By TIOL News Service

NEW DELHI, MAY 05, 2017: THE ISSUE BEFORE THE COURT IS - Whether retraction made by assessee in his declaration after two years so as to negate the surrender which was made voluntarily post survery u/s 133A, can be treated as bonafide, for purpose of deleting the additions made to assessee's income on basis of such voluntary declaration. NO is the verdict.

Facts of the case:

The Assessee is an individual. During the subject year, a survey u/s 133A was undertaken in the premises of assessee. Nearly two months later, the Assessee submitted a letter on his own before the Asst CIT (Investigation) declared that, assessee will pay all the taxes applicable on an estimated basis, the basis be on the seized documents and things. When the Assessee filed his return of income for the AY 2009-10, he did not include the amount mentioned in his declaration as he made post survey u/s 133A as part of his income. Assessee withdrew the declaration he had made post survey on the ground of pressure or coercion after two years of survey had goneby. AO proceeded to pass the assessment order and added the sum of Rs. 1.25 crores as mentioned in declaration to the Assessee's income as undisclosed income. The AO reasoned that "to presume pressure or coercion even after 2 months was against the common sense. As per AO, it would be possible that after having made surrender they had manipulated their accounts so as to negate the surrender which was voluntarily made".

On appeal, the HC held that,

++ there was no statement of the Assessee recorded during the survey under Section 133A of the Act. 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 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 resiled 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 was not a retraction at all in the eyes of law. The Court was not satisfied that the retraction made by the Assessee two years after the declaration was bonafide. There was no satisfactory explanation for not including the said amount in the return of income filed by the Assessee. There was no justification whatsoever for the ITAT to have deleted the additions made by the AO which were upheld by the CIT(A).

(See 2017-TIOL-847-HC-DEL-IT)