2026 (2) TMI 1246 - HC - Income Tax

Voluntary admission of income during survey cannot be challenged first at the Tribunal absent foundational facts; tax upheld.

Voluntary offer of income during a survey and its subsequent declaration in the return cannot be contested for non taxability for the first time at the ... Income voluntarily offered by the assessee during survey - scope of reversion or withdrawal of income voluntarily admitted by the assessee in a duly filed return of income - chargeability of the additional income at the special rate of 60% under Section 115BBE OR taxability of the additional income per se HELD THAT:- When a return of income is selected for scrutiny, the scope of scrutiny is ordinarily confined to the verification and disallowance of claims made by the assessee. A scrutiny assessment to examine the correctness of such claims cannot be extended or enlarged to reduce the income voluntarily admitted by the assessee. The Assessing Officer is not vested with the power to reduce the admitted income. If any erroneous admission is made, the statute provides a specific mechanism to correct such an error. The assessee, however, has chosen not to avail the remedies provided under the Act. Reliance placed by assessee on the circulars is of no assistance. None of the circulars mandates the reversion or withdrawal of income voluntarily admitted by the assessee in a duly filed return of income. The various judgments relied upon do not deal with a situation akin to the present case. Those decisions were rendered in the context of admissions made during the course of a survey which were not corroborated, and it was held that such unsubstantiated admissions could not, by themselves, form the sole basis for assessment. In the case on hand, as noticed above, the return of income was filed nearly 14 months after the survey. The letter dated 29.09.2016, volunteering to offer additional income, is not the sole basis of the return of income; rather, the income was consciously declared in the return subsequently filed. It is difficult to accept the contention that even after a lapse of 14 months from the date of survey, the assessee continued to be under coercion or pressure while offering the additional income. Assessee had the statutory opportunity to revise the return under Section 139(5) of the Income-tax Act, which was not availed. Significantly, the letter dated 29.09.2016 was never retracted. Apart from this, as observed hereinabove, no claim was made before the Assessing Officer seeking exclusion of the additional income. Even in the appeal before the CIT(A), no such contention was raised. On the contrary, throughout the proceedings, the assessee consciously canvassed that the additional income be taxed at the normal rate instead of the special rate of 60% under Section 115BBE of the Act. Such conduct clearly demonstrates that the assessee entertained no doubt regarding the taxability of the additional income voluntarily and consciously offered in the return of income after due verification. We further find no justifiable grounds to support the contention that the additional income offered was not based on evidence. In the case of admitted income, it is not for the Assessing Officer to establish the evidentiary basis thereof. The income is admitted by the assessee on the basis of self-assessment, and such burden cannot be shifted to the Assessing Officer. The findings recorded by the Tribunal are based on the facts of the case and constitute findings of fact - Appeal of assessee dismissed. Issues: (i) Whether the Tribunal was correct in upholding the taxation of the sum of Rs. 1,14,20,100/- voluntarily offered by the assessee during survey and declared in the return, and in refusing to entertain for the first time before it a plea that the admitted sum was not taxable.Analysis: The Court noted that a survey under Section 133A was conducted and the assessee voluntarily offered Rs. 1,14,20,100/- by letter dated 29.09.2016 and subsequently declared that amount in the return filed on 20.11.2017. The statutory framework permits revision of returns under Section 139(5) and confines limited scrutiny to the matters for which selection is made. The Tribunal has discretion under Section 254 to entertain new grounds of law if foundational facts are on record; however, where the contention raised for the first time before the Tribunal involves mixed questions of fact and law and foundational facts were not placed before the lower authorities, the Tribunal cannot adjudicate the matter on merits. The Court observed that the assessee neither retracted the admission nor revised the return, paid tax on the declared amount, and did not challenge the taxability of the admitted amount before the Assessing Officer or the Commissioner (Appeals), who was only asked to examine applicability of Section 115BBE. The Court further noted that allowing the assessee to challenge the admitted income at the Tribunal stage, in the absence of foundational facts and without availing statutory remedies, would undermine the finality of admissions in returns.Conclusion: The Tribunal's decision upholding taxation of Rs. 1,14,20,100/- and declining to entertain the plea of non-taxability raised for the first time before it is justified; the appeal is dismissed and the assessment confirmed in that respect.