1997 (7) TMI 200 - AT - Income Tax

Summary

Issues Involved:
1. Determination of business income and income from undisclosed sources.
2. Right to appeal against agreed assessments.
3. Rejection of books of account and reliance on admissions by counsels.
4. Telescoping of income.
5. Charging of interest under Section 139(8) and Section 215/217 of the Income-tax Act.
6. Initiation of penalty proceedings.

Detailed Analysis:

1. Determination of Business Income and Income from Undisclosed Sources:
The assessee filed returns for assessment years 1987-88, 1988-89, and 1989-90. During search operations under Section 132 of the Income-tax Act, 1961, various incriminating documents were seized. The assessee agreed to a specific amount of assessment to avoid prolonged litigation. The assessments were completed as follows:

- 1987-88: Returned income: Rs. 21,141; Assessed income: Rs. 5,24,185.
- 1988-89: Returned income: (-) Rs. 5,618; Assessed income: Rs. 3,10,000.
- 1989-90: Returned income: Rs. 99,470; Assessed income: Rs. 4,91,000.

The CIT(Appeals) upheld the assessments on the grounds that they were agreed assessments.

2. Right to Appeal Against Agreed Assessments:
The assessee argued that despite agreeing to the assessments, it retained the right to appeal. The Tribunal examined Section 246(1)(a) of the Income-tax Act, which grants the right to appeal if the assessee is aggrieved by the assessment order. The Tribunal noted that the assessee's case fell under the provision where the assessee disputes the quantum of income assessed. However, since the assessments were based on the assessee's own offers, the Tribunal concluded that the assessee could not be said to be aggrieved.

3. Rejection of Books of Account and Reliance on Admissions by Counsels:
The assessee contended that its books of account were verifiable and that the Assessing Officer erred in rejecting them. The Tribunal found that the assessee had conceded to be taxed on a certain income to avoid prolonged disputes. The Tribunal also noted that the admissions made by the assessee's counsels were based on the assessee's own letters and were binding. The Tribunal cited the Calcutta High Court's decision in CIT v. Chrestian Mica Industries Ltd., which held that a fact admitted by counsel is substantive evidence against the client.

4. Telescoping of Income:
The assessee raised an alternative ground that telescoping should have been done against additions/disallowances made in past years. The Tribunal rejected this ground, stating that the admissions made by the assessee were distinct and independent for each year, leaving no scope for telescoping.

5. Charging of Interest Under Section 139(8) and Section 215/217:
The assessee argued that interest could not be levied without issuing a show-cause notice, citing the Supreme Court's decision in J.K. Synthetics Ltd. v. CTO. The Tribunal, however, referred to the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, which held that the levy of interest is automatic. The Tribunal dismissed the assessee's ground, stating that no decision to the contrary was brought to their notice.

6. Initiation of Penalty Proceedings:
The ground pertaining to the initiation of penalty proceedings was not pressed by the assessee during the hearing and was thus rejected.

Conclusion:
All the appeals of the assessee were dismissed. The Tribunal upheld the assessments based on the admissions made by the assessee and ruled that the assessee's right to appeal was not extinguished but was not applicable in this case due to the agreed nature of the assessments. The Tribunal also upheld the automatic levy of interest and rejected the plea for telescoping of income.