AR cannot sign additional ground on behalf of assessee

Brief of the case:

Addition on behalf of undisclosed income of various amounts has been made against the assessee. Before ITAT assessee raised additional ground that addition was made before approval of concerned authorities prescribed u/s 158BG and hence invalid. ITAT dismissed the ground as non-maintainable as it have noticed that additional grounds were signed by the counsel of assessee not by assessee himself. Other various additions were decided separately by ITAT.

Facts of the case:

• Assessee is the proprietor of M/s Tamilarasi Publication. The business of this proprietory concern is publishing of two magazines namely, Tamilarasi, a weekly and Puthiaparvai, a fortnightly. Regular books of accounts are maintained in respect of this business.
• On 24.09.1996 search u/s 132 was conducted on residential and business premises of the assessee. Various documents were seized during search operation.
• Special search report was also sought by AO and made assessment u/s 143 (3) r.w.s. 158 BC at Rs. 3,77,41,760/-.
• Appeal to the ITAT Was dismissed and further appeal was preferred before Hon’ble HC.
• HC excluded a big amount from the Block assessment and remitted the case back to AO on other issues related to undisclosed income.
• During the previous year relevant to assessment year 1994-95 there was credit balance in the subscription deposit account of Rs. 70,32,500/-, which went up to Rs. 1,47,86,860/- for the year ending 31.03.1995. It was set to be received from 6000 parties ranging from Rs. 1,500/- to Rs. 2,500/- for which one of the magazines were given free of cost as along as deposit was not withdrawn, who has given Rs. 2,500/- two magazines were given free of cost.
• These deposits will not bear any interested and the assessee was asked to explain from whom it had received the deposits.
• As per report of special audit the entire deposits running to more than Rs. 147 lakhs are stated to be received in cash except for a negligible amount of Rs. 3.5 lakhs which is stated to be received by way of drafts from Thirunelveli and Madurai.
• The auditor has reported that the depositors’ registers were not made available for the purpose of checking and verification.
• In short assessee does not know the names or have a record of the persons to whom the deposits have been returned. There is no correspondence also in this regard in the nature of request from the depositors for return of the deposits.
• The special auditor has reported that there is absolutely no evidence for dispatch of the magazines to these alleged subscribers.
• Hence this huge amount (85 % of the total) is added as income from undisclosed sources on account of subscriber deposits.
• During appellate proceedings before ITAT counsel of the assessee filed additional submissions that additions made are invalid as made without proper sanction or approval.

Contention of the revenue:

Out of 6000 person/ subscriber only 14 gave their confirmation.

Contention of the assessee:

• Assessing Officer having allowed 15% of subscriber deposits as genuine, it was implicit that he had accepted the bonafide of the subscriber deposit scheme of the assessee. It logically follows that there was no case for the Assessing Officer to treat the balance of the deposits as not genuine.
• The only reason seems to be that in the random enquiry conduced, some of the addresses returned unserved since those persons had shifted their residence or some had not given accepted to have participated in the deposit scheme of assessee.
• It was submitted that the enquiry launched after a lapse of time would normally be at variance since many distancing themselves.

Held by ITAT:

• The procedure for filing of additional grounds is at par with the filing of appeal and the rules framed under ITAT Rules for filing of appeal will also apply to additional ground also.
• The IT Rules, 1962, prescribes an appeal shall be in form No.36 and the form gives the required verification portion. It is also prescribed in Rule 47 that memorandum and the grounds of appeal as also the verification portion shall be signed by the assessee as prescribed under Rule 45(2).
• If the entire provisions of the IT Act, 1961, IT Rules, 1962 and ITAT Rules, 1963, are read together it clearly emerges that an application for admission of addition grounds in this case can be filed either by the assessee or the Assessing Officer, as the case may be. If additional ground filed before the Tribunal by the assessee or the Assessing Officer, the same can be considered, subject to the provisions of law.
• The only interested persons in the result can file the additional ground and the Tribunal has to act on representation made to it by the assessee or by the Department, i.e. through Assessing Officer only who is party to the appeal.
• The AO gave ample of opportunity to get confirmation from the parties from whom the deposits were collected. Inspite of this, the assessee failed to prove the genuineness of the deposits. In our opinion, no useful purpose will be served by remitting the issue back to the file of the Assessing Officer for fresh consideration.

Comments by the author:

In the above case several other additions were also made as income from undisclosed sources. It is difficult to discuss all of them here in judicial review as it only provide outline of the judgment. One ground here in I found interesting raised by the assessee is with regard to foreign travel expenses to tune of Rs. 31,42,000/- which was treated as undisclosed income by the AO. AO made addition by estimating foreign expenses per day, ticket expenses etc. in absence of any detail provided by assessee. ITAT remitted this matter back to AO by holding that one cannot estimate the expenditure in block assessment without any seized material suggesting the expenditure.