LETTER TO AO – ACCEPTING ADDITION TO AVOID LITIGATION

[CA DEV KUMAR KOTHARI]

Time to decide for filing or not filing appeal:

Assessments have been completed and in many assessments additions, disallowances, or adverse inferences have been made by Assessing Officers. Some of such variations are of routine nature and made based on estimates and presumptions.

In case of large variations and variations having repetitive / consequential nature in future it becomes necessary to file appeal and contest properly.

Small variations:

However, in case of small variations , a policy decision is to be taken about whether to contest or not in appeal or revision.

For filing appeal, time available is usually short (30 days from date of receipt of notice under Income-tax Act), whereas in case of revision petition usually longer time is allowed to file appeal. Besides appeal as well as revision petition can be filed belatedly if there is reasonable or sufficient cause for such delay.

Therefore, in case of petty variations made by the Tax Officer is assessment assessee can decide not to file appeal.

To protect from possible consequences, in future, it is advisable to write letter to the Tax officer explaining the policy aspect about litigation.

A draft letter is appended below which can be modified depending on circumstances:     

Letter head of assessee with details of name, address , PAN and other relevant Registrations

Before the AO…/ Authority

Dear Sir,

PAN:                    Assessment year       Reg: Order u/s      dt.           - Not filing of appeal to avoid costly litigation and to save time for productive work.

I/ We received above order. On perusal of the order I /  we find that some routine petty disallowances / additions or other variations have been made, or adverse inferences have been drawn against us/ assessee which are of  usual  nature in case of scrutiny assessment as per practice, followed by  most of Assessing Officers.

All such variations are also based on presumption, conjecture and estimations. And there can be different views on the same. This is also due to reason that tax laws are very complex and we find that even honourable Supreme Court had on some occasions  taken different view on same matter or review some cases and taken different decisions. 

Though we do not agree to the additions / disallowances/ inferences, however, considering time and costs involved in litigation we have decided not to file an appeal or revision petition, though there are good chances that such additions / disallowances will be deleted, if contested properly.

Filing of appeal or revision petition and contesting the same is time consuming and involves costs. It also detract attention of administration from main business. Therefore, as a policy to avoid such costs and buy peace of mind we are presently not filing any appeal / revision petition / rectification petition etc.

Non-filing of appeal, revision petition or rectification petition should not, in any way, be considered (a) as acceptance of additions, disallowances, adverse variations ,adverse inference  made by you

 (b) should not be treated as precedence in future

(c) should not be considered for initiation and levy of penalty.

We reserve our right to file appeal, revision petition or rectification petition as may be advised, if the tax department take any adverse action, in future against us for such addition / disallowances/ inferences etc.

Thanking you,

Yours faithfully

 

Assessee

Discussions to this article

[DALJIT SINGH CHHABRA]

The opinion of author in the article under reference will be of no use as not binding on AO for future assessment. In case assessee disagree to the additions made and doesn't like to file appeal, the letter to AO will not provide any relief or assurance in case of assessments in future. Moreover in case the penalty has been initiated in order itself, the same will be imposed provided contested in legal grounds. WE are of the opinion that in any case the assessment has been made with large or small variations, disallowance or addition, on should file appeal for future protection and should not think about costs of filling appeal.