In a recent ruling the division bench of the Delhi High Court upheld an addition made under the Income Tax Act by holding that the same is justifiable when assessee voluntarily admits Tax Liability during the course of proceedings and later refuses to pay tax.
Search under section 133A of the Income Tax Act was conducted on the premises of the assessee. During the course of search, assessee admitted his tax liability. After two months of search, he made a written submission to the department admitting his liability and sought for time to clear the dues. After two years, assessee filed his return and refused to admit the tax liability on the disputed income discovered during the search. Consequently, AO made addition which was later confirmed by the first appellate authority. However, the ITAT deleted the addition for want of any corroborative material.
The bench noticed that “as observed by the CIT(A), the Assessee voluntarily made a declaration two months after the survey. There was absolutely no compulsion on the Assessee to make such a declaration. The Assessee waited for two years to resile from the said declaration. The submission of learned counsel for the Assessee that since he had filed a return on 26th September, 2009 without disclosing the sum of Rs. 1.25 crores, he should be deemed to have reasiled from the said declaration cannot be accepted. The retraction in writing happened only on 16th December 2010. It was much too delayed to be taken to be bonafide. The circumstances under which the retraction was made has also not been explained. The Court finds that the above retraction, without any explanation whatsoever, and without mentioning the offer of surrender of Rs.1.25 crores made earlier on 18th December, 2008 is not a retraction at all in the eyes of law. The above decision of this Court, therefore, does not come to the assistance of the Assessee.”
Dismissing the appeal, the division bench comprising of Justice S.Muralidhar and Justice Chander Shekhar observed that the retraction made by the Assessee two years after the declaration was bonafide. Further, it was pointed out that there was no satisfactory explanation by the assessee for not including the said amount in the return of income filed by the Assessee on 26th September, 2009. Accordingly, the ITAT order deleting the addition was overruled.
Read the full text of the Order below.
