2019 (10) TMI 237 - AT - Income Tax

Accrual of income - Addition towards interest on bank fixed deposits - contention of the assessee that due to premature encashment of FDRs, the assessee has received lower interest income as against the interest so reflected in Form No. 26AS - DR submitted that during the course of assessment as well as appellate proceedings, the assessee has failed to produce any evidence to prove that the FDRs were encashed prematurely - HELD THAT - We agree that mere reflection of certain transaction in Form 26AS is not determinative of holding such transaction as taxable transaction in the hands of the assessee. However, given that the transaction has been reflected in Form 26AS, the onus is on the assessee to demonstrate that such transaction doesn t represent real income in its hands. In the instant case, we find that the assessee has failed to adduce any evidence in support of its contention that it has received lower interest income than what has been reflected in Form 26AS. Further, nothing has been brought on record to suggest that the Form 26AS has been subsequently modified/amended to reflect the actual interest payment to the assessee. In the result, the ground so taken is dismissed. Disallowance of ESI/EPF contributions u/s 36(1)(va) - HELD THAT - As contributions were deposited before the due date of filing of the return of income u/s 139(1), in view of a series of decisions of the Hon ble Jurisdictional High Court in favour of the assessee and further Hon ble Supreme Court in case of PCIT vs. Rajasthan State Beverages Corporation Ltd. 2017 (7) TMI 1087 - SC ORDER has dismissed the SLP filed by the Department this issue is decided in favour of the assessee and against the Revenue. Hence, disallowances/additions made by the AO on account of employees contribution to PF ESI are deleted. - Decided in favour of assessee.

Summary

Issues:
1. Challenge to addition of interest on bank fixed deposits.
2. Disallowance of ESI/EPF contributions under section 36(1)(va) of the Act.

Issue 1: Addition of Interest on Bank Fixed Deposits
The appeal challenged the addition of ?51,618 towards interest on bank fixed deposits for the Assessment Year 2014-15. The assessee argued that due to premature withdrawals of fixed deposits, the actual interest received was lower than what was reflected in Form 26AS. The contention was that the interest actually received was offered for tax, and the remaining amount in Form 26AS was not received and hence not offered for tax. However, the Department contended that the assessee failed to provide evidence of premature encashment of deposits. The Tribunal noted that while the reflection in Form 26AS is not conclusive of taxable income, the burden is on the assessee to prove the transaction doesn't represent real income. As the assessee failed to provide evidence of lower interest income received, the ground was dismissed.

Issue 2: Disallowance of ESI/EPF Contributions
The appeal challenged the disallowance of ?115,849 under section 36(1)(va) of the Act for ESI/EPF contributions. The Tribunal referred to a previous case and noted that various decisions of the High Court favored the assessee on this issue. It was highlighted that the disallowance made by the Assessing Officer was due to a misunderstanding of a High Court decision. The Tribunal ruled in favor of the assessee, citing the series of decisions in favor of the assessee by the High Court and the Supreme Court. The disallowances/additions made by the AO were deleted based on the decisions of the High Court and the Supreme Court. Consequently, the matter was decided in favor of the assessee against the Revenue, and the appeal was partly allowed.

In conclusion, the Tribunal upheld the addition of interest on bank fixed deposits due to lack of evidence supporting the assessee's claim of lower interest income received. However, the disallowance of ESI/EPF contributions was overturned in favor of the assessee based on precedents and decisions of the High Court and the Supreme Court.