Dismissing the appeal of the assessee and confirming the addition made by the Tribunal , the court held that a rosy picture as to the financial position of the applicant seeking credit facilities from a bank would be presented before the bank for the bank to assess the creditworthiness of the applicant and the desirability of extending credit facilities to such applicant; but later another balance sheet and profit and loss accounts would be slipped into the file, possibly indicating a less robust financial position of the constituent. If such was the object on the exercise, to which the chartered accountants appear to have been a willing accomplice, the assessee has been appropriately dealt with by the fora below. The balance sheet and profit and loss accounts of an assessee accompanied by a certificate as to its fairness, notwithstanding the caveat as noticed in paragraph 2(A) thereof, cannot be tailor-made to suit a particular purpose or window-dressed to make it attractive for bankers to rely thereupon and all the gloss and sheen removed thereafter when it was the time to pay tax. The doctrine of pari delicto would apply and preclude the appellant herein from detracting from the figures contained in the balance sheet and profit and loss accounts certified on 18-7-2005 at any subsequent stage. When the assessee presented the financial position as in the balance sheet of 18-7-2005, the assessee could no longer resile from such position. It was then open to the Assessing Officer and the income tax authorities to pin the assessee down on the basis of the assessee’s representation contained in the earlier balance sheet and the reasoning indicated in paragraph 2(A) by the Appellate Tribunal does not call for any interference. Indeed, the Appellate Tribunal may only be faulted for not reporting the chartered accountants to the Institute of Chartered Accountants for having apparently abetted in the commission of a colossal act of misrepresentation which the appellant assessee undertook before his bankers for the purpose of obtaining credit facilities by indicating a financial position that was not warranted by the books of the assessee.
Binod Kumar Agarwala v. CIT (2018) 257 Taxman 58/ 303 CTR 406/ 167 DTR 433 /( 2019) 411 ITR 493 (Cal)(HC)
S.143(3): Assessment – Balance sheet and profit and loss account certified by a chartered accountant in Form 3CB in accordance with rule 6G(1)(b) for obtaining loan from bank- AO is justified in making the additions on basis of window dressed financial statement to make it attractive for bankers to rely thereupon and all gloss and sheen removed thereafter when it was time to pay tax – The doctrine of pari delicto would apply and preclude the appellant herein from detracting from the figures contained in the balance sheet and profit and loss accounts certified on 18-7-2005 at any subsequent stage-Appellate Tribunal may only be faulted for not reporting the chartered accountants to the Institute of Chartered Accountants for having apparently abetted in the commission of a colossal act of misrepresentation which the appellant assessee undertook before his bankers for the purpose of obtaining credit facilities by indicating a financial position that was not warranted by the books of the assessee. [S.44AB , R. 6G]