ADESH TYAGI,UTTAR PRADESH vs. ITO, GHAZIABAD

After hearing the rival contentions, I find that as far as the opening balance is concerned, the assessment of the earlier assessment year was reopened and the claims of the assessee was accepted. Order was passed u/s 143(3) read with section 148 of the Act on 25.2.2014. Thus, the opening balance cannot be added. Coming to the surrender made by the assessee, I find that this is a conditional surrender. The assessee, in his detailed reply dated 27.12.2011, explained the sources of cash deposit made during the year. It was submitted that the assessee was having sufficient cash in hand at the beginning of the year amounting to Rs.22,36,415/-. As already stated, this opening balance was explained by filing the financial statement as well as the assessment order for the assessment year 2008-09. The assessee, in his detailed explanation, had explained monthwise, the cash deposits made in the savings bank account along with the corresponding sources. This explanation runs into ten pages. Cash memos with regard to the sales made of MS BARS was also furnished. The AO has not pointed out any defect or discrepancy in these details submitted by the assessee. The entire addition was based on the conditional surrender made by the assessee.

The AO did not honour the condition of not levying penalty and went ahead and issued notice for levying penalty u/s 271(1)(c). The AO, in my view, should have entirely rejected the offer of the assessee and gone ahead with his finding based on evidence or, in the alternative, desisted from initiating penalty proceedings. In this case, the AO chose to accept only a part of the statement. This, in my view, is not correct.

The Hon’ble Supreme Court in the case of Narayanan Vs. Gopal AIR 1960 SC 235, has held that if an admission or surrender made by the assessee is shown to have been impelled by the mistaken belief or misunderstanding, etc., the same cannot act as an estopple. In the case of Asit Kumar Ghosh Vs. CIT 24 ITR 576 (Cal) and in Mathuraprasad & Sons vs. State of Punjab (1962) 13 STC 280 (SC), it is held that an admission made is only a piece of evidence and cannot by itself be a cause of action and that an amount cannot be assessed merely on admission. The worth of the admission has to be considered along with other material. In the case of CIT vs. Bharat General Insurance Company Ltd., 81 ITR 303 (Del), it is laid down that even if the assessee shows income in his return, the Income-tax Officer cannot assess it merely on that account and has to consider the taxability of the amount de-hors the said admission.

As the submissions of the assessee vide letter dated 27.12.2011 were not factually controverted by any of the authorities, the addition made merely on the ground of disclosure cannot be sustained. The assessee has explained the source of each deposit with evidence and the AO has not found any fault in the claim made by the assessee. No defects were pointed out. Hence, the addition in question is hereby deleted.

In the result, the appeal of the assessee is allowed.