessee cannot change the course of events by raising further disputes. It was similarly held by Allahabad and Madras High Courts in cases of Sterling Machine Tools [TS-5589-HC-1979(ALLAHABAD)-O] and Ramanlal Kamdar [TS-5719-HC-1976(MADRAS)-O]

Concession by an Authorised Representative for an addition during assessment

[TS-5016-ITAT-1994(MADRAS)-O] - Agreement by the assessee's authorised representative before the AO for making the additions would not debar the assessee from preferring an appeal to the appellate authority- ITAT rules in favour of the assessee, holds 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’, however, it is not the same when assessment made by the AO is on the basis of an agreement made by the assessee's ‘authorised representative’; Follows P&H HC decision in case of Chhat Mull Aggarwal vs. CIT [TS-5917-HC-1978(PUNJAB & HARYANA)-O]

Can particulars in Return of income be treated as admission

[TS-5111-ITAT-1987(Allahabad)-O] : Mere fact that an amount is shown in the return of income cannot lead to the conclusion that assessment framed by the AO amounts to an agreed assessment; Living allowance paid by Indian Company to non - resident assessee is taxable as salary as per Sec. 9(1)(ii) - ITAT accepts assessee’s plea that if the assessing officer had wrongly assessed a receipt which is not taxable in law, it is always open to the assessee to take the case in appeal; Holds that there can be no estoppel against law; However, on the issue of taxability of living allowance, ITAT rules in favour of Revenue and holds that had accrued and become payable to him in India, hence treated as income as per Sec. 5(2) and 9(1)(ii) and Explanation to Sec. 9(1)(ii);

Concealment penalty on an agreed addition

[TS-5127-HC-1996(MADRAS)-O] :Assessee agreeing to additions to his income does not follow that the amount agreed to be added was concealed income – HC rules in favour of the assessee, holds that no penalty is applicable for concealment of income under s. 271(1)(c); Observes that the assessee agreed for an addition of the undisclosed income, but did not agree for addition on the basis that the undisclosed income is his concealed income; Follows SC decision in the case of Sir Shadilal Sugar & General Mills Ltd. [TS-5028-SC-1987-O] wherein it was held that “There may be a hundred and one reasons for such admission, i.e., when the assessee realises the true position, it does not dispute certain disallowances but that does not absolve the Revenue from proving the mens rea of a quasi-criminal offence.”

[TS-5749-HC-1976(BOMBAY)-O]: Penalty u/s 271(1)(c) can be levied even when addition was made as a result of assessee’s admission to the addition - HC rules in favour of Revenue; Rejects contention of assessee that no penalty could be levied because there was an agreement between the assessee-firm and the ITO; Distinguishes decision of SC in Anwar Ali [TS-4-SC-1970-O] and holds that decision is not applicable because addition in this case was not by a mere rejection of the explanation of the assessee but on account of an admission of the assessee that the amounts may be added as its income; 

Editorial Note : P&H High Court in the case of Banta Singh Kartar Singh [TS-5829-HC-1979(Punjab & Haryana)-O] had on similar grounds upheld Tribunal order which had declined to interfere with levy of penalty which was agreed to by the assessee before the Commissioner (Appeals).