By TIOL News Service

HYDERABAD, FEB 04, 2014: THE issues before the Bench are - Whether voluntary admission of income by the assessee can be considered as a valid piece of evidence and Whether in case an assessee accepts the tax liability on its own, there is no need to collect further evidence or making any enquiry. And the verdict goes against the assessee.

Facts of the case

The assessee is a company. During assessment, AO made an assessment on the basis of voluntary statement made by the MD of assessee. In that statement, it was admitted that certain defects persist in maintenance of expense vouchers. The payments were not properly recorded. Taking into account the above deficiencies, which were not deliberate and to cover up any other omissions and commissions, assessee voluntarily offer Rs.20.00 lakhs as additional income in respect of training and development divisions of the company and EOU division of the company. The fact shows that at the time of assessment, assessee had not retracted the aforesaid admission making voluntary disclosure. Even the assessee on the basis of the assessment had paid the tax and after that an appeal was preferred before CIT(A), in which assessee had made out any case that the aforesaid admission was not made voluntarily and it was made by mistake or anything else. It appears from the record that only the Revenue's counsel took up the factual point, which was not stated in the grounds of appeal, that the aforesaid admission was recorded under mistaken belief of fact and law.

It was observed by the CIT(A), that before going into the legal intricacy whether income offered during the course of survey can be agitated before the appeal proceedings or not, I want to state that an addition made by the AO should stand on its own legs irrespective of the fact whether it is accepted or not accepted by the assessee. I agree that in this case, the MD of the appellant-company had offered a sum of Rs.20 lakhs at the time of survey. It is also a fact that he has not disputed the same during the course of assessment proceedings. It is also a crucial fact that the appellant had even paid taxes on the income offered. But can he sustain an addition only on the basis of admissions and acquiscences, particularly, when the appellant has gone back on the admission The answer is an emphatic "No" as, if an addition can be made on the basis of admission, the same has to be deleted on the basis of retraction.

Held that,

++ we fail to understand from where the case of retraction has been discovered by the CIT(A) when the appellant has not stated in the grounds of appeal before it that it has retracted. Notwithstanding above, the counsel before us very strenuously argues that there has been retraction of admission before the CIT(A) and the Commissioner has taken into consideration of the same. Therefore, the Tribunal should not have set aside the order of the Commissioner, but at the most it should have remanded the matter. According to him, the CIT(A) has extensive power and he has rightly exercised the same. We are of the view that the argument of the counsel is absolutely misplaced on fact as before the CIT(A) there was no case of retraction. Factually, he perhaps noted oral arguments of the lawyer. According to us, it is not permissible under law as retraction of admission is purely a matter of fact, which must be made available before the Court of law or Tribunal, which then can consider the same. It is settled position of law that admission is a very important piece of evidence, unless it is explained or retracted. Here the assessee has not made any attempt to explain before the CIT(A) suggesting not to accept the same. Here instead of retracting the assessee called upon to act upon the same to pass assessment order and accordingly it was done and the tax was duly paid. We fail to understand why challenge should be made at a later stage;

++ the counsel thereafter argues that the admission cannot be looked into under the law, as it is a material collected during the period of survey and this is not a valid piece of evidence. We think there must be distinction between the admission and the evidence collected during the course of survey. This is a voluntary act of the assessee and if the assessee accepts the liability, there is no point or scope to collect further evidence or making any enquiry. Here exercising of power by the Commissioner was not called for. Exercise of power evaluating legal implication of admission was not called for because no case was made out factually. Therefore, the decisions cited by the counsel for the appellant before us are absolutely inappropriate. Hence, we ignore all these decisions. The Tribunal has taken a correct decision and we are constrained to comment on the decision taken by the CIT(A), even basing on his own recording that the same is without any factual basis and further unsupported by law. When a case is not made out before the Commissioner, he should not have made out so to say his own case basing on a lawyer's argument. A lawyer cannot improve the case of the litigant on fact unlike in case of law. Such an act is without jurisdiction. The appeal is accordingly dismissed. We are of the view that for filing such a frivolous appeal an exemplary cost has to be imposed. Accordingly, we impose costs estimated at Rs.10,000/- (Rupees Ten thousand only), to be paid by the appellant to the A.P. Legal Services Authority within a period of two weeks from date.

(See 2014-TIOL-138-HC-AP-IT)