2017 (7) TMI 1258 - AT - Income Tax

Concealment Of interest income for taxation - difference in interest received as per Form No. 26AS and interest disclosed in the return in the computation of taxable total income - Held that - A credit in one s bank account amounts to receipt by the account holder. Cash system of accounting does not mean that it should be cash received by the assessee. A credit to bank account is equally a receipt. It is true that if such interest is credited in the accounts of any third party, such interest cannot be taken as receipt. But interest from the bank is different, because the bank holds money on behalf of the account holder. Even where bank collects cheques, dividends, bills, promissory notes and the like for credit to customer s account, the bank is acting as the agent of the customer. The relationship of the banker and the customer is not necessarily different as between current account and fixed deposits. Since the assessee can draw the fixed deposit amount on maturity, the interest receivable on maturity shall be treated as received , though it was not drawn. The interest credited to the assessee s account during the financial year 2009-10 by various Banks/institution, with respect to which TDS was deducted and therefore, the same has to be assessed as income in the hands of the assessee - decided against assessee.

Summary

Issues Involved:
Appeal against addition in interest income discrepancy between Form No. 26AS and return

Analysis:
The appeal before the Appellate Tribunal ITAT Chennai concerned the addition made by the Assessing Officer in the interest income of the assessee due to a variance between the interest received as per Form No. 26AS and the interest disclosed in the return. The primary contention raised in the appeal was that the Assessing Officer erred in confirming the addition based on this difference.

The assessee, in this case, had filed its income tax return declaring a total income. Upon scrutiny, it was observed that the assessee had not offered the full interest income accrued but not received for taxation. The Assessing Officer added the unreported interest income to the total income of the assessee, leading to the dispute.

The main argument put forth by the assessee was that they followed a cash system of accounting where interest income accrued but not received was not declared until maturity of the deposit. The assessee claimed that since tax was deducted at the source, it was considered as income. However, the Assessing Officer disagreed and added the unreported interest income to the total income.

The ld. CIT(A) upheld the addition made by the Assessing Officer, emphasizing that interest credited to the assessee's account should be treated as received income, even if not physically withdrawn. The CIT(A) referred to Circular No. 243 dated June 22, 1978, which highlighted that interest credited to the account of the account holder is considered as receipt, especially when TDS is deducted.

The Tribunal, after considering all arguments and previous directives, dismissed the appeal, affirming the decision of the ld. CIT(A). The Tribunal concurred with the CIT(A)'s reasoning that interest credited to the account should be treated as received income, regardless of physical withdrawal, and upheld the addition of the unreported interest income to the total income of the assessee.

In conclusion, the Tribunal's judgment upheld the addition of the unreported interest income, emphasizing the treatment of credited interest as received income, in line with Circular No. 243 and the principles of accounting for income.