Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2024 Supreme(Online)(ITAT) 3957

INCOME TAX APPELLATE TRIBUNAL (CHANDIGARH BENCH)
PARESH M. JOSHI, JM, VIKRAM SINGH YADAV, AM
Headmasters Saloon Pvt. Ltd. – Appellant
Versus
Revenue – Respondent
Income Tax Appeal No. 111/Chd/2020

Advocates:
For the Appellants/Petitioners:Shri Tejmohan Singh, Advocate
For the Respondents: Shri Manpreet Duggal, JCIT, Sr. DR

Admissions made during survey do not absolve tax liabilities unless effectively retracted; the burden lies on the assessee to prove any retraction of such admissions is valid and justifiable.

Headnote:(A) Income Tax Act, 1961 - Sections 133A, 143(1), 143(3), and 250(6) - Income assessment - The appeal by the assessee company against the CIT(A)'s order sustaining the addition of Rs. 1,02,00,000/- was analyzed. The court noted that voluntary surrender of income was made during a survey, but the assessee failed to declare the surrendered income in their tax return, leading to the addition by the Assessing Officer (AO). The court asserted that mere panic-induced admissions do not absolve the assessee from tax liabilities if the surrender is not retracted. The crucial distinction between statements made during section 133A surveys and statements during section 132(4) examinations was discussed, highlighting that the burden of proof to refute any admissions rests with the assessee. The impugned order was set aside and remitted back for re-evaluation concerning all issues and relevant materials. (Paras 1-54)

Facts of the case:
The assessee, engaged in salon operations under the name “HEADMASTERS WELLNESS ZONE,” voluntarily surrendered Rs. 1,35,00,000/- when assessed under sections 143(3) and 133A after discrepancies were identified. The return filed reported an income of Rs. 34,27,130/-, thereby failing to honor the surrender made.

Findings of Court:
The court determined that the AO's addition of Rs. 1,02,00,000/- due to the recorded discrepancies was consistent with the evidence gathered, emphasizing the necessity of proper investigation into surrendered income vis-à-vis the corresponding documentation.

Issues: The main issue was the reliance on a surrender letter and the adequacy of recorded statements concerning additional income and discrepancies identified during the survey.

Ratio Decidendi: The court ruled that the evidence and admissions made during the survey proceedings hold substantial weight, necessitating the assessee to provide counter-evidence if they retract from such admissions. The case was remitted for a comprehensive review of discrepancies and corroborative documentation, stressing the empirical nature of tax assessment.

Result: Appeal allowed for statistical purposes, with the impugned order set aside and remitted for re-evaluation.

Table of Content
1. overview of the factual background (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10)
2. details of the income declaration discrepancy (Para 11 , 12 , 13 , 14 , 15 , 16)
3. arguments concerning voluntary income surrender (Para 17 , 18 , 19)
4. court's analysis of legal precedent on admissions (Para 20 , 21 , 22)
5. assessment of the consequences of the surrender (Para 23 , 24 , 25)
6. discussion on section 40a(3) and its implications (Para 26 , 27 , 28)
7. arguments and responses during hearings (Para 29 , 30 , 31)
8. court's conclusions and statutory provisions (Para 32 , 33 , 34)
9. court's directive for the assessment process (Para 35 , 36 , 37)
10. final decision and remand for reassessment (Para 38 , 39)

आदेश Order /

PER PARESH M. JOSHI, J.M. :

This is an appeal filed by the assessee Headmasters Saloon Pvt. Ltd. who are aggrieved by an order dt. 19/12/2019 (passed in Appeal No. 10577/16-17) of Ld. CIT(A) in terms of Section 250 (6) of the Income Tax Act, 1961 which is hereinafter referred to as the “impugned order”. The present second appeal is filed in terms of Section 253 of the Act. The relevant Assessment Year is 2014-15 corresponding to previous year 01/04/2013 to 31/03/2014.

FACTUAL MATRIX

2. The assessee company is in the business of Saloon. They operate with Brand Name “HEADMASTERS WELLNESS ZONE”.

3. The assessee filed return of income for the A.Y. 2014-15 declaring a taxable income of Rs. 34,27,130/-.

4. The return was processed under section 143(1) and subsequently the case was selected for scrutiny.

5. Statutory notice under section 143(2) was issued on 07/09/2015 which was duly served on the assessee.

6. Subsequently, questionnaire alongwith statutory notices under section 142(1) and 143(2) was issued on 06/06/2016. In response to the said notices Shri Kapil Khanna, Advocate attended the assessment proceedings from time to time and furnished the requisite details.

7. The brief facts prior to the aforesaid are that a survey operation under section 133A of the Income Tax Act, was carried out at the business premises of the assessee on 04/03/2014.

8. During the course of survey operation an amount of Rs. 45.00 lakhs was voluntarily surrendered as and by way of additional tax liability, by the assessee.

9. The relevant extract of the surrender letter is reproduced below as under:

“ March 5 2014

The Commissioner of Income Tax Chandigarh, Dear Sir, Subject: Advance Income Tax There was a survey carried at out premises u/s 133A of Income Tax Act, 1961 on 4^th and 5^th March 2014 While carrying at the survey, there were certain looses documents were found at our premises. While scrutinizing those documents, we observed that certain Income needs to be booked over and above, already capture in the books of accounts. Considering the additional Income, which needs to be booked we worked out tax liability of Rs. 45 lacs, which need to be deposited.

We are pleased to deposit the same as per the following details: Cheque No. Date Amount(Rs.) 066991 15.02.2014 Rs. 10,00,000 066692 20.03.2014 Rs. 10,00,000 066693 25.03.2014 Rs. 10,00,000 066694 31.03.2014 Rs. 15,00,000 Thanking You For Headmaster Saloon Private Limited Veer Kaul (Director)

The copy of surrender letter dt. 05/03/2014 not in the paper book filed.

10. On a perusal of the aforesaid surrender letter it is seen that the surrender of income of Rs. 1,35,00,000/- (45,00,000/- x 3) was made in the hands of the assessee on account of discrepancies found.

11. Since the surrender was made voluntarily and it was made for the assessment year 2014-15 relevant to the Financial Year 2013-14, therefore the assessee was required to file his income tax return and voluntarily declare the surrendered income of Rs. 1,35,00,000/- alongwith the normal income and accordingly pay the due taxes thereon.

12. However, on the perusal of the income tax return of the assessee, it was seen that the assessee had declared an income of Rs. 34,27,131/- only. Thus the surrendered income of Rs. 1,35,00,000/- on

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2024 Supreme(Online)(ITAT) 3957

INCOME TAX APPELLATE TRIBUNAL (CHANDIGARH BENCH)PARESH M. JOSHI, JM, VIKRAM SINGH YADAV, AMHeadmasters Saloon Pvt. Ltd. – AppellantVersusRevenue – RespondentIncome Tax Appeal No. 111/Chd/2020

Admissions made during survey do not absolve tax liabilities unless effectively retracted; the burden lies on the assessee to prove any retraction of such admissions is valid and justifiable.

INCOME TAX APPELLATE TRIBUNAL (CHANDIGARH BENCH)
PARESH M. JOSHI, JM, VIKRAM SINGH YADAV, AM
Headmasters Saloon Pvt. Ltd. – Appellant
Versus
Revenue – Respondent
Income Tax Appeal No. 111/Chd/2020