LATE MS. SHAHEDABEGUM SHAIKH AKRAM THROUGH LEGAL REPERESENTATIVE MR. AKRAM SHAIKH,UMRED vs. INCOME TAX OFFICER, WARD 4(4), NAGPUR

No doubt, the issue under consideration with regard to late deposit of employees’ contribution of Provident Fund is squarely covered against the Assessee by the decision of the Hon'ble Apex Court in the case of M/s. Checkmate Services Pvt. Ltd. vs. CIT(2002) 143 taxmann.com 178 (SC) dated 12/10/2022, but admittedly, the same was not part of the issues selected for limited scrutiny.

There are certain guidelines/constraints in the procedure established by law and if the same is not followed in its true spirit then the result would be zero and/or the addition made if any, by not following the due process of law, would entail the addition made, being illegal. The Appellate Authority also can not cure the defect.

The Coordinate Bench of the Tribunal at Delhi in the case of Sudhir Chanda vs. ACIT(ITANo.6118/Del/2019, dt. 28/11/2022) has also dealt with an identical issue, wherein the Assessee himself has committed a default by debiting the amount of ` 4,80,000/–to the Profit & Loss Account under the head “commission paid to others” and by filing its reply dated 25/08/2017 in the assessment proceedings, tried to justify/substantiate the said claim of 3 ITA.No. 338/NAG/2023 “commission paid to others”, however, before the Ld. Commissioner in appeal, changed his stand and claimed that the A.O. had made addition by completely misunderstanding and misinterpreting the facts of the case. Therefore, the Coordinate Bench of the Tribunal has held “that the claim of the Assessee that the A.O. had made the addition by completely misunderstanding and misinterpreting the facts of the case, is frivolous and totally unwarranted and therefore not to be encouraged, however, considering the legal aspect of the case, as the case of the then Assessee was selected for limited scrutiny and the addition did not emanate from the grounds, on which the case of Assessee was picked up for limited scrutiny”, and ultimately deleted the addition. For brevity and ready reference, conclusion drawn by the Hon’ble Co- ordinate Bench is reproduced herein below: “5.2 We have given thoughtful consideration to the contradictory stand taken by the Assessee before the Assessing Officer and the ld. Commissioner. The Apex Court time and again reminded that the receiving of any freebies, bonus or commission, etc. by medical practitioner(s) from the allied health industry including hospitals for referring any patient by them for medical investigation, surgical, or other treatment purposes is prohibited under The Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (in short “the Regulations”). In the same way clause 6.4.1 of the regulation prohibits the medical practitioner (s) from giving, soliciting , or receiving or offering to give any gift, gratuity, commission or bonus in consideration of or return for the referring, recommending or procuring of any patient for medical, surgical or other treatment. Further prohibits the medical practitioner (s)from directly or indirectly, participating in or be a party to act of division, transference, assignment, subordination, rebating, splitting or refunding of any fee for medical, surgical or other treatment etc. The Hon‟ble Apex Court also reminded that if demanding of commission is bad then paying of the same is also equally bad and therefore commission paid by medical practitioner is opposed to public policy and should be discouraged as the same is not a fair practice and has to 4 ITA.No. 338/NAG/2023 be termed as against the public policy as the consideration or object of the agreement between the Medical practitioner and the commission agent is not only unlawful but also void as per Contract Act. 5.3 The Hon‟ble Apex Court in the case of M/S Apex Laboratories P. Ltd. vs The Deputy Commissioner Of Income ... on 22 February, 2022 Indian Kanoon - http://indiankanoon.org/doc/43893743/12 also reminded as under: “27. It is also a settled principle of law that no court will lend its aid to a party that roots its cause of action in an immoral or illegal act (ex dolomalo non oritur action) meaning that none should be allowed to profit from any wrongdoing coupled with the fact that statutory regimes should be coherent and not self- defeating. Doctors and pharmacists being complementary and supplementary to each other in the medical profession, a comprehensive view must be adopted to regulate their conduct in view of the contemporary statutory regimes and regulations. Therefore, denial of the tax benefit cannot be construed as penalizing the assessee pharmaceutical company. Only its participation in what is plainly an action prohibited by law, precludes the Assessee from claiming it as a deductible expenditure.” 5.4 It is the also mandate of law that it is the onerous duty of the litigant to come to the Court with clean hands. In the caseof Kishore Samrite vs. State of U.P. & Others reported in 2013(2) SCC 398, the Hon'ble Apex Court held as follows: "32. With the passage of time, it has been realised that people used to feel proud to tell the truth in the Courts, irrespective of the consequences but that practice no longer proves true, in all cases. The Court does not sit simply as an umpire in a contest between two parties and declare at the end of the combat as to who has won and who has lost but it has a legal duty of its own, independent of parties, to take active role in the proceedings and reach at the truth, which is the foundation of administration of justice. Therefore, the truth should become the ideal to inspire the courts to pursue. This can be achieved by statutorily mandating the Courts to become active seekers of truth. To enable the courts 5 ITA.No. 338/NAG/2023 to ward off unjustified interference in their working, those who indulge in immoral acts like perjury, prevarication and motivated falsehood, must be appropriately dealt with. The parties must state forthwith sufficient factual details to the extent that it reduces the ability to put forward false and exaggerated claims and a litigant must approach the Court with clean hands. It is the bounden duty of the Court to ensure that dishonesty and any attempt to surpass the legal process must be effectively curbed and the Court must ensure that there is no wrongful, unauthorised or unjust gain to anyone as a result of abuse of the process of the Court. One way to curb this tendency is to impose realistic or punitive costs.” 5.5 A litigant is not only required to come with clean hands and bound to make full and true disclosure of facts, but it is imperative to come with clean mind, clean heart and clean objective that are the equi-fundamentals of judicious litigation. One should not be enriched by the loss or injury to another, is the percept for Courts. The jurisdiction of the court should not become a source of abuse of the process of law by the disgruntled litigant. Careful exercise is also necessary to ensure that the litigation is genuine, not motivated by extraneous considerations and imposes an obligation upon the litigant to disclose the true facts and approach the court with clean hands. No litigant can play hide and seek with the courts or adopt pick and choose. True facts ought to be disclosed as the Court knows law, but not facts. Suppression or concealment of material facts is impermissible to a litigant. The Court is also a Court of Equity. It is, therefore, of utmost necessity that when a party approaches a Court, he must do equity and place all the facts before the Court without any reservation. If there is suppression of material facts on the part of the petitioner or twisted facts have been placed before the Court, the Court may refuse to entertain the petition and dismiss it without entering into merits of the matter. 5.6 In the instant case it is a undisputed fact that the Assessee himself had debited the amount of Rs.4,80,000/- to the Profit & Loss Account under the head „commission paid to others‟ and by filling reply dated 25.08.2017 in the assessment proceedings tried to justify/substantiate the said claim of „commission paid to others‟. However before the Ld. Commissioner in appeal changed its stand and also claimed that the Assessing 6 ITA.No. 338/NAG/2023 Officer had made addition by completely misunderstanding and misinterpreting the facts of the case. It is not the case of the Assessee that the Assessee inadvertently or unknowingly claimed the said amount as „commission paid to others‟, and it is also not the case of the Assessee that the reply dated 25.08.2017 (supra) does not belongs to the Assessee. Therefore the claim of the Assessee that the Assessing Officer had made addition by completely misunderstanding and misinterpreting the facts of the case is frivolous and totally unwarranted and therefore not to be encouraged. On the aforesaid reasons, in cumulative effects, we are unable to accept the contradictory stand of the Assessee taken before the L. Commissioner because the contradictory stand of the Assessee clearly seems to be concocted story, twisting facts, erratic, vague and superfluous and thus liable to be depreciated. Even otherwise as per the judgements referred to above, the payment of commission by the Assessee for referring patients to it by any stretch of imagination, cannot be accepted as legal or as per public policy of India, hence such commission is not an allowable expense. Consequently the Assessee in any case is not entitled for any relief on merit, we are thus inclined not to interfere in sustaining the addition of Rs.4,80,000/-by the Ld. Commissioner on merit. 5.7 Coming to the legal aspect of the case, as the case of the Assessee was selected for limited scrutiny and the addition in hand does not emanate from the grounds on which the case of the Assessee was picked up for limited scrutiny. Though the Ld. Commissioner, in the impugned order incorporated the legal contention of the Assessee objecting to the jurisdiction of the Assessing Officer to extend the assessment proceedings beyond the points of limited scrutiny, but the ld. Commissioner has not adverted to decide this contention of Assessee in the impugned order. As it is settled law that the Revenue Authorities are not allowed to travel beyond the issues involved in limited scrutiny cases, except in exceptional circumstances and by completing the relevant formalities before proceeding to other issues, which in the instant case does not appears to have adhered to. Hence, we deem it appropriate to delete the addition in hand. Consequently, the appeal of the Assessee is liable to be allowed.”

Thus, considering the ratio laid down by the Coordinate Bench of the Tribunal and the legal impediment qua limited scrutiny assessment as the issue qua addition under consideration was not selected for scrutiny, the addition is deleted.

In the result, appeal of the Assessee is allowed.