1987 (1) TMI 147 - AT - Income Tax

Summary

Issues:
1. Deletion of addition of Rs. 1 lakh in respect of purchases and purchase expenses.
2. Validity of the agreement made by an unauthorized person for disallowance of Rs. 1 lakh on gross profit account.
3. Whether the addition of Rs. 1 lakh was made on an 'agreed basis'.

Detailed Analysis:

1. The appeal pertains to the deletion of an addition of Rs. 1 lakh in respect of purchases and purchase expenses made by the Commissioner (Appeals). The assessee, engaged in the business of processing and sale of marine products, had filed a return declaring a loss for the assessment year. The Income Tax Officer (ITO) proposed the addition based on various discrepancies in the accounts. The Commissioner (Appeals) deleted the addition stating that in the absence of specific unsupported expenditures, the addition was unwarranted. The revenue challenged this deletion on the grounds of unverifiable expenses.

2. The crux of the issue lies in the validity of the agreement made for the disallowance of Rs. 1 lakh on the gross profit account. The departmental representative argued that the agreement by the financial adviser of the assessee amounted to acceptance of the addition. However, the assessee contended that the adviser had no authority to bind the assessee, and his actions were unauthorized. The Tribunal examined the agreement and concluded that without proper authorization, the adviser could not bind the assessee, thereby dismissing the revenue's contentions.

3. The final issue addressed was whether the addition of Rs. 1 lakh was made on an 'agreed basis'. The revenue contended that since there was no objection raised by the assessee against the draft assessment proposing the addition, the assessee was bound by the agreement. However, the Tribunal held that without proper authorization as required by law, any agreement made by an unauthorized person is not binding on the assessee. Citing precedents, the Tribunal ruled that the addition was not made on an 'agreed basis' and dismissed the appeal.

In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decision to delete the addition of Rs. 1 lakh, emphasizing the importance of proper authorization in agreements related to tax assessments.