Voluntary concession of undisclosed income binds assessee; ITAT upholds additions in search assessment u/s 143(3) r.w.s.153A

The ITAT Bangalore dismissed the assessee's appeal arising from assessment u/s 143(3) r.w.s. 153A following a search. During assessment, the assessee had, by a written letter, voluntarily conceded 80% of certain expenditure as undisclosed income in addition to 20% earlier offered, and expressly agreed to pay tax thereon. The Tribunal held that such a suo motu concession, based on documents found during search, is binding and cannot be resiled from in subsequent appellate proceedings. Reliance on CBDT Circular No. 14(XL-35)-1955 was rejected as inapplicable on these facts, and the additions were sustained.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether income voluntarily conceded by the assessee during assessment proceedings, through a written communication to the Assessing Officer, can be challenged or withdrawn at a later appellate stage or in subsequent proceedings.

1.2 Whether CBDT Circular No. 14 (XL-35) of 1955, regarding the Department not taking advantage of an assessee's ignorance, is applicable to undo or disregard such voluntary concession of income.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Effect of voluntary concession of income during assessment proceedings

Interpretation and reasoning

2.1 The Tribunal noted that during the first search proceedings, cash payments were found and 20% of such cash payments was initially offered as income by the assessee. Subsequently, during the course of assessment proceedings, by letter dated 22.12.2017, the assessee further conceded and offered the balance 80% of the expenditure as income, thus suo motu enhancing the taxable income.

2.2 The Assessing Officer completed the assessment on the basis of this written concession and included the conceded amount in the assessed income. The same income was again reflected in the computation filed pursuant to the later search and consequent proceedings.

2.3 The Tribunal accepted the submission of the Departmental Representative that the assessee had conceded the income on his own choice, in writing, without any pressure from the Department, and that such concession formed the basis of the assessment order.

2.4 The Tribunal held that once the assessee has, during the assessment proceedings, consciously and voluntarily conceded an addition and offered the amount as income by a written letter to the Assessing Officer, the assessee cannot subsequently challenge that addition at a later stage or in appellate proceedings.

Conclusions

2.5 The addition arising from the assessee's written concession of income during assessment proceedings is binding on the assessee and cannot be withdrawn or contested in later stages. The assessment made on the basis of such concession is valid.

Issue 2: Applicability of CBDT Circular No. 14 (XL-35) of 1955

Interpretation and reasoning

2.6 The assessee relied on CBDT Circular No. 14 (XL-35) of 1955 to contend that the Department should not take advantage of the assessee's ignorance and should not assess a higher income than legally due.

2.7 The Tribunal examined this contention with reference to the factual matrix that documents were found during search, 20% of related cash payments was initially offered by the assessee, and the remaining 80% was later offered as income through a specific written letter dated 22.12.2017, wherein the assessee expressly conceded to the addition and to payment of tax.

2.8 On these facts, the Tribunal held that the CBDT Circular was not applicable because the assessee's conduct was not a case of the Department exploiting ignorance; instead, it was a conscious, written concession of income based on documents found in search and voluntarily offered in assessment proceedings.

Conclusions

2.9 CBDT Circular No. 14 (XL-35) of 1955 does not assist the assessee in retracting or disputing a clearly recorded and voluntary concession of income made in writing during assessment proceedings. The Department is entitled to rely on such concession, and the assessee's grounds based on the Circular were rejected.

2.10 In consequence of the above findings, all grounds raised by the assessee were rejected and the appeal was dismissed.

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