Principles of estoppel not apply to Income Tax proceedings

Bipin Singh Rana Vs ACIT (ITAT Dehradun)

The ITAT, Dehradun in the matter of Bipin Singh Rana v. ACIT [I.T.A. No. 15/DDN/2019 dated January 9, 2023] has held that, principles of estoppel do not apply to Income Tax proceedings and the Revenue Department must keep in mind that the correct income of the assessee must be taxed in the proper Assessment Year and within the limitation prescribed by the Income Tax Act, 1961 (“the IT Act”). Further held that, the Revenue Department must decide matters on merit in accordance with law and not based on the admission or refusal made by the assessee. Remanded the matter back to the Assessing Officer (“AO”) with a direction to ignore the surrender made during the assessment proceedings and decide the matter on merit.

Facts:

This appeal has been filed by Bipin Singh Rana (“the Appellant”) challenging the assessment order dated December 30, 2016 (“the Impugned Order”) passed by the Revenue Department (“the Respondent”) under Section 143(3) of the IT Act after carrying out the compulsory scrutiny, wherein, the total income of the Appellant was assessed to be INR 48,21,376/- as against the returned income of INR 25,06,020/-, contending that, the Impugned Order was passed based on the admission/surrender made by the counsel of the Appellant without its consent. Further, the Appellate Authority did not go into the facts while sustaining the Impugned Order and that opportunity of hearing was not given to the Appellant as the Appellate Authority sustained the addition made, even though the Appellant had not agreed for the same and as the case was dismissed on the grounds of limitation.

However, the Respondent contended that the Appellant cannot retract the admission made by its representative before the Revenue Department.

Issue:

Whether the Impugned Order passed by the Respondent merely on the basis of admission/surrender sustainable?

Held:

The ITAT, New Delhi in I.T.A. No. 15/DDN/2019 held as under:

• Stated that, the allegation made by the Appellant against its counsel who had represented the Appellant before the Respondent could not be believed merely based on an affidavit filed by the Appellant, that too when nothing was brought on record regarding the action taken against the said counsel for alleged professional misconduct.
• Observed that, the Respondent has not decided the issues on its merit and passed the Impugned Order only based on the admissions/surrender made by the counsel of the Appellant.
• Noted that, the Respondent ought to have decided the matter on merits in accordance with law, not based on the admission or refusal of the Appellant.
• Held that, the principle of estoppel is not applicable to income tax proceedings and the Respondent should bear in mind that the right income of the Appellant should be taxed in the right assessment year and well within the limitation as prescribed in the IT Act.
• Remanded the matter back to the Respondent for fresh consideration.
• Directed the Respondent to ignore the surrender made during the assessment proceedings and decide the matter on merit.

Relevant Provisions:

Section 143(3) of the IT Act:

“Assessment-

3) On the day specified in the notice issued under] sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:

Provided that in the case of a-

(a) research association referred to in clause (21) of section 10;

(b) news agency referred to in clause (22B) of section 10;

(c) association or institution referred to in clause (23A) of section 10;

(d) institution referred to in clause (23B) of section 10,

which is required to furnish the return of income under sub-section (4C) of section 139, no order making an assessment of the total income or loss of such research association, news agency, association or institution, shall be made by the Assessing Officer, without giving effect to the provisions of section 10, unless-

(i) the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B), as the case may be, by such research association, news agency, association or institution, where in his view such contravention has taken place; and

(ii) the approval granted to such research association or other association or institution has been withdrawn or notification issued in respect of such news agency or association or institution has been rescinded:

Provided further that where the Assessing Officer is satisfied that any fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), of clause (23C) of section 10, or any trust or institution referred to in section 11, has committed any specified violation as defined in Explanation 2 to the fifteenth proviso to clause (23C) of section 10 or the Explanation to sub-section (4) of section 12AB, as the case may be, he shall-

(a) send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be; and

(b) no order making an assessment of the total income or loss of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB:

Provided also that where the Assessing Officer is satisfied that the activities of the university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned university, college or other institution, recommend to the Central Government to withdraw the approval and that Government may by order, withdraw the approval and forward a copy of the order to the concerned university, college or other institution and the Assessing Officer.”

FULL TEXT OF THE ORDER OF ITAT DEHRADUN

This appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals), Haldwani [hereinafter referred to CIT (Appeals) dated 13.03.2019 for assessment year 2014-15.

2. The assessee has raised the following substantive grounds of appeal:-

“I. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeals), erred in confirming the addition of Rs.23,15,360.00

II. The Appellant respectfully, submits as under:-

1. The Learned Commissioner of Income Tax Appeals (CIT-A) has without going into the facts has sustained addition aggregating to Rs.23,15,360.00

2. The Learned CIT-A has sustained the addition after being aware that the appellant had not agreed for additions made and as the case was being barred by limitation the appellant did not get proper opportunity of being heard.

3. That the order is bad in law, not in agreement with facts and is against the principles of natural justice.”

3. Brief facts of the case are that, a survey u/s 133A of the Act was carried out on 16/11/2013 in the business premises of the assessee. The case of the assessee was selected for compulsory scrutiny. The assessment order came to be passed u/s 143(3) of the Act on 30/12/2016 by assessing the total income of the assessee at Rs. 48,21,376/- as against the returned income of Rs. 25,06,020/-.

4. Aggrieved by the assessment order dated 30/12/2016, the assessee has preferred an appeal before the CIT(A) mainly on the ground that the assessment order passed based on the admission/surrender made by the counsel for the assessee, wherein the assessee has not given any consent for such admission/surrender. The Ld. CIT(A) vide order dated 13/03/2019 dismissed the appeal filed by the assessee.

5. As against the order of the Ld.CIT(A) dated 13/03/2019, the assessee has preferred the present appeal on the grounds mentioned above.

6. The Ld. Counsel for the assessee submitted that the Ld.CIT(A) has not gone into the facts while sustaining the addition of Rs. 23,15,360/- further submitted that, the assessee did not get proper opportunity of being heard wherein the Ld.CIT(A) has sustained the addition after being aware that the assessee had not agreed for addition made and as the case was being barred by limitation.

7. Per contra, the Ld. Counsel for DR submitted that the additions were made by the A.O. based on the surrender/admission made by the representative of the assessee. Further submitted that, the assessee cannot retract the admission made by his representative before the A.O. merely by filing appeal through different advocate/chartered accountant the admission made by the representative of the assessee is binding on the assessee. Therefore, the assessee cannot find fault with the orders of the Lower Authorities. Thus, the Ld. DR relied on the orders of the Lower Authorities.

8. We have heard the parties perused the material available on record and gave our thoughtful consideration.

9. It is not in dispute that during the assessment proceedings in response to show cause notice dated 22/12/2016, the representative of the assessee attended on 27/12/2016 and vide order sheet entry dated 27/12/2016 the AR of the assessee conveyed his consent for making the additions, accordingly based on the admission of the AR of the assessee the assessment order came to be passed.

10. During the appeal proceedings before the CIT(A), the assessee specifically contended that the assessee has not agreed with the additions/disallowance made before the A.O., the admission made by the AR of the assessee is without the authority, therefore, sought for setting aside the assessment order. Even before us, the ld. Counsel for the assessee vehemently contended that the admission made by the AR before the Assessing Officer is without the consent on the assessee, therefore, the same is not binding on the assessee. Further submitted that, at no point of time the assessee has agreed for any additions and assessee did not get proper opportunity of being heard.

11. The assessee has also filed an affidavit before us stating that the Authorized Representative has surrendered before the A.O. for which the assessee has not given the consent. The portion of the said statement is as follows:-

“5. That the Authorized Representative of the undersigned appellant had surrendered the additions made to the income of the appellant for which the appellant had not given his consent.”

12. During the hearing the Bench has posed a specific question regarding the action taken for professional misconduct against the AR who has surrendered before the A.O. without the consent by the assessee. It has been informed to the Bench by the Ld. Counsel for the assessee that, the assessee has not taken any action against the AR who claimed to have been surrendered before the A.O. without the consent of the assessee. Therefore, the said allegation made by the assessee against the AR who has represented the assessee before the Ld. A.O. cannot be believed merely based on an affidavit filed by the assessee, that too when nothing brought on record by the assessee regarding the action taken against the said AR for alleged professional misconduct.

13. Be that as may, the fact remains that, the Ld. A.O. has not decided the issues involved before him on its merit and passed the assessment order only based on the admissions/surrender made by the AR, the Ld. A.O. ought to have decided the matter on merit in accordance with law, not based on the admission or refusal of the assessee. The principle of estoppels is not applicable to income tax proceedings and the authorities should bear in mind that the right income of the assessee to be taxed in the right assessment year and well within the limitation as prescribed in the Act. Therefore, we deem it fit to remand the matter to the file of the A.O. for de-novo consideration with a direction to ignore the surrender made during the assessment proceedings and decide the matter on merit.

14. Accordingly, the Grounds of Appeal No. 2 & 3 filed by the Assessee are allowed for statistical purpose by remanding the matter to the file of Ld. A.O. for de-novo consideration to decide the matter on merit, subject to condition that the assessee shall pay a sum of Rs. 5,000/- to the Prime Minister’s National Relief Fund. Since, we have remanded the matter to the file of Ld. A.O., the other ground of appeal of the assessee on merit requires no adjudication at our hands.

15. In the result, appeal of the Assessee is partly allowed for statistical purpose.

Order pronounced in the Open Court on : 09.01.2023.

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