2014 (12) TMI 796 - AT - Income Tax

Deduction of addition of NSC maturity Held that - CIT(A) while granting partial relief to the assessee has given a finding that the amount was invested by cheque from the bank account maintained with Federal Bank and thus the source of investment has been established - with respect to taxing of interest of 54,072/- he has noted that such interest was not reflected in assessee s return of income of earlier years - the interest is considered to have been rightly taxed - revenue has not brought any material to controvert the finding of CIT(A) the order of the CIT(A) is upheld Decided against revenue. Interest income from various saving bank accounts deleted Held that - CIT(A) has noted that the interest from bank aggregating to ₹ 5,89,197/- has already been offered to tax and the shortfall was to the extent of ₹ 64,304/- as against the difference of ₹ 4,07,238/- worked by the AO - the addition to the extent by ₹ 64,304/- is upheld - revenue has not placed any material on record to controvert the findings of CIT(A) thus, the order of the CIT(A) is upheld Decided against revenue. Deletion of addition on interest of HDFC bonds Held that - CIT(A) while granting relief to the assessee has noted that assessee had offered for taxation interest on HDFC bonds on the basis of calculation of simple interest at 8% amounting to ₹ 10,40,000/- whereas as per terms and conditions of the bonds, the interest was on cumulative basis - CIT(A) has further given a finding that as against the interest of ₹ 12,81,981/- worked out by the AO, assessee had offered for taxation interest on HDFC bonds of ₹ 10,40,000/- and therefore addition of only differential amount of ₹ 1,78,981/- was upheld - revenue has not placed any material on record to controvert the findings of CIT(A) thus, the order of the CIT(A) is upheld Decided against revenue. Deletion of addition accrued interest u/s. 64(2) Held that - CIT(A) while deleting the addition rightly noted that provision of section 64 were not applicable - no material has been placed on record by the Revenue to controvert the findings of CIT(A) and there is no reason to interfere with the order of CIT(A) Decided against revenue. Deletion of addition of ₹ 19,22,500/- on account of received from family members Held that - CIT(A) has given a finding that the interest of ₹ 19,22,500/- accrued on loans given by the assessee was formed part of the income of ₹ 85.05 lacs that was offered by Assessee to tax and thus the amount was already offered to tax - revenue has not brought any material on record to controvert the findings of CIT(A) - there is no reason to interfere with the order of CIT(A) Decided against revenue.

Issues Involved:
1. Deletion of addition on account of NSC maturity treated as unexplained investment under Section 69 of the IT Act.
2. Relief granted on addition made on account of interest income from various savings bank accounts.
3. Relief granted on addition made on account of interest from HDFC bonds.
4. Deletion of addition on account of accrued interest income under Section 64(ii) of the IT Act.
5. Deletion of addition on account of interest received from family members.
6. Assessee's Cross Objection regarding interest component of NSC and levy of interest under Section 234B of the IT Act.

Detailed Analysis:

1. Deletion of Addition on Account of NSC Maturity:
The AO added Rs. 60,000 as unexplained investment under Section 69 of the IT Act, noticing that the assessee did not declare the NSC investment in earlier years. The Ld. CIT(A) found that the investment was made via cheque from the assessee's bank account, establishing the source of investment, and thus deleted the addition. However, the interest accrued on NSC, amounting to Rs. 54,072, was rightly taxed as it was not reflected in earlier returns. The Tribunal upheld the Ld. CIT(A)'s decision, finding no reason to interfere.

2. Relief on Addition of Interest Income from Various Savings Bank Accounts:
The AO added Rs. 4,70,238 as understated interest income. The Ld. CIT(A) found that the assessee had already offered Rs. 5,89,197 for tax, leaving a shortfall of Rs. 64,304. Thus, the addition was reduced to Rs. 64,304, granting relief of Rs. 3,42,934. The Tribunal upheld this decision, as the Revenue could not provide contrary evidence.

3. Relief on Addition of Interest from HDFC Bonds:
The AO added Rs. 12,81,981 as accrued interest on HDFC bonds. The Ld. CIT(A) found that the assessee had already offered Rs. 10,40,000 as simple interest for tax, and only the differential amount of Rs. 1,78,981 should be added. The Tribunal upheld this decision, noting that the Revenue failed to provide contrary evidence.

4. Deletion of Addition on Account of Accrued Interest Income under Section 64(ii):
The AO added the differential interest of Rs. 4,84,434, applying Section 64(2) as the assessee had transferred funds to his wife without adequate consideration. The Ld. CIT(A) held that Section 64(ii) and Section 64(iv) were not applicable, as the investment in bonds was not envisaged under Explanation 3 for clubbing purposes. The Tribunal upheld this decision, finding no reason to interfere.

5. Deletion of Addition on Account of Interest Received from Family Members:
The AO added Rs. 19,22,500 as interest income not declared by the assessee. The Ld. CIT(A) found that this interest was already included in the Rs. 85.05 lakh offered for tax. The Tribunal upheld this decision, as the Revenue could not provide contrary evidence.

6. Assessee's Cross Objection:
The assessee's CO regarding the interest component of NSC and the levy of interest under Section 234B was dismissed as it lacked substance, as submitted by the Ld. AR.

Conclusion:
The Tribunal dismissed the Revenue's appeal and the assessee's CO, upholding the Ld. CIT(A)'s decisions on all counts. The order was pronounced in open court.

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