Judgment:
In these appeals, at the outset, learned Senior Departmental Representative raised a preliminary objection. According to him, these appeals are not maintainable because of two reasons. Firstly, the assessee has not paid admitted tax as per mandatory requirement and secondly, the assessee is not aggrieved party. Therefore, he had no right to file these appeals. As far as first objection is concerned, he read out the provisions of section 249(4). He further submitted that though assessee had originally filed returns declaring nil income, later on some surrenders were made as per detailed letter of the assessee dated 20-11-1996, and some of the returns were revised accordingly. In this regard, he also pointed out that proviso to section 158BC was inserted with effect from 1-1-1997, by which right to file revised returns was withdrawn. However, the assessee has filed revised returns before that date, therefore, the provision is applicable. He contended that section 249(4) is very clear and before filing the appeal assessee is supposed to pay tax on returned income as per clause (a) of sub-section (4) of section 249. He further contended that even the proviso to sub-section (4) of section 249 give the power to Tribunal to exempt the assessee from payment of taxes only against clause (b) of sub-section (4), i.e., where no return has been filed by the assessee and he should have paid amount equal to amount of advance tax which was payable by him. He further submitted that provisions of section 249(4) though inserted in Part A of Chapter XX but were equally applicable to appeals filed before the Tribunal. He also relied on the decision of V. Bhaskaran v. Asstt. CIT (1998) 62 TTJ (Chennai) 698 and CIT v. Filmistan Ltd. (1961) 42 ITR 163 (SC).
According to learned Senior Departmental Representative the appeals are further incompetent and void ab initio because assessee cannot be said to have been aggrieved from the orders against which the appeals have been filed. In this regard, he relied, on following cases : (vii) CIT v. Cochin Malabar Estates & Industries Ltd. (1989) 180 ITR 152 (Karn).
At this stage, Bench posed specific, query to learned Senior Departmental Representative that once a certificate has been issued under Kar Vivad Samadhan Scheme, 1998 (hereinafter referred to as 'KVSS'), to the assessee, how Tribunal can entertain the preliminary objection. In reply to this query, he submitted that though assessee had made application under KVSS and has been issued the certificate accordingly but the same has been obtained on the basis of false particulars. As the appeals are void ab initio and can be said to be never have been filed, assessee had no right to apply for KVSS, 1998.
In this regard, he read proviso of section 90 of KVSS, 1998, which is as under : "Provided that where any material particular furnished in the declaration is found to be false, by the designated authority at any stage, it shall be presumed as if the declaration was never made and all the consequences under the direct tax enactment or indirect tax enactment under which the proceedings against the declarant are or were pending shall be deemed to have been revived." The learned Departmental Representative contended that KVSS was brought on the statute book in 1998 to reduce litigation and settle the outstanding disputes on the one hand and raising resources on the other. Scheme was never meant to defraud the revenue of its genuine dues which were never disputed by the parties. He read from the observation of Hon'ble Allahabad High Court in Brij Bhushanlal & Sons v. Designated Authority (2000) 246 ITR 353 (All). At p. 362, the Hon'ble High Court has observed as follows : "The scheme contains a special legislation granting substantial benefit to tax defaulters and, therefore, its provisions have to be strictly complied with, if a person wants to avail of the benefit of the scheme.
The tax should have remained unpaid on the date of declaration and the tax that was not in arrears on the date of the declaration, cannot be treated to be in arrears on the relevant date by a sheer fraudulent device like the one adopted by the petitioner. Jurisdiction under Article 226 of the Constitution of India is a special jurisdiction conferred on the High Court to do justice and it cannot be allowed to be a tool for encouraging a fraud on public revenue. In the present case, the round about turn taken by the petitioner without any genuine grievance was solely to harm the public revenue and to gain an undeserved advantage and the High Court cannot extend a helping hand to such attempt." He narrated the facts in brief that a search operation was conducted at the premises of the assessee and when the assessee was cornered with evidence and was pushed back to the wall, he came out with a surrender of about Rs. 94.50 lakhs after discussions. The surrender was confirmed by the group through its letter dated 20-11-1996, to the Commissioner, Bhopal. On the basis of this surrender, assessments were finalised. In view of this surrender, returns in four cases, namely, (1) Malwa Texturising (P) Ltd., (2) Indore Texturising (India) (P) Ltd., (3) Ragatan Leasing and Finance Co. Ltd. and (4) Rita Trading and Marketing Ltd., were also revised by the assessee-group. Despite the surrender and revision of returns, taxes were not paid and instead appeals were filed which are void ab inito and cannot have been filed legally as assessee was not aggrieved by these orders. Later on, assessee filed applications under KVSS. In this process, assessee has not paid full taxes which were generally due and had tried to abuse the KVSS by taking advantage of the appeals which are void ab initio and to which benefit of the scheme cannot be extended in view of the proviso to section 90 of the scheme. He also relied on Gopal Films v. Dy. CIT (1999) 237 ITR 655 (Ker), Paresh Premji Rajda v. CIT (1999) 239 ITR 11 (Cal), Dr. Mrs. Renuka Datla v. CIT (1999) 240 ITR 463 (AP) and Birumal Gaurishankar Jain & Co. v. CIT (2000) 243 ITR 234 (P&H). On the other hand, learned authorised representative submitted that before replying to the objections raised by the learned Departmental Representative he would like to point out that learned Departmental Representative has not considered the facts of the case and legal position applicable to the same. He submitted that appeals were filed with the Tribunal under section 253(1)(b) of the Income Tax Act, 1961, on 30-12-1996. In these appeals, assessment made under section 158BC was challenged as illegal, arbitrary and without jurisdiction. In the meantime Government of India started KVSS, 1998, which was introduced by Finance (No. 2) Act, 1998.
The assessee opted for this scheme in terms and provisions of this scheme and submitted a declaration under section 88 in the prescribed form to the designated authority. The declaration was accepted and the sum determined payable was paid and the designated authority issued a certificate under section 90(2) of the scheme, learned authorised representative brought to our attention the provisions of sub-section (4) of section 90 of the scheme which reads as under : "Where the declarant has filed an appeal or reference or a reply to the show-cause notice against any order or notice giving rise to the tax arrear before any authority or Tribunal or court, then, notwithstanding anything contained in any other provisions of any law for the time being in force, such appeal or reference or reply shall be deemed to have been withdrawn on the date of which the order referred to in sub-section (2) is passed." According to him, in terms of above-mentioned section 90(4), these appeals are deemed to have been withdrawn in April, 1999, only and now only a formal order is required. In view of this position of law, the preliminary objections raised by the learned Departmental Representative are only academic and will not alter the situation even if the same are decided by the Tribunal. In this regard, he also relied on the decision of Rajasthan High Court in CIT v. Fateh Dangi (2001) 118 Taxman 628 (Raj) where the same view has been taken by the court.
Learned authorised representative submitted that though preliminary objections are not legally maintainable, still he would like to reply to each argument of the learned Departmental Representative. First of all, contention that section 249(4) is also applicable to appeals filed before the Tribunal is not correct. He submitted that only authority available on the interpretation of this section is the decision quoted by learned Departmental Representative in case of V. Bhaskaran v.Asstt. CIT (supra) is not correct interpretation and submitted that same requires reconsideration by the Tribunal. He submitted that Chapter XX of the Act which deals with appeals and revisions has five sections, out of which Part A deals with appeals before Deputy Commissioner (Appeals) and Commissioner (Appeals) starting from section 246 to 251, Part B of the Chapter deals with the appeals before the Tribunal which consists of sections 252 to 255 and Parts C, CC, D, E and F consist of sections 256 to 269 which deals with references, appeals before High Court and Supreme Court and revisionary powers of the Commissioner. According to this arrangement, though appeals and revisions have been included in one chapter but separate sub-parts deal with different subjects and each part is independent. Therefore, provisions of section 249(4) which appear in Part A cannot be applied to Part B of the chapter which deals with appeal before Tribunal.
Moreover, in most of the cases of this group, returns were filed declaring nil income and in view of that fact also the provisions cannot be applied. As far as question of revised return is concerned, according to learned authorised representative, Chapter XIV-B does not provide for filing of revised returns because this chapter dealt with special procedure for assessment in search cases. As far as second proviso to section 158BBC(a) is concerned, it was inserted with effect from 1-1-1997, specifically prohibiting filing of revised returns but this does not mean that before that date revised return could be filed.
In any case, the proviso is of clarificatory nature and should be held to be effective from retrospective date, i.e., w.e.f. introduction of Chapter XIV-B, i.e., with effect from 1-7-1995. Therefore, if a revised return has been filed under this chapter, that would be an invalid return and cannot be taken cognizance.
As far as the contention that assessees of the group are not aggrieved parties is concerned, learned authorised representative submitted that facts of the cases which were relied by the learned Departmental Representative are totally different than the facts of the assessee's case. He submitted that according to the Black's Dictionary, aggrieved person is one whose right of pecuniary interest is directly affected by the adjudication. According to him, 'aggrieved' is somewhat wider term than 'injured' and a person is aggrieved if a decision has been pronounced which has wrongly refused him something which he had a right to demand. In this regard, he relied on CIT v. Hyderabad Secunderabad Food Grains Association Ltd. (1989) 175 ITR 574 (AP). He further submitted that the fact that assessment is made by consent does not take it out of section 246(1)(a) since there is no provision in the Income Tax Act, 1961, corresponding to section 96(3) of CPC 1908. In this regard, he relied on Chhatmall Agrawal v. CIT (1979) 116 ITR 694 (P&H), Gauri Sahai Ghisa Ram v. CIT (1979) 120 ITR 338 (All). He contended that assessee's group did not file any revised return except in two cases. According to him, no agreement was reached between assessee and department and whatever agreement is being mentioned by the learned Departmental Representative was made under pressure and cannot be relied for holding that assessee is not aggrieved party. In any case, Hon'ble Punjab and Haryana High Court in Chhatmall Agrawal v.CIT (supra) has held that assessment order made by consent of the assessee is also appealable. He also referred to decision of Supreme Court in CIT v. V.MR.P. Firm (1965) 56 ITR 67 (SC) in which Supreme Court has held that if a particular income is not taxable under the Act, it cannot be taxed on the basis of doctrine of estoppel.
He further submitted that it is apparent from the proceedings that during search assessees' statements were recorded under duress and the proceedings also continued in the same spirit. There was always a threat to the assessee for heavy taxes, penalties and prosecution. In this background, an additional income was offered to appease the Income Tax Authorities which was accepted by the assessing officer as such.
Further, the revised figure was not supported by any evidence and assessing officer has also not supplied any material or evidence to substantiate the assessed figure which could be said to be only based upon seized material. According to him, it is well settled position of law that if it appears to the court that there is any inducement, threat or promise, however slight, the admission, if any, shall lose its value. As far as decisions regarding KVSS, which were relied upon by the learned Departmental Representative are concerned, most of the cases relate to the situation where certificate under KVSS was refused and court found the refusal to be justified which is not the situation in the present case. In the case of assessees group certificates have been duly issued by the department and now the department cannot resort to preliminary objections to withdraw the certificates. He also submitted that appeals were filed in November/December, 1996, whereas the KVSS came into force with effect from 1-9-1998, therefore, it is clear that appeals were not filed to take benefit of KVSS. In these circumstances, the preliminary objections of the department shall not be accepted by the Tribunal.
We have considered the rival contentions carefully and have perused the material on record and judgments relied on by the parties. We do not agree with the contention of learned authorised representative that in view of the group having gone for KVSS and obtained certificate accordingly, the preliminary objections raised by the revenue are only academic and the appeals are deemed to have been withdrawn in the month of April, 1999, only. This is so because revenue has raised the preliminary objections on the issue whether the assessee was competent to file these appeals or not and the dispute is not regarding the KVSS and effect thereof. Therefore, we will proceed to analyse, and adjudicate the preliminary objections raised by the revenue. The first contention raised is that assessee-group has not paid due taxes, therefore, in view of the provisions of section 249(4), the appeals could not have been filed. We have gone through the provisions of section 249(4) and find that same cannot be applied for filing of appeals before the Tribunal. We have also gone through the decision of Chennai Bench of the Tribunal in case of V. Bhaskaran (supra), wherein the issue has been decided in favour of the revenue. The Chennai Bench has laid emphasis on the word 'Chapter' in sub-section (4) of section 249 and has held that this provision is applicable to appeals before the Tribunal also because what legislature intended was to compel the assessee to pay admitted tax as per returns. Here we would like to point out that before the introduction of Chapter XIV-B with effect from 1-7-1995, there was no provision for filing first appeals directly to the Tribunal. When Chapter XIV-B was introduced, corresponding clause (b) was also inserted in section 253 by which first appeal against the orders under section 158BC was required to be filed directly with the Tribunal. It seems that when these amendments were made, corresponding provision of section 249(4) was omitted to be inserted in Part-B of Chapter XX. We feel that it is not the duty of courts to fill up omissions. Other view could be that legislature intentionally did not insert provision equivalent to section 249(4) in Part-B of the Chapter XX. Therefore, with due respect, we are not inclined to agree with the decision of Chennai Bench of the Tribunal in case of V. Bhaskaran. In any case, the assessee had declared nil income in the return and in that sense also provisions of section 249(4) cannot be made applicable to the cases of the assessee's group.
As far as other contention of the revenue is concerned that assessee is not aggrieved by the order of assessing officer passed under section 158BC, we agree with the same. Though there is no provision corresponding to section 96(3) of CPC, 1908, in the Income Tax Act, 1961, but various High Courts have clearly held that once the assessment is completed on the basis of consent, assessee cannot be an aggrieved party and as such appeal is not maintainable. Otherwise also, it is plain and clear that once the assessee gives his consent for a particular assessment, then revenue if agrees with the same stops further investigation with the understanding that assessee would stick to his consent and make assessments accordingly. If this kind of agreements is allowed to be disturbed, then assessments would never attain finality. In this background, we would proceed to analyse the decisions relied on by the parties.
In Jiwatlal Purtashi v. CIT (supra), it was held by Hon'ble Bombay High Court 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 order to enable, it to file an appeal to the Tribunal, the appeal of the department regarding deletion of the amount was neither competent nor capable for being maintained by the Tribunal.
In the case of M.M. Annaih v. CIT (supra), it was held by the Hon'ble Madras High Court that the Income Tax Officer was bound by the circular and, further, as he had conceded before the Appellate Assistant Commissioner that the penalty had to be computed on the basis of the net tax only, when the Appellate Assistant Commissioner acted on the said concession, it could not be said that the Income Tax Officer was aggrieved by the order of the Appellate Assistant Commissioner and his appeal so far as it related to the deduction of the advance tax paid by the assessee was unsustainable.
In Rameshchandra & Co. v. CIT (supra), the Hon'ble Bombay High Court was again concerned with the same issue. In this case, during the course of assessment proceedings, Income Tax Officer came across a discrepancy in the 'sarki' account, he found that assessee had purchased 477 bags of this commodity but its sales and closing stock amounted only to 117 bags. When confronted with this information, one of the partners of the firm appeared before the Income Tax Officer and expressed in writing the assessee's inability to reconcile the discrepancy and asked the Income Tax Officer that the amount be added to the income. The court observed that having regard to the statement made by the partner of the assessee, there was nothing either improper or illegal in the order of Income Tax Officer having regard to the addition while the statement stood, the assessee could not have grievance in that behalf and was not entitled to appeal thereagainst.
In Sterling Machine Tools v. CIT (supra) the assessee had declared cost of centering machines at Rs. 9,434 per machine. The Income Tax Officer had the report of Vigilance Bureau and a Board of experts in respect of cost of manufacturing machines which according to them after deducting 25 per cent profit for the trader came to Rs. 7,331 per machine. The assessee was confronted with this report, upon which a partner of the firm sent a letter stating that although the cost of machine was much more than calculated by the Board of experts, its income may be worked out on the basis of experts' report. On these facts, the hon'ble court held that the letter of the partner of the assessee-firm, being a voluntary one and assessee having regard to the cost of machine being worked out on the basis of experts report, the Income Tax Officer was justified in working out the profit on the sales of these machines by deducting the cost price as worked out by the experts from the sale proceeds. The court held that Tribunal was right in holding that no appeal lay to Appellate Assistant Commissioner from such order.
In Bantasingh Kartarsingh v. CIT (supra) the Hon'ble Punjab and Haryana High Court has held that it was on the agreement of the assessee, which agreement mention the rate of sales figure, the penalty had been levied. The assessee had no right to agitate this question in appeal.
Again in Ramlal Kamdar v. CIT (supra) the Hon'ble Madras High Court did not answer the question referred to it as it found that reference itself was incompetent because the assessee did not object to the proposed revision of the assessment and consequently the assessee could not be said to have been aggrieved by the order of the officer revising the assessment.
In CIT v. Cochin Malabar Industries & Estates Ltd. (supra), the Hon'ble Kerala High Court has held that appeals filed by the assessee before the Commissioner (Appeals) itself was incompetent regarding the allocation of overhead charges in rectification proceedings, since the assessee could not be considered to be a person aggrieved by the order passed under section 154 by the Income Tax Officer because assessee had agreed to such rectification.
On the other hand, learned authorised representative relied on three judgments which are, according to him, contrary to the above decisions.
Now we shall proceed to examine those judgments. In Chhatmall Agrawal v. CIT (supra), the Hon'ble Punjab and Haryana High Court held that it cannot be held as a matter of law that remedy of appeal provided by the provisions of section 246(1)(c) of the Act cannot be availed of by the assessee without having filed application of rectification before the Income Tax Officer. This position was taken because court further observed that assessee was able to convince the Appellate Assistant Commissioner that admission made by him was not binding on him as the same was made under the misapprehension that the amount of Rs. 15,000 was being added for the subsequent assessment year. Similarly, in Gaurisahai Ghisa Ram v. CIT the Hon'ble Allahabad High Court held that contention of the revenue that no appeal lay to Appellate Assistant Commissioner against assessment order because it was passed on concession made by the assessee could not be accepted because no such objection was taken before the Appellate Assistant Commissioner or Tribunal. Similarly, the facts in CIT v. Hyderabad Secunderabad Food Grains Association Ltd. (supra) are altogether different.
From this analysis, it is clear that most of the High Courts have taken a view that once assessee gives his consent on a particular assessment, the assessee loses the right to appeal.
As far as the contention regarding assessee being under pressure and duress is concerned, we do not agree with learned authorised representative. We have perused the letter dated 20-11-1996, which was filed on behalf of the assessee before Commissioner, Bhopal. This letter runs into three pages and contains the details regarding issues being investigated by the department and difficulties being faced by the assessee in procuring the required details. The concluding para of the latter runs as under : "In view of the above facts and complexities specially the circumstances prevailing at present involved i.e., complete closure of the new industrial undertaking, namely, M/s Rajratan Synthetics Ltd. this surrender is being made to avoid litigation to buy peace of mind with the assurance that prosecution proceedings will not be initiated at all against any of the promoters of directors of the company." From this para and other contents of the latter, it is evidently clear that assessee agreed to surrender Rs. 94.05 lakhs in various cases when it was faced with more severe consequences like, prosecution, etc. From the contents of letter, it is very clear that this letter was not written under pressure but was written after negotiations with the department and due deliberations on the part of the assessee. The assessing officer framed assessments in the cases of Rita Trading & Marketing Ltd., Indore Texturising (India) (P) Ltd. and Malwa Texturising (P) Ltd. on the basis of surrender made through this letter. In case of Devendrakumar Rajmal Jain, the surrender was made during assessment proceedings which is clear from para 5.3 of the assessment order, wherein assessing officer has recorded the finding that on 26-11-1996, assessee accepted Rs. 5.61 lakhs being the peak credit of the bank account of M/s Rajesh Corpn. as his unexplained money to buy peace of mind and to avoid litigation. However, as far as appeals relating to M/s Rajratan Synthetics Ltd. and Rajmal Praskumar Sarees (P) Ltd. are concerned, it is seen from the assessment order that these assessments were not framed on the basis of letter of surrender. On these facts and circumstances of the case, we uphold the preliminary objections raised by the revenue and finds the IT (SS)A Nos. 84, 85 86 & 90/Ind/96 are not competent and void ab initio. The assessee had no right to file these appeals and, thus, these appeals shall be treated as deemed to have never been filed. In view of this, revenue is free to take action against the assessee as per the law. As far as IT (SS)A Nos. 88 & 89/Ind/96 are concerned since the assessments have not been framed on the basis of surrender letter, therefore, preliminary objections of the revenue in regard to these two appeals is dismissed.
In the result, IT(SS)A Nos. 84, 85, 86 & 90/Ind/96 shall not be treated to have been filed before the Tribunal and dismissed accordingly.