CIT vs Vamadevan Bhanu

C.N. Ramachandran Nair, J.—Even though counsel appearing for the Respondent raised a contention that the appeals are not maintainable for want of tax effect above Rs. 4 lakhs in terms of the Boards circular, we notice that the circular provides for exception for maintainability of appeal in cases involving substantial question of law of importance as well as cases where the same question of law will repeatedly arise. In this case, we notice that assessment was made on the basis of the Assessees agreement that interest income in the financing business could be adopted 27 per cent, as against 20 per cent, borne out by the accounts. In fact even for the preceding year, viz., for the assessment year 1996-97, the Assessee agreed for assessment of interest income in the financing business at 27 per cent, as against 20 per cent. We notice from the letter written by the chartered accountant that he has given the commitment on behalf of the Assessee agreeing that assessment of interest income at 27 per cent, for both the assessment years 1997-98 and 1998-99 specifically on condition that no penalty proceedings will be initiated u/s 271(1)(c) of the Income Tax Act. Counsel for the Respondent pointed out the last portion of the assessment order, which is contradictory to the understanding because penalty proceedings were initiated against the Assessee. We feel, if the assessing officer commits violation of the conditional offer, then the validity of the penalty proceedings could be questioned before higher authorities or in Court. However, the violation on the side of the officer does not mean that the assessment is not made on an agreed basis. We find from the assessment order, the specific statement by the assessing officer that "the assessment is completed taking interest at 27 per cent, and as agreed to by the Assessee". In the circumstances, we do not think, even an appeal is maintainable by the Assessee by taking the untenable contention that the auditor had no authority to represent the Assessee. In our view, after disabling the assessing officer to conduct enquiry and to sustain assessment on his own reasoning by agreeing for specific additions, it is not fair on the part of the Assessee and the auditor to backtrack and disown the commitments. The Board has also decided that in cases involving substantial question of law of importance as well as in cases where the same question of law will repeatedly arise, either in the case concerned or in similar cases, appeal should be entertained and considered on the merits without being hindered by the monetary limits.

We therefore allow the income tax appeals by reversing the order of the Tribunal and by restoring the assessment confirmed in first appeal on this issue. It is open to the Assessee to challenge the penalty orders, if at all issued contrary to the understanding that the Assessee had with the officer.