Short Overview : Though, there is no legal bar on challenging an agreed addition, but the fact of the matter is that a valid challenge can be laid before the appellate authorities only if such an admission before the AO was not in consonance with law. If, on the other hand, an admission is based purely on factual matrix, then the assessee cannot challenge the same before the appellate authorities without there being any contrary evidence.

Assessee debited a sum towards Salary to labourers. AO found certain infirmities in the details furnished in as much as the expenses were mostly backed by self-made vouchers. Assessee agreed for ad hoc disallowance before AO, which addition was made and came to be countenanced in the first appeal. Later assessee was aggrieved by confirmation of such an addition. 

 

It is held that  When an assessee agrees for an addition, AO does not proceed further in his examination on that issue and closes it by recording the concession of assessee. The later challenge to such an admission de hors any contrary evidence could not bring the arms of clock back enabling AO to continue from the stage where he left the issue on assessee agreeing for surrender. In such a scenario, assessee could not be allowed to resile from the agreed addition made before AO in the backdrop of a pure factual panorama. The extant addition, being an agreed addition on purely factual aspects without any thing contrary could not be interfered with.

Decision: Against the assessee.

 

IN THE ITAT, PUNE BENCH

R.S. SYAL, V.P.

Sudhakar Motiram Kadam v. ITO

I.T.A. No. 1397/PUN/2019

7 February, 2020

Assessee by: Pratik B. Sandbhor

Revenue by: Elsy Mathew, ACIT

R.S. Syal, V.P.

This appeal by the assessee is directed against the order passed by the learned Commissioner (Appeals)-9, Pune on 17-6-2019 in relation to the assessment year 2007-08.

2. The first issue raised in the appeal is against confirmation of addition of Rs. 2,69,000 made by the assessing officer (AO) under section 68 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

3. Briefly stated facts of the case are that the assessee is a civil contractor carrying out the business in the name and style of M/s. S.M. Kadam. Return was filed declaring total income at Rs. 9,40,760. In the assessment proceedings, the assessing officer observed that sundry creditors to the tune of Rs. 50,86,860 were appearing in the assessee’s Balance Sheet. On being called upon to furnish confirmations from the sundry creditors, the assessee furnished all except in the case of M/s. Yashoda Construction with outstanding amount of Rs. 2,69,000. The assessing officer made the addition. Before the learned Commissioner (Appeals), the assessee submitted that the time limit provided by the assessing officer was too short for enabling him to file necessary confirmations. The assessee furnished copies of Profit and Loss Account and Balance Sheet of M/s. Yashoda Construction, in which the assessee was shown as a debtor for Rs. 2,69,000. The learned Commissioner (Appeals) called for a remand report from the assessing officer who harped on Rule 46A of the Income Tax Rules, 1962 (hereinafter referred to as ‘the Rules’) for making out a case for the rejection of the additional evidence. Without prejudice, the assessing officer also referred the matter to the concerned assessing officer of the proprietor of M/s. Yashoda Construction. The other assessing officer endorsed the view that the return was filed in time. He however, expressed inability to furnish the necessary record which were more than 10 years old. The learned Commissioner (Appeals), considering the remand report, chose to confirm the addition. Aggrieved thereby, the assessee has approached the Tribunal.

4. I have heard both the parties and perused the relevant material available on record. It is observed that the assessee declared, inter alia, loan credit of Rs. 2,69,000 in the name of M/s. Yashoda Construction. Though, the relevant evidence was not filed at the assessment stage because of paucity of time, the assessee did furnish copy of return of M/s. Yashoda Construction along with Profit and Loss Account and Balance Sheet, indicating that the said creditor had acknowledged such a balance receivable from the assessee, which was also reflected in his Balance Sheet. Once the creditor had admitted the transaction and also incorporated the same in his accounts, there remained nothing more to prove the genuineness of the transaction, more so, when the assessing officer of the creditor also did not raise any doubt over it. Considering the above facts, I order to delete the addition.

5. The only other ground is against confirmation of ad hoc disallowance of Rs. 25,000 out of expenses.

6. The facts apropos this ground are that the assessee debited Rs. 92,65,070 towards Salary to labourers. The assessing officer found certain infirmities in the details furnished in as much as the expenses were mostly backed by self-made vouchers. The assessee agreed for ad hoc disallowance of Rs. 25,000 before the assessing officer, which addition was made and came to be countenanced in the first appeal. Now the assessee is aggrieved by the confirmation of such an addition.

7. Having heard both the sides and perused the relevant material on record, it is observed that the assessee had recorded Rs. 92,65,070 towards salary to labourers, which expenses were not properly backed by external vouchers. When confronted, the assessee agreed for an ad hoc disallowance of Rs. 25,000 during the course of assessment proceedings by considering the magnitude of total expenses vis-a-vis expenses not properly supported by vouchers. This being a factual admission by the assessee, cannot be raked up in the appellate proceedings. Though, there is no legal bar on challenging an agreed addition, but the fact of the matter is that a valid challenge can be laid before the appellate authorities only if such an admission before the assessing officer was not in consonance with law. If, on the other hand, an admission is based purely on factual matrix, then the assessee cannot challenge the same before the appellate authorities without there being any contrary evidence. The reason is obvious that when an assessee agrees for an addition, the assessing officer does not proceed further in his examination on that issue and closes it by recording the concession of the assessee. The later challenge to such an admission de hors any contrary evidence cannot bring the arms of the clock back enabling the assessing officer to continue from the stage where he left the issue on the assessee agreeing for the surrender. In such a scenario, the assessee cannot be allowed to resile from the agreed addition made before the assessing officer in the backdrop of a pure factual panorama. The extant addition, being an agreed addition on purely factual aspects without any thing contrary, cannot, ergo, be interfered with. I, therefore, countenance the impugned order on this score. This ground fails.

8. In the result, the appeal is partly allowed.