The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that voluntary deposit of tax should not be considered as admission of guilt before receiving notice under Section 148 of the Income Tax Act, 1961. Hence, the bench deleted the penalty imposed under Section 271(1) of the Income Tax Act, 1961.
Pradip Burman, the taxpayer, filed the appeal against the order of CIT(A) pertaining to assessment year 2007-08 relating to the deposit in the HSBC account.
The assessee, Pradip Burman, learned of the information and approached the ADIT, conducting his own investigation and offering to pay income tax on the purported deposit in the purported HSBC Bank account. This was in response to the CBDT receiving information about the assessee’s foreign account and income for the period pertinent to the assessment years 2006–07 and 2007–08.
Prior to receiving the notice under Section 148 of the Act, the assessee paid taxes on the income that was offered for taxation, which was US$ 40,000 in the assessment year 2006–07 and US$ 32.13 lacs in the assessment year 2007–08. During making the offer, the assessee explicitly stated that he is willing to deposit the tax on the condition that such deposit should not be considered his admission of guilt.
Thereafter the assessment was completed and levied penalty under Section 271(1) of the Income Tax Act.
It was observed by the tribunal that the accused had deposited the additional tax for the relevant assessment years much before initiation of proceedings under Section 148 of this Act, which shows that there was no possibility of revenue loss.
Furthermore, for the purposes of assessment in tax procedures, a taxpayer may resile from the position they willingly took in their income return. Therefore, just because money is offered as tax in exchange for peace does not imply that the giver has acknowledged that the money is his.
After considering facts and reviewing the records, the two-member bench of Astha Chandra (Judicial Member) and N. K. Billaiya (Accountant Member) held that voluntary deposit of tax should not be considered as admission of guilt before receiving notice under Section 148 of the Income Tax Act. M.P. Rastogi, counsel, appeared for the assessee, and Vivek Vardhan, counsel, appeared for the revenue.
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