In Patil Kadpakal Garjan v. ACIT, the Bangalore ITAT held that the right of the assessee to challenge the order of the assessment cannot be denied by applying the Doctrine of Estoppel, since it is a material legal right.
Assessee co-operated with the assessment proceedings and admitted the additions subject to a condition that the Assessing Officer will not initiate penalty proceedings against him. However, the AO initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act on ground of submission of inaccurate particulars of income and agreed for certain disallowances.
Assessee approached the CIT(A) contending that the estimation of income should not be more than 8% as it is provided under Section 44AD of the Income Tax Act and he agreed to the addition on estimation of income at 12.5% with the condition that the Assessing Officer not to initiate the penalty proceedings under Section 271(1)(c) of the Act. However, the CIT(A) dismissed his plea by pointing out that when the assessment was framed on the consent of the assessee then the assessee has no right to challenge the assessment order.
The Judicial Member opined that the consent of the assessee while estimating income is immaterial in framing best judgment assessment. However if the Assessing Officer has accepted the consent of the assessee then such statement of the assessee has to be considered as a whole and not selective.
Reversing the order of the first appellate authority, he added that “there is no dispute that the Assessing Officer is not bound by the said request made by the assessee for not initiating the penalty proceedings and therefore it was well within the jurisdiction of the Assessing Officer to initiate the penalty proceedings. However the levy of penalty is always subject to the explanation and all other relevant factors and circumstances under which the addition was made by the Assessing Officer. Once the Assessing Officer is not bound by the consent of the assessee then on the similar analogy the assessee is also not bound by one part of the consent when the other part of the consent was not accepted by the Assessing Officer. Thus when the Assessing Officer has not accepted the consent of the assessee in toto then the said consent cannot be applied as a Doctrine of estoppels against the assessee and the assessee has a legal right to challenge the assessment order before the appellate authority. The CIT (Appeals) has not gone into the merits of the assessee’s case and dismissed the appeal of the assessee on the ground that the assessment was framed on the consented addition.”
The bench further relied on the decision of Karnataka High Court in the case of Bandari Metal & Alloys Vs. State of Karnataka and held that doctrine f Estoppel cannot be applied to deny the assessees’ right of appeal.
Read the full text of the Order below.
