2016 (2) TMI 693 - AT - Income Tax

Undisclosed deposits in bank account - Held that - From the order of the CIT(A) it appears that a sum of ₹ 10 lakhs was deposited in bank by Shri Subramanian and not by the assessee. When Shri Subramanian deposited the money and the bank account relates to all the family members, this Tribunal is unable to accept the contention of the ld. DR. Therefore, the CIT(A) has rightly deleted the addition made by the Assessing Officer. When the deposit of ₹ 10 lakhs cannot be added in the hands of the assessee, the interest accrued on such deposit of ₹ 4,81,953/- also cannot be taxed in the hands of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A) - Decided in favour of assessee

Summary

Issues:
1. Addition of Rs. 10 lakhs claimed as a loan.
2. Addition of Rs. 4,81,953 as interest accrued on a fixed deposit.

Analysis:

Issue 1: Addition of Rs. 10 lakhs claimed as a loan
The appeal and cross objection were against the Commissioner of Income-tax (Appeals) order for the assessment year 2006-07. The first ground of appeal was regarding the addition of Rs. 10 lakhs. The Departmental Representative argued that the assessee, in an earlier assessment, denied receiving any loan but later claimed to have received Rs. 10 lakhs from his son. The Assessing Officer added this amount under section 69 of the Act due to contradictory statements. However, the CIT(A) found that the bank account reflected transactions of all family members, not just the assessee. The Revenue contended that since the Rs. 10 lakhs was added, the interest accrued on it should also be added. The Counsel for the assessee argued that the assessee never claimed to have taken a loan in any proceedings and that the deposit was made by someone else. The Tribunal upheld the CIT(A)'s decision, stating that the deposit was made by another individual and not the assessee, hence no addition was warranted. Consequently, the interest accrued on this amount was also not taxable in the assessee's hands.

Issue 2: Addition of Rs. 4,81,953 as interest accrued on a fixed deposit
The second ground of appeal was related to the addition of Rs. 4,81,953 as interest accrued on a fixed deposit. The Revenue argued that since the Rs. 10 lakhs was added, the interest accrued should also be added. However, the Counsel for the assessee reiterated that the assessee did not own any fixed deposit and that the transactions in the bank account were not solely the assessee's. The Tribunal agreed with the Counsel, stating that as the deposit was made by another individual and the bank account reflected transactions of all family members, no addition was necessary. Therefore, the Tribunal dismissed the appeal of the Revenue and the cross objection of the assessee, confirming the CIT(A)'s order.

In conclusion, the Tribunal upheld the CIT(A)'s decision, ruling in favor of the assessee regarding the addition of Rs. 10 lakhs claimed as a loan and the interest accrued on it. The Tribunal also rejected the Revenue's appeal to add the interest accrued on a fixed deposit, as it was not owned by the assessee.