The validity and bonafide nature of surrender declarations made under Section 133A of the Income Tax Act, and the evidentiary value of such declarations.

S. Muralidhar, J.

1. This is an appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (‘Act’) against the order dated 28th April, 2016 passed by the Income Tax Appellate Tribunal (‘ITAT’), Delhi in ITA No. 1787/Del/2014 for the Assessment Year (‘AY’) 2009-10.

2. While admitting the appeal on 22nd February, 2017 the following question of law was framed:

“Did the ITAT fall into error in holding that the surrender made by the assessee in the course of the survey and confirmed two months later in writing, was deserved to be deleted in the circumstances of the case for lack of any corroborative material?

3. The facts are that on 20th October, 2008 a survey under Section 133A of the Act was undertaken. Nearly two months later, on 18th December, 2008 by the Assessee submitted the following letter on his own before the Assistant Commissioner of Income Tax (Investigation):

“Respected Madam,

Kindly note that survey proceedings were carried out at my premises on 20-10-2008/21-10-2008 and certain records and documents were seized I have been tendering the explanations/clarifications about various documents from time to time. I hereby declare that I shall pay income tax on Estimated Income} over and above my Normal Income} of Rs. 1}2~00}000/- (Rupees One Crore Twenty Five Lacs Only) and pay income tax thereon in due course of time. This income will be as per the impounded documents} impounded computers and/or impounded record I his estimated Income shall be declared in my own individual case or any other associates concern or company in which I have interest.

This declaration may be treated as a declaration made in pursuance of proceedings under Section 133-A of the Income Tax Act} 1961.

This declaration is made voluntarily and to buy peace and avoid protracted litigation with the Income Tax Department with understanding that penalty U/s271(l) ( c ) the income Tax Act} as well as the prosecution proceedings shall not be initiated against me or any of my concern in which I have interest.”

4. However, when the Assessee filed his return of income on 26th September, 2009 for the AY 2009-10, he did not include the aforementioned amount as part of his income. He made no reference to the declaration made by him on 18th December, 2008. Nearly two years after the above declaration, the Assessee submitted the following letter dated 16th December, 2010:

“Withdrawal dated 16.12.2010 of declaration dated 18.12.2008

Sir,

Re:- In the matter of Sh. Avinash Kumar Setia withdrawal of surrender declaration made during survey operation conducted u/s 133 A of the Income Tax Act 1961

This is to inform you that during survey operation conducted u/s 133A of the Income Tax Act 1961 declaration was made vide letter dated 18/12/2008 making a surrender of Rs 1.25 crore in my Individual case as well as any other associate concern in which I had interest.

That the said declaration was made u/s 133(A) of the Income Tax Act -1961. In this connection it is submitted that letter for declaration was given to Investigation was filed to remove the pressure of the Income Tax Authorities and it does not represent true and correct picture of the affairs. Further it is also submitted that there was no incriminating documents seized/found during the course of suggesting the undisclosed income of Rs 1.25 crore in the hands of assessee. This fact is also proved from the seized documents and books of accounts regularly maintained by the assessee. Keeping this factual position into consideration and background, no such income is declared in the returns filed for A.Y. 2009-10.

Further the assessment has to be made on the basis of actual income and not on the basis of hypothetical figure. The Income Tax return for the captioned assessment year was filed based on the regular books of accounts which are already seized by the department. Accordingly facts and figures can be verified from the seized material including the books of accounts.

Further your kind attention is invited to in