2014 (1) TMI 877 - AT - Income Tax

Deletion made on account of Interest income Held that - The decision in B And A Plantations And Industries Ltd. Versus Commissioner Of Income-Tax 1999 (12) TMI 43 - GAUHATI High Court followed - there is no provision in IT Act empowering the ITO to include in the in the income of the assessee, interest which was not due or collected The AO should have examined the books of account and should have given specific finding that the assessee has charged more interest - there would have been any complication in the matter or the AO could not have examined the books of account, the proper course is provided in the Act for referring the matter for special audit - the AO did not examine the books of account in detail before arriving at the finding of charging of lower interest and also did not refer the matter for special audit - If the AO was of the view that the assessee has suppressed the interest, he should have given specific finding of fact and should have brought some material on record to justify his findings - even the book results of the assessee have not been rejected u/s.145(3) of the IT Act - the AO has merely estimated notional interest, which was not due or received by the assessee Decided against Revenue.

Summary

Issues:
1. Addition of interest income challenged by the department.
2. Justification of the addition by the Assessing Officer.
3. Decision of the Commissioner of Income Tax (Appeals) regarding the addition.
4. Arguments presented by both parties.
5. Analysis of the findings and submissions.
6. Legal provisions and case laws considered.
7. Final decision and dismissal of the appeal.

Issue 1:
The appeal concerned the department challenging the deletion of an addition of Rs.2,96,22,000 made on account of interest income for the assessment year 2009-10.

Issue 2:
The Assessing Officer (AO) found that the assessee, a Co-operative Bank, had suppressed interest income from advances. The AO estimated the interest income and made the addition as the assessee did not provide a detailed break-up of the interest received on different types of advances.

Issue 3:
The Commissioner of Income Tax (Appeals) deleted the addition after considering the explanations and material on record. The CIT(A) found the AO's addition to be based on mere conjectures and surmises, without concrete evidence or proper examination of the books of account.

Issue 4:
The department argued that the AO's estimate of income should not have been deleted as the assessee failed to furnish desired details. The assessee's counsel reiterated that all accounts were audited as per banking regulations, and the addition was made without a proper basis.

Issue 5:
The Tribunal considered the submissions and findings of the authorities. It noted that the AO did not point out specific defects in the books of account or the audit report. The Tribunal emphasized that if the AO suspected suppression of interest, a detailed examination or special audit should have been conducted before making such an addition.

Issue 6:
Referring to legal provisions and case law, the Tribunal cited that there is no provision empowering the AO to include interest not due or collected in the income of the assessee. The Tribunal highlighted the importance of proper examination of books of account and specific findings before alleging suppression of interest income.

Issue 7:
Ultimately, the Tribunal dismissed the appeal, upholding the CIT(A)'s decision to delete the addition. The Tribunal found no concrete material to support the department's appeal and concluded that the AO's estimation of notional interest without proper investigation was unjustified.

In conclusion, the Tribunal dismissed the appeal, emphasizing the necessity of concrete evidence and proper examination before alleging income suppression, especially in cases involving interest income from advances.