Can an assessee appeal against an addition he agreed to during the assessment?
The Punjab & Haryana High Court held that an assessee's agreement to an addition recorded in the assessment order does not take away the statutory right of appeal. The remedy of appeal can be availed of notwithstanding the recital of consent, because the Act contains no bar founded on agreement.
Decided by the High Court (Punjab & Haryana High Court — B.S. Dhillon J and S.S. Sidhu J) on 1978-11-09, reported as [1979] 116 ITR 694 (Punjab & Haryana); income-tax reference under s.256(1), decided 9 November 1978. TS-5917-HC-1978(Punjab & Haryana) is a subscription database's internal identifier, not a law-report citation.. It bears on section 246(1)(c), section 256(1) of the Income Tax Act 1961, in Appeals and Assessment & Scrutiny matters.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee was a Hindu undivided family with income from interest and house property. For assessment year 1970-71 it had invested Rs 83,042 in building a house. The Income-tax Officer had two estimates of the cost of construction before him — Rs 87,668 from the Sub-Divisional Officer, P.W.D., and Rs 1,06,846 from the income-tax inspector — and added Rs 15,000 as the assessee's unexplained investment in house property, recording that the assessee had agreed to the addition. On appeal the assessee said the construction was completed only in the year ended 31 March 1971, that the total cost was Rs 98,152, and that although he had agreed to the addition of Rs 15,000 he had not understood that it would be added to his income for assessment year 1970-71. The Appellate Assistant Commissioner accepted that and deleted the addition. The Tribunal reversed him, holding that in the absence of a rectification application and of an affidavit explaining the circumstances that misled the assessee the appeal before the Appellate Assistant Commissioner was itself incompetent, and that the cost of construction was irrelevant. At the assessee's instance the Tribunal referred two questions of law to the High Court under s.256(1).
Both questions referred were answered in the negative and against the Revenue (para 8). It cannot be held as a matter of law that the remedy of appeal provided by s.246(1)(c) cannot be availed of without first filing a rectification application, in a case where the Income-tax Officer's order shows that the assessee agreed to the addition: there is no provision in the Act barring an appeal against an order of the Income-tax Officer or of the Appellate Assistant Commissioner because the order mentions that it was passed on the assessee's agreement (para 6). Nor is an affidavit necessary in every case; where the assessee files none, the circumstances appearing on the file are to be judged on the material available. The Court was equally clear about what does not follow: if the Appellate Assistant Commissioner concludes that the order was passed on the assessee's admission and the assessee is unable to explain that the admission was wrongly recorded under some mistaken belief of fact or law, the appeal may be dismissed on the merits — what cannot be held is that no appeal is competent at all (para 6). On the second question, the Appellate Assistant Commissioner was duty bound to go into the merits of the cost of construction, and on the figures before him — the Income-tax Officer's own estimate of about Rs 1 lakh against the assessee's total of Rs 98,152 over the two years — there was no reason for the addition of Rs 15,000 (paras 6 and 7).
The Court reasoned from the appeal provision itself. Section 246(1)(c) entitles an assessee to appeal to the Appellate Assistant Commissioner where he denies his liability to be assessed under the Act, and nothing in the Act withdraws that remedy because the assessment order recites the assessee's agreement. Rectification is an additional course, not a condition: where an admission has been wrongly recorded it is open to the assessee to file a petition for rectification, but if the order is appealable it is equally open to him to avail of the remedy of appeal, and the appellate authority has then to decide the appeal on the merits. An affidavit is optional; where none is filed the appellate authority judges the circumstances on the record, and if there are sufficient circumstances on the file to conclude that the admission was not binding on the assessee he is entitled to relief in appeal. Applying that, the Court held the Tribunal had erred in law in treating the appeal as not maintainable: from the record itself the assessee had satisfied the Appellate Assistant Commissioner that the admission was made under a misapprehension that the Rs 15,000 was being added for the following assessment year, and the Appellate Assistant Commissioner was right to reverse the Income-tax Officer and, consequently, duty bound to go into the merits of the cost of construction (para 7).
There is no provision in the I.T. Act, wherein the remedy of appeal against the order of the ITO or against the order of the AAC is barred if the impugned orders make mention that the order had been passed on the agreement of the assessee.
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Handle my notice → Ask a CA on WhatsAppThe Punjab & Haryana High Court held that an assessee's agreement to an addition recorded in the assessment order does not take away the statutory right of appeal. The remedy of appeal can be availed of notwithstanding the recital of consent, because the Act contains no bar founded on agreement. This was decided by the High Court (Punjab & Haryana High Court — B.S. Dhillon J and S.S. Sidhu J) and bears on section 246(1)(c), section 256(1) of the Income Tax Act 1961. It is reported as [1979] 116 ITR 694 (Punjab & Haryana); income-tax reference under s.256(1), decided 9 November 1978. TS-5917-HC-1978(Punjab & Haryana) is a subscription database's internal identifier, not a law-report citation.. If it applies to you, the first step is this: If the assessment order says the addition was 'agreed', file the appeal anyway and deal with the recital as a merits point.
The assessee was a Hindu undivided family with income from interest and house property. For assessment year 1970-71 it had invested Rs 83,042 in building a house. The Income-tax Officer had two estimates of the cost of construction before him — Rs 87,668 from the Sub-Divisional Officer, P.W.D., and Rs 1,06,846 from the income-tax inspector — and added Rs 15,000 as the assessee's unexplained investment in house property, recording that the assessee had agreed to the addition. On appeal the assessee said the construction was completed only in the year ended 31 March 1971, that the total cost was Rs 98,152, and that although he had agreed to the addition of Rs 15,000 he had not understood that it would be added to his income for assessment year 1970-71. The Appellate Assistant Commissioner accepted that and deleted the addition. The Tribunal reversed him, holding that in the absence of a rectification application and of an affidavit explaining the circumstances that misled the assessee the appeal before the Appellate Assistant Commissioner was itself incompetent, and that the cost of construction was irrelevant. At the assessee's instance the Tribunal referred two questions of law to the High Court under s.256(1). The matter was decided on 1978-11-09 by the High Court (Punjab & Haryana High Court — B.S. Dhillon J and S.S. Sidhu J). On those facts the High Court held as follows. Both questions referred were answered in the negative and against the Revenue (para 8). It cannot be held as a matter of law that the remedy of appeal provided by s.246(1)(c) cannot be availed of without first filing a rectification application, in a case where the Income-tax Officer's order shows that the assessee agreed to the addition: there is no provision in the Act barring an appeal against an order of the Income-tax Officer or of the Appellate Assistant Commissioner because the order mentions that it was passed on the assessee's agreement (para 6). Nor is an affidavit necessary in every case; where the assessee files none, the circumstances appearing on the file are to be judged on the material available. The Court was equally clear about what does not follow: if the Appellate Assistant Commissioner concludes that the order was passed on the assessee's admission and the assessee is unable to explain that the admission was wrongly recorded under some mistaken belief of fact or law, the appeal may be dismissed on the merits — what cannot be held is that no appeal is competent at all (para 6). On the second question, the Appellate Assistant Commissioner was duty bound to go into the merits of the cost of construction, and on the figures before him — the Income-tax Officer's own estimate of about Rs 1 lakh against the assessee's total of Rs 98,152 over the two years — there was no reason for the addition of Rs 15,000 (paras 6 and 7).
The Court reasoned from the appeal provision itself. Section 246(1)(c) entitles an assessee to appeal to the Appellate Assistant Commissioner where he denies his liability to be assessed under the Act, and nothing in the Act withdraws that remedy because the assessment order recites the assessee's agreement. Rectification is an additional course, not a condition: where an admission has been wrongly recorded it is open to the assessee to file a petition for rectification, but if the order is appealable it is equally open to him to avail of the remedy of appeal, and the appellate authority has then to decide the appeal on the merits. An affidavit is optional; where none is filed the appellate authority judges the circumstances on the record, and if there are sufficient circumstances on the file to conclude that the admission was not binding on the assessee he is entitled to relief in appeal. Applying that, the Court held the Tribunal had erred in law in treating the appeal as not maintainable: from the record itself the assessee had satisfied the Appellate Assistant Commissioner that the admission was made under a misapprehension that the Rs 15,000 was being added for the following assessment year, and the Appellate Assistant Commissioner was right to reverse the Income-tax Officer and, consequently, duty bound to go into the merits of the cost of construction (para 7). In the words reproduced by the source cited on this page: "There is no provision in the I.T. Act, wherein the remedy of appeal against the order of the ITO or against the order of the AAC is barred if the impugned orders make mention that the order had been passed on the agreement of the assessee."
It was decided by the High Court on 1978-11-09 and is reported as [1979] 116 ITR 694 (Punjab & Haryana); income-tax reference under s.256(1), decided 9 November 1978. TS-5917-HC-1978(Punjab & Haryana) is a subscription database's internal identifier, not a law-report citation.. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 246(1)(c), section 256(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Both questions referred were answered in the negative and against the Revenue (para 8). It cannot be held as a matter of law that the remedy of appeal provided by s.246(1)(c) cannot be availed of without first filing a rectification application, in a case where the Income-tax Officer's order shows that the assessee agreed to the addition: there is no provision in the Act barring an appeal against an order of the Income-tax Officer or of the Appellate Assistant Commissioner because the order mentions that it was passed on the assessee's agreement (para 6). Nor is an affidavit necessary in every case; where the assessee files none, the circumstances appearing on the file are to be judged on the material available. The Court was equally clear about what does not follow: if the Appellate Assistant Commissioner concludes that the order was passed on the assessee's admission and the assessee is unable to explain that the admission was wrongly recorded under some mistaken belief of fact or law, the appeal may be dismissed on the merits — what cannot be held is that no appeal is competent at all (para 6). On the second question, the Appellate Assistant Commissioner was duty bound to go into the merits of the cost of construction, and on the figures before him — the Income-tax Officer's own estimate of about Rs 1 lakh against the assessee's total of Rs 98,152 over the two years — there was no reason for the addition of Rs 15,000 (paras 6 and 7). It arises in Appeals and Assessment & Scrutiny matters, on section 246(1)(c), section 256(1) of the Income Tax Act 1961, and was decided by Punjab & Haryana High Court — B.S. Dhillon J and S.S. Sidhu J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put on record contemporaneously - by letter to the AO - that no agreement was given, or the circumstances in which it was given, because the recital is what the Revenue will rely on. Where the agreement was given by an authorised representative rather than the assessee personally, say so: at least one bench has treated that as leaving the right of appeal untouched. Expect the Revenue to cite contrary High Court authority; address it head-on rather than assuming the point is settled. Do not assume an agreed addition automatically escapes penalty - the authorities are split on that too, so argue the penalty separately.
Still good law. A separate check on conflicting authority found the position genuinely split: Sahu & Co (Orissa), Sterling Machine Tools (Allahabad) and Ramanlal Kamdar (Madras) take the view that a matter once agreed cannot be reopened by appeal, while Chhat Mull Aggarwal (P&H) holds the statutory right of appeal survives. Practitioner commentary treats maintainability as turning on the facts of each case. That finding was checked against a published source, which is linked on this page, on 2026-08-19. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Both questions referred were answered in the negative and against the Revenue (para 8). It cannot be held as a matter of law that the remedy of appeal provided by s.246(1)(c) cannot be availed of without first filing a rectification application, in a case where the Income-tax Officer's order shows that the assessee agreed to the addition: there is no provision in the Act barring an appeal against an order of the Income-tax Officer or of the Appellate Assistant Commissioner because the order mentions that it was passed on the assessee's agreement (para 6). Nor is an affidavit necessary in every case; where the assessee files none, the circumstances appearing on the file are to be judged on the material available. The Court was equally clear about what does not follow: if the Appellate Assistant Commissioner concludes that the order was passed on the assessee's admission and the assessee is unable to explain that the admission was wrongly recorded under some mistaken belief of fact or law, the appeal may be dismissed on the merits — what cannot be held is that no appeal is competent at all (para 6). On the second question, the Appellate Assistant Commissioner was duty bound to go into the merits of the cost of construction, and on the figures before him — the Income-tax Officer's own estimate of about Rs 1 lakh against the assessee's total of Rs 98,152 over the two years — there was no reason for the addition of Rs 15,000 (paras 6 and 7).
TaxSphere, “Chhatmull Agarwal v CIT”, https://taxnotice.vittsphere.com/caselaw/case/chhatmull-agarwal-v-cit-appeal-against-agreed-addition/ (validity last checked 2026-08-19)
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