The Delhi bench of the Income Tax Appellate Tribunal (ITAT) recently deleted an addition made on undisclosed income and observed that notional interest cannot be taxed as income.
The assessee,Sh. VikramDhirani had the main sources of income as salary, house property, and capital gains. A search took place on M/s. Dhirani group of cases on 28th July, 2011.
A notice was issued on requiring assessee to file the return for the relevant assessment years. Assessee filed the returns. In the assessment year 2007-08, assessee was found to have not disclosed an HSBC Bank account at Dubai.
Assessing officer observed that the said account had balanced of 19,15,148 Euros in April, 2006 and applying a conversion rate of Rs. 62 it was treated as undisclosed income of the assessee for the F.Y. 2006-07 relevant to A.Y. 2007-08.
Assessing officer also added to the income, interest income on the credit balance up to 31st March, 2007 @ Rs. 4% per annum at Rs. 43,53,770/-.Thereafter, as a consequence to addition made in assessment year 2007-08 as above, addition of interest income on the credit balance was made in the subsequent assessment years 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13.
In appeal CIT (A) had deleted the additions on the interest income in the said account on a notional basis. In the assessment year 2009-10 additions were made by assessing officer in the hands of assessee with regard to cash deposits appearing in the account of Aditya Dhirani (son of assessee) in the account of Bank of America. Ld. CIT (A) deleted the same.
In regard to A.Y. 2009-10 an addition of Rs. 1,65,900/- was made in the hands of assessee on the basis of purchase of 2 split air conditioners for cash which was also deleted by CIT(A).
In regard to assessment year 2010-11, Assessing officer had made additions in the hands of assessee for unexplained cash deposits in the bank account of Aditya
Dhirani, son of the assessee which were deleted by the CIT(A).
In regard to A.Y. 2011-12, assessing officer had made additions in the hands of assessee on account of cash deposits appearing on account of Ms. Natalia Dhirani, daughter of the assessee in bank account with Bank of America.
Addition was also made on account of unexplained source of expenditure of reimbursement expenses which assessee had incurred on account of sale of a flat. These two additions were also deleted by the CIT(A). An addition was also made on account of cash deposits in the account of son, the same was also deleted by CIT(A).
In assessment year 2012-13, assessing officer had made addition in hands of assessee’s own account of cash deposits in the foreign bank accounts of sonAditya Dhirani and Daughter NetaliaDhirani. Further, an addition of Rs.10,80,000/- was made on account of unexplained transfer of 24,000 US dollars to the children Aditya Dhirani and Natalia Dhirani by one RavinderBahal, relative of the assessee with help of a friend Mr. Raj Kapoor. These additions were also deleted by CIT(A).
The Revenue was in appeal for AY 2008-09 to 2012-13 challenging the various deletions by CIT(A) and the assessee was in appeal against order of CIT(A) for the quantum of addition for the base year 2007-08.
Counsel for the assessee argued that it was pen drive which was received allegedly from the French Govt., in the absence of link evidence, the same is not admissible. It is submitted that the print out from this Pen Drive is not a bank account statement.He specifically pointed out there is no stamp, letterhead, signatures upon these so called statement and no recovery of anyincriminating material during the search.
The counsel for the revenue submitted that the information in the Form of the bank statement reflected all the necessary inputs required to establish that the bank account was opened and operated by the assessee VikramDhirani.
The issues were to be determined are the admissibility of information received from the French authorities and there was any other material of inculpatory nature found during search and any incriminating material antecedent to the search itself on the basis of assessment.
The bench consisting of Anil Chaturvedi (accountant member) and AnubhavsSharma(judicial member) observed that what was received from French authorities was merely information in a pen drive. No provision under the Income Tax Act attaches any presumption of truth to the contents of such information received from the Competent Authority under Exchange of Information framework of DTAC/DTAA between India and France.
The assessments for the said years had become final prior to the date of search and there was no incriminating material found during the course of search to support and substantiate the said addition. Further added that there was also no error in CIT(A) holding that it is settled law that notional interest cannot be taxed as income. The appeal of the assessee got allowed in result.
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