CIT v. D.K.B. & Co. - Taxpublishers.in

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The Tax Publishers2000 TaxPub(DT) 1146 (Ker-HC) : (2000) 243 ITR 0618 : (2000) 161 CTR 0187 : (2003) 128 TAXMAN 0552 Commissioner of Income Tax v. D.K.B. & Co. () INCOME TAX --Assessment----APPLICABILITY OF PRINCIPLE OF PROMISSORY ESTOPPELImposition of penalty under section 271(1)(c)-- Catch Note: Assessee is a Partnership firm, which during the relevant period i.e. assessment year 1983-84 was having abkari contracts in and around Quilon--Premises of the firm, and the residence of its partners were searched by the departmental authorities--Certain incriminating materials were found, on the basis of which further investigations were carried out--Since the materials found by the departmental authorities disclosed suppressions, assessee approached the department for a settlement of the income-tax liability of the firm and its partners--It is to be noted that by the time of the search, return for the concerned assessment year 1983-84 had been filed--Four of the partners wrote a letter to the assessing officer agreeing for an addition of Rs. 41 lakhs, but indicated that they were agreeable for such addition only if penal provisions were not applied--The Income Tax Officer wrote a letter to the assessee suggesting that it may file a revised return since the amount involved was substantial--Assessee filed a revised return adding Rs. 41 lakhs to the income already disclosed--Assessment was accordingly completed--Penalty proceedings were also initiated--Assessee preferred appeal questioning the correctness of the addition made as well as the penalty levied before the Tribunal, after the appeals before the Commissioner (Appeals) were dismissed--So far as levy of penalty is concerned Tribunal did not consider the case of the assessee on merits, but proceeded on the ground that after having agreed not to initiate penalty proceedings it is not open to the revenue to initiate penalty proceedings--The concept of promissory estoppel was pressed into service--Not proper--There cannot be estoppel against a statute and where explanation is submitted by the assessee before the assessing officer it is incumbent on the assessing officer to consider the explanation on merits but it cannot be said that applying principle of promissory estoppel penalty could not be levied, therefore the, matter is remanded back to Tribunal for considering assessee's explanation on merits. Held: The definitions in Black's Law Dictionary which are based on decided cases, indicate that before the rule of 'Promissory Estoppel' can be invoked, it has to be shown that there was a declaration or promise made which induced the party to whom the promise was made to alter its position to its disadvantage. It is the settled position in law that there cannot be estoppel against a statute. There is no provision in the statute which permits a compromise assessment. The above position was indicated by the Apex Court in Union of India v. Banwari Lal Agarwal (1999) 238 ITR 461. It cannot be laid down as the principle of universal application that whenever an assessment has been completed by accepting the offer of an assessee, no penalty can be imposed. It is for the department to consider the explanation offered by the assessee in respect of an amount which was offered to be, taxed. It is not automatic that whatever amount has been offered by the assessee, penalty is to be levied. Therefore, in the penal proceedings which conceptually differ from assessment proceedings, the assessee can file an explanation justifying its action in not including particular item of income in its return, though it may have offered the amount to be taxed subsequently. If such an explanation is offered, the department has to examine its acceptability and record a finding as to whether the explanation is acceptable or not. Only if the explanation is not found acceptable, the question of penalty will arise. In other words, the explanation of the assessee has to be considered on merits. Tribunal has not kept this aspect in view. Though scope of reference jurisdiction is limited, court accepts the suggestion and remit the matter back to the Tribunal for fresh consideration on merits. It is open to the parties to place such materials. in addition to those already produced, for disposal of the matter. Application: Also to current assessment year. Decision: Matter remanded. Date of Judgment: 3 January 2000 Assessment Year: 1983-84 SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2000 TaxPub(DT) 1146 (Ker-HC) : (2000) 243 ITR 0618 : (2000) 161 CTR 0187 : (2003) 128 TAXMAN 0552

Commissioner of Income Tax v. D.K.B. & Co. ()

INCOME TAX

--Assessment----APPLICABILITY OF PRINCIPLE OF PROMISSORY ESTOPPELImposition of penalty under section 271(1)(c)--

Catch Note:

Assessee is a Partnership firm, which during the relevant period i.e. assessment year 1983-84 was having abkari contracts in and around Quilon--Premises of the firm, and the residence of its partners were searched by the departmental authorities--Certain incriminating materials were found, on the basis of which further investigations were carried out--Since the materials found by the departmental authorities disclosed suppressions, assessee approached the department for a settlement of the income-tax liability of the firm and its partners--It is to be noted that by the time of the search, return for the concerned assessment year 1983-84 had been filed--Four of the partners wrote a letter to the assessing officer agreeing for an addition of Rs. 41 lakhs, but indicated that they were agreeable for such addition only if penal provisions were not applied--The Income Tax Officer wrote a letter to the assessee suggesting that it may file a revised return since the amount involved was substantial--Assessee filed a revised return adding Rs. 41 lakhs to the income already disclosed--Assessment was accordingly completed--Penalty proceedings were also initiated--Assessee preferred appeal questioning the correctness of the addition made as well as the penalty levied before the Tribunal, after the appeals before the Commissioner (Appeals) were dismissed--So far as levy of penalty is concerned Tribunal did not consider the case of the assessee on merits, but proceeded on the ground that after having agreed not to initiate penalty proceedings it is not open to the revenue to initiate penalty proceedings--The concept of promissory estoppel was pressed into service--Not proper--There cannot be estoppel against a statute and where explanation is submitted by the assessee before the assessing officer it is incumbent on the assessing officer to consider the explanation on merits but it cannot be said that applying principle of promissory estoppel penalty could not be levied, therefore the, matter is remanded back to Tribunal for considering assessee's explanation on merits.

Held:

The definitions in Black's Law Dictionary which are based on decided cases, indicate that before the rule of 'Promissory Estoppel' can be invoked, it has to be shown that there was a declaration or promise made which induced the party to whom the promise was made to alter its position to its disadvantage. It is the settled position in law that there cannot be estoppel against a statute. There is no provision in the statute which permits a compromise assessment. The above position was indicated by the Apex Court in Union of India v. Banwari Lal Agarwal (1999) 238 ITR 461. It cannot be laid down as the principle of universal application that whenever an assessment has been completed by accepting the offer of an assessee, no penalty can be imposed. It is for the department to consider the explanation offered by the assessee in respect of an amount which was offered to be, taxed. It is not automatic that whatever amount has been offered by the assessee, penalty is to be levied. Therefore, in the penal proceedings which conceptually differ from assessment proceedings, the assessee can file an explanation justifying its action in not including particular item of income in its return, though it may have offered the amount to be taxed subsequently. If such an explanation is offered, the department has to examine its acceptability and record a finding as to whether the explanation is acceptable or not. Only if the explanation is not found acceptable, the question of penalty will arise. In other words, the explanation of the assessee has to be considered on merits. Tribunal has not kept this aspect in view. Though scope of reference jurisdiction is limited, court accepts the suggestion and remit the matter back to the Tribunal for fresh consideration on merits. It is open to the parties to place such materials. in addition to those already produced, for disposal of the matter.

Application:

Also to current assessment year.

Decision:

Matter remanded.

Date of Judgment:

3 January 2000

Assessment Year:

1983-84