Where agreement with regard to additions made by the authorised representative was erroneous, it could not be said that the assessee was not aggrieved by the orders on the basis of agreement made by the authorised representative (AR) and consequently he could not be denied the right of vindicating his grievance before a higher forum.
In view of certain deficiencies in some of the accounts, assessing officer made estimated additions to cover the defects. Aggrieved by the said additions, the assessee preferred appeals before the Deputy Commissioner (Appeals). According to the Deputy Commissioner (Appeals), at the time of the hearing of the appeals the assessee's counsel, Shri V, had pleaded that though the assessee's case was a case for addition for all the assessment years under consideration, the additions made were excessive. The Deputy Commissioner (Appeals) dismissed the appeals by observing that in the appellant's case it cannot be said that he is aggrieved as the additions made by the Income Tax Officer were agreed by the AR of the appellant whose actions are binding on the appellant.
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. 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 cannotb be denied the right of vindicating his grievance before a higher forum.CIT v. Indian Express (Madurai) (P) Ltd. (1983) 140 ITR 705 (Mad applied.
1. These appeals filed by the assessee are against the common order of the D.C. (Appeals) dated 23-10-1990 for the assessment years 1985-86 to 1988-89. Since a common point is involved in these appeals, they have been disposed of by a consolidated order for the sake of convenience.
2. The assessee is an individual engaged in the business of purchase and sale of cotton. The returns of income were filed on 14-6-1989 admitting the following incomes :Asst. year Income returned Rs.1985-86 19,5701986-87 20,5501987-88 17,9301988-89 15,520 As these returns were filed belatedly notices under Section 148 were issued to the assessee and the cases were posted for hearing. Shri V.Ramachandran ITP, appeared on the date of hearing and produced the books of account. He stated that the returns already filed on 14-6-1989 may be treated as returns filed in response to the notices issued under Section 148. The books of account had been examined by the Assessing Officer. The Assessing Officer observed that the purchases of kappas were properly supported by invoices and bills were made for sales, that the drawings of the assessee were poor when compared to the size of this family that some of the commission payments for purchases and sales effected were not capable of verification and that travelling expenses were on the high side in view of the fact that purchases and sales were made locally. In view of the above deficiencies, he made estimated additions in the following manner to cover the aforementioned defects:Asst. year Additon madeRs.1985-86 23,0001986-87 22,0001987-88 24,0001988-89 25,000 Aggrieved by the said additions, the assessee preferred appeals before the DC (Appeals).
3. In the grounds of appeal filed before the DC (Appeals) it was contended that the Assessing Officer erred in stating that the assessee was doing business locally, that the assessee approached Andhra and Karnataka merchants to effect purchases and sales, that cotton business was mainly based on commission payments when effecting purchases and sales and that travelling expenses were not high when compared to the turnover of the relevant years. According to the DC (Appeals), at the time of the hearing of the appeals the assessee's counsel Shri V.Ramachandran, ITP, had pleaded that though the assessee's case was a case for addition for all the assessment years under consideration, the additions made were excessive. The DC (Appeals) dismissed the appeals by observing as under : I have considered the representations made on behalf of the appellant and also verified the records. On a perusal of the records it is found that the AR has agreed for additions for all the four years on behalf of the appellant and he has also signed on the order sheet of the relevant order sheets for having agreed for the additions proposed by the ITO. As per Section 246(1) any assessee aggrieved by the orders of the Assessing Officer may appeal to the DC (Appeals). In the appellant's case it cannot be said that he is aggrieved as the additions made by the ITO were agreed by the AR of the appellant whose actions are binding on the appellant. Under these circumstances, the additions are confirmed and the appeals are dismissed.
Against the said common order of the DC (Appeals) the assessee preferred the present appeals before the Tribunal.
4. In the grounds of appeal filed before the Tribunal it was contended that the order passed by the DC (Appeals) was erroneous in law and not sustainable under the facts and circumstances of the assessee's case, that he erred in not considering the various points mentioned by the assessee in the grounds of appeal filed before him, that the assessee was not given sufficient and reasonable opportunity to place all the materials before the Assessing Officer in support of the expenditure claimed by him, that the DC (Appeals) should have held that the additions made by the Assessing Officer were highly excessive and arbitrary, that the expenses claimed by the assessee were quite reasonable considering the smallness of the business and the nature of the transactions, that the drawings were reasonable and fair considering the size and the income of the family members, that the assessee's representative while representing the assessee's case before the Assessing Officer and the DC (Appeals) had failed to bring all the relevant facts to the consideration of the concerned authorities, that the assessee was under the honest belief that the representative would do justice in submitting proper explanations on his behalf, that the additions accepted by the representative were in detriment of his interests and, therefore, could not be sustained. It was accordingly urged that he was an aggrieved assessee and entitled to appeal under Section 246. It was further urged that the representative has acted not in accordance with the intention of the assessee in the appeals. It was accordingly prayed that the order of the DC (Appeals) may be cancelled and justice rendered.
5. The assessee's counsel filed a written representation running to 15 pages which were to the following effect: The question that arises for consideration of the Tribunal in these appeals in whether, as held by the DC (Appeals), the actions of the authorised representative of the assessee were binding on the assessee. It is not disputed that Shri V.Ramachandran, ITP, was duly authorised by the assessee to appear before the Assessing Officer on behalf of the assessee. The authorisation on record contains the words "whatever explanations or statements he gives or makes on my behalf will be binding on me". Evidently the DC (Appeals) had borne in mind these words while holding that the authorised representative's actions were binding on the assessee. The Bombay High Court in the case of CIT v. Dayaram Vasudeo [1992] 193 ITR 602 did not hold the representative's admission and endorsement in the order-sheet against the assessee. Applying this decision, the endorsement by the assessee's representative in the present case cannot be held against the assessee. In the case of Smt Parbati Devi v. CIT [1970] 75 ITR 625 the Allahabad High Court held that the fact that the petitioner had agreed to file a voluntary return as a result of a compromise did not bar her contention that the return filed was barred by time. The Supreme Court in the case of Esthuri Aswathiah v. CIT [1967] 66 ITR 478 held that the method adopted by the Appellate Tribunal was an unsatisfactory way of disposing of the appeal before it andthe order passed by the Tribunal without recording any reasons in support of its estimate could not be sustained when the Tribunal estimated the income from undisclosed sources at Rs. 50,000 relying merely upon the offer made by the counsel for the assessee against the addition of Rs. 1,35,000 made by the Assessing Officer towards income from undisclosed sources and confirmed by the first appellate authority. The Bombay High Court in the case of Jivatlal Pwtapshi v.CIT [1967] 65 ITR 261 held that the department, having agreed to delete the amount from the assessment and having conceded the deletion before the Appellate Assistant Commissioner, cannot be held to be aggrieved by this part of the order to enable it to file an appeal to the Tribunal.
It also held that the appeal of the department regarding the deletion of the amount was neither competent nor capable of being entertained by the Tribunal. This is a case in which the assessee and the department had arrived at a settlement. The Bombay High Court was not concerned in the said case with the authority or competence of the representative of the assessee to enter into a settlement and bind the assessee. Hence, this case is not relevant to the present case of the assessee. The Kerala High Court in the case of CFT v. Chemmeens (Regd.) [1991] 188 ITR 634 held that any agreement made before the Assessing Officer by an unauthorised person was not binding on the assessee. The Kerala High Court in the case of Jayasree Chit Funds & Services (P.) Ltd. v. CIT [1981] 127 ITR 740 held that the expression "statements and explanations" in the authorisation in favour of the assessee's representative was wide enough to take in all statements and explanations relating to the matters that were germane to the assessment proceedings for the relevant year, which would include the claim for deduction put forward by the assessee. Herewith submitted six standard forms of Vakalatnama used in the (1) Supreme Court of India, (2) Madras High Court, (3) City Civil Court of Madras, (4) Delhi Courts, (5) Karnataka Courts, and (6) Andhra Pradesh Courts. While Vakalatnamas in 1 to 3 do not make any reference "to compromise", there is an express authorisation in the other three Vakalatnamas "to compromise". In the absence of an express authority as found in the Delhi, Karnataka and Andhra Pradesh Vakalatnamas, the Advocate will not be Competent to enter into a compromise or make any concession on behalf of his client so as to bind the client. Reference may kindly be made to Rule 3 of Order XXIII of the Code of Civil Procedure, 1908. In the said rule relating to "compromise of suit" the words "in writing and signed by the parties" have been inserted by the Code of Civil Procedure (Amendment) Act, 1976 with effect from 1-2-1977. It is evident from this rule that in civil matters before a Court, a compromise is required to be in writing and signed by the parties. The rules of procedure prescribed under the CPC are relevant in principle in income-tax proceedings as well. In the light of the above, it is submitted that a case in which the compromise in writing is not signed by the parties (the assessee and the department) or where the representative of the assessee has no express authority from the assessee "to compromise", any concession made before the Department cannot bind the assessee. The words "statements and explanations" in the authorisation cannot extend to cover a compromise or a concession by the assessee's representative. In the present case, the ITP Shri V.Ramachandran representing the assessee before the Assessing Officer clearly exceeded his specific authority and the concession made by him is incompetent and cannot bind the assessee. In the case of Jayasree Chit Funds & Services (P.) Ltd.'s case (supra) the Kerala High Court had referred to the contentions raised before the Tribunal that the Chartered Accountant engaged by an assessee to represent him before the ITO had no inherent authority or competence to make any concession on behalf of the assessee unless he has been expressly instructed to do so by the assessee. But it appears that the said contention was not argued before the High Court and hence the High Court had not considered the same. In the above facts and circumstances the DC (Appeals) is not right in dismissing the assessee's appeals holding that the assessee's representative had agreed for the additions and signed in the order-sheets and the appeals against the assessments are not maintainable. It is prayed that the additions made in these assessments may be deleted. Alternatively, the orders of the authorities below may be set aside and the assessments may be restored to the Assessing Officer with a direction to make fresh assessments after giving the assessee an opportunity to state and substantiate his case.
6. The departmental representative filed written submissions to the following effect: Section 246 of the IT Act gives the assessee a right of appeal where the assessee is aggrieved by any orders specified in that section. Any person who feels disappointed with the result of the case is not "a person aggrieved". The order must cause him a legal grievance by wrongfully depriving him of something. In the Income-tax proceedings before the Assessing Officer the assessee can appear directly in person or through an authorised representative as laid down in Section 288 of the IT Act, 1961. Before the Assessing Officer the assessee Shri R.T. Balasubramaniam has duly authorised Shri V.Ramachandran, B. Com., Auditor, Tirupur, to represent his case for all the assessment years under consideration. Copies of authorisations issued by the assessee in favour of Shri V. Ramachandran are given at pages 1, 3, 5 & 7 of the paper-book filed by the Department. The authorisation include the words "whatever explanations or statements he gives or makes on my behalf will be binding on me". Kind attention is invitee to the judgment of the Madras High Court in the case of Ramanlal Kamdar v. CIT [1977] 108 ITR 73. The High Court in the said case held 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.
In the present Shri V. Ramachandran, authorised representative of the assessee before the Assessing Officer, had agreed in no uncertain terms for fixing his income by making certain additions to the income returned for the reasons recorded in the ordersheets for the assessment years under consideration and they were duly signed by him. The order sheet entries are given at pages 2, 4, 6, & 8 of the paper-book filed by the Department. Therefore, the assessee cannot be considered to be an aggrieved person in respect of these assessment orders. The judgment of the Bombay High Court in the case of Dayaram Vasudeo's case (supra) does not help the assessee as the High Court had not discussed about the validity or otherwise of the agreement given by the assessee's authorised representative to make additions. Further, the case was decided keeping in view the smallness of the revenue involved, etc. The ratio of the decision in the case of Smt. Parbati Devi's case (supra] is of no use to the assessee since the return in that case was filed beyond the time permitted under the Act. The judgment of the Supreme Court in the case of Esthuri Aswathiah (supra) is also not applicable to the facts of the present assessee's case. There the Tribunal decided the appeal by estimating the income from undisclosed sources at Rs. 50,000 merely relying on the offer made by the counsel for the assessee. In the present case, the facts are different. The Assessing Officer recorded the reasons for making the additions. The cases of Jivatlal Purtapshi (supra) and Jayasree Chit Finds & Services (P.) Ltd. (supra) support the stand of the Department. The case of Chemmeens (Regd.) (supra) is distinguishable on facts. In that case, the person who agreed for the addition was not authorised by the assessee as laid down in Section 288 of the Income-tax Act, 1961. The assessee's counsel had made reference to the provisions of the Civil Procedure Code and the Vakalatnamas filed before the Courts to support his contention that any compromise should be in writing and signed by both the parties concerned. It may be stated here that tax appeals are not similar to civil appeals. In tax appeals, proceedings are not adversary proceedings. The judgment of the Madras High Court in the case of CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705 may kindly be seen. A tax appeal is quite different from a civil appeal. The judgment of the Madras High Court in the case of State of Tamil Nadu v.Arulmurugan & Co. [1982] 51 STC 381 (FB) may also be seen. Summary of the said judgments can be seen at pages 5150 and 5151 of Chaturvedi. & Pithisaria's "Income-tax Law", Fourth Edition, Volume 5. Therefore, the reliance by the assessee's counsel on the Civil Procedure Code and the forms of Vakalatnamas filed before the Courts are of no application to the income-tax proceedings. In view of the provisions of Section 288 of the IT Act, 1961, the authorised representative of the assessee is fully empowered to bind the assessee. The assessee cannot be considered as an aggrieved party to file appeals against the orders of assessment.
In the circumstances the present appeals should be dismissed as incompetent.
7. The assessee's counsel filed a written reply to the following effect: In the present assessee's case additions ranging from Rs. 22,000 to Rs. 25,000 had been made resulting in higher total income than the income returned. Hence the assessee is undoubtedly an aggrieved person eligible to prefer an appeal under Section 246(1) (a) objecting to the amount of income assessed. The additional tax burden resulting from the additions to the income returned has the effect of wrongfully depriving the assessee. So, the appeal under Section 246 is competent. The judgment in the case of Ramanlal Kamdar (supra) relied on by the departmental representative has no application to facts of the present assessee's case. In that case one of the partners of the assessee-firm appeared before the Assessing Officer in response to a show-cause notice issued by him and stated that the assessee had no objection to the revision proposed by the Assessing Officer. On this disputed fact the High Court held that the assessee cannot be held to be aggrieved with the order of the Assessing Officer. However, in the present case, it is not the assessee but the ITP who had agreed to the additions and the question raised is whether the assessee's representative was competent to agree to the additions so as to bind the assessee.
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....
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 Jauasree 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 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, has inter 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 sitting in appeal in a tax case, cannot be regarded as deciding a lis, 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 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.
10. On the facts and circumstances of the case, I set aside the orders of the lower authorities and restore the matter to the Assessing Officer. He is directed to frame fresh assessments as per law after ascertaining the correct facts obtaining in the assessee's case and after affording the assessee a reasonable opportunity of being heard.
11. In the result, the appeals are treated as allowed for statistical purposes.