2023 (1) TMI 960 - AT - Income Tax

Addition of interest income - Appellant failed to furnish evidence to show that the aforesaid income has been offered to tax for the Assessment Year 2011-12 - HELD THAT - The facts on record suggested that the interest income pertained to Assessment Year 2011-12. It was not the case of the AO that the Appellant was following cash basis of accounting in respect of interest income. To the contrary before CIT(A), the Appellant contended that interest income accrued during the previous year relevant to the Assessment Year 2011-12 and the interest income could not be taxed on receipt basis during the Assessment Year 2012-13. The CIT(A) did not deal with this contention and dismissed the appeal holding that the Appellant had failed to produce the loan confirmation and/or the uploaded return. We note that CIT(A) has observed that a loan confirmation filed before ITO-34(3)(5), Mumbai which was forwarded to the Assessing Officer and on the basis of the same reassessment proceedings were initiated. Thus, loan confirmation for the Assessment Year 2011-12 issued by the husband of the Appellant was already on record. Though the Appellant did not file the loan confirmation, the same was available on record. Therefore, to this extent the finding returned by the CIT(A) and Assessing Officer are contrary to material on record. The material on record suggested that the interest income did not pertain to Assessment Year 2012-13. Therefore, the onus shifted on Revenue, and the Revenue failed to bring on record any material to establish that the interest income pertained to Assessment Year 2012-13. Accordingly, we accept the contention of the Appellant that the interest income pertained to Assessment Year 2011-12 and delete the addition made by the Assessing Officer.

Summary

Issues:
- Challenge to order dismissing appeal for Assessment Year 2012-13
- Addition of income pertaining to Assessment Year 2011-12 in Assessment Year 2012-13
- Reopening proceedings initiated without independent inquiries
- Failure to consider submissions made by Assessee
- Timing of reopening case and subsequent addition of income
- Dismissal of appeal by CIT(A) based on lack of evidence

Analysis:
The Appellant challenged the order dismissing the appeal for Assessment Year 2012-13, where the Assessing Officer added an amount pertaining to Assessment Year 2011-12 in Assessment Year 2012-13 on receipt basis. The Appellant contended that the income accrued in 2011-12 and was only received in 2012-13. The Appellant also argued that the reopening proceedings were mechanical without independent inquiries. The CIT(A) dismissed the appeal, stating that the reassessment was based on tangible material indicating the income exceeded the threshold for filing returns. However, the Appellant failed to provide evidence that the income related to 2011-12 was offered for tax.

The Assessing Officer initiated proceedings based on information that the Appellant received interest from her husband, leading to the addition of income in 2012-13. The Appellant argued that the interest income was from 2011-12 and should not be taxed in 2012-13. The CIT(A) upheld the addition, emphasizing the lack of evidence from the Appellant. The Appellant's failure to produce documents supporting the income's taxability in 2011-12 led to the dismissal of the appeal.

The Tribunal analyzed the facts, noting that the Appellant provided a loan to her husband, with outstanding interest as of 31.03.2011. The loan confirmation formed part of the assessment record, supporting the initiation of reassessment proceedings. The Tribunal found that the interest income related to 2011-12 and should not have been taxed in 2012-13. The Appellant's contention that the interest accrued in 2011-12 was not addressed by the CIT(A), who dismissed the appeal based on lack of loan confirmation. The Tribunal concluded that the interest income indeed pertained to 2011-12 and deleted the addition made by the Assessing Officer. The Appellant's first ground was allowed, while other grounds were dismissed as infructuous.

In conclusion, the Tribunal allowed the appeal, overturning the addition of income for 2012-13 and emphasizing that the interest income belonged to 2011-12. The decision was based on the lack of evidence supporting the taxability of the income in the relevant assessment year, highlighting the importance of accurate assessment and evidence presentation in tax matters.