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TMI Blog2024 (11) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... ny basis and is clearly hypothetical/ imaginary. Since there is no evidence that the assessee actually received interest on the disputed deposit and just by figment of imagination it has been concluded that the assessee earned interest on such deposits @ 4% p.a., the impugned addition on account of notional interest, has, even on merits, been rightly deleted by the CIT(A). Assessee appeal allowed. - Shri S. Rifaur Rahman, Accountant Member And Shri Yogesh Kumar U.S., Judicial Member For the Appellant : Sh. Rohit Jain, Adv Sh. Shivam Gupta, CA For the Respondent : Shri Om Prakash, Sr. DR ORDER PER YOGESH KUMAR U.S., JM : This appeal is filed by the Assessee against the order of Commissioner of Income Tax (Appeals)-34, New Delhi [ Ld. CIT(A) for short], dated 28/03/2018 for the Assessment Year 2014-15. 2. The grounds of Appeal are as under: - On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs 35,48,741/- made by AO on account of undisclosed interest income on the undisclosed deposits of Rs. 8,87,18,528/- in HSBC Bank Geneva without appreciating the fact that the assessee had not submitted any details regarding the same during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n has been made on notional basis. It is seen that the AO has presumed that assessee would have earned interest on the credit balance in one foreign bank account existing as on 31.03.2013. 5.4. However, the background of the case has been provided by the appellant s AR in the written submissions. For the sake of clarity, the relevant part is reproduced as under: A search and seizure operation under section 132 of the Act was carried out in the case of the appellant on 09.11.2011 at his residential premises located at A-1, Maharani Bagh, New Delhi. During the course of search, the appellant was shown one unsigned/ undated piece of paper and the said paper was stated by the authorized officer to be bank statement of HSBC Bank, Geneva. When the paper was shown to the appellant (copy not provided then), the appellant categorically denied having any knowledge about the said piece of paper. Despite the fact that the appellant had no concern/ connection with the aforesaid piece of paper shown to him at the time of search, merely to avoid entering into protracted/ costly litigation with the Income Tax Department and particularly having regard to the fact that the tax liability on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid addition on account of notional interest has been made by the assessing officer in the absence of any bank statement or any other documents, merely on the basis of presumption, without even first establishing the existence of the alleged foreign bank account in the period under consideration. Without prejudice, the addition made by the Assessing Officer by applying interest ate of 4% p.a. is without any basis, too high and calls for being reduced. 5.5. The case of the appellant is connected to various other individuals of the group, on whom search and seizure action was carried out. In one such individual's case Sh. Parag Dalmia (PAN No. AAAPD3725B), In whose case the facts are 100% identical to the fact of the case of appellant and identical addition on account of interest income worked out on notional basis, has been made by AO in that case, Ld. CIT(A)-XXVI, Delhi, has delivered his judgement pertaining to A.Y. 2014-15, In appeal no. 10240/14- 15, vide appeal order dated 11.08.2017. The findings of CIT(A) In that case are as under: I have considered the facts of the case, the basis of addition made by the AO and the arguments of the AR during assessment as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank account operated by the appellant and, and whether there is any mention of any interest earned on the said credit balances. (iv) The presumption of the AO is apparently based on experience with the Indian Banking System wherein the saving bank accounts generally, earns an interest, of 4% or so. The AO therefore applied the same standards in respect of the credit balances, held by the assessee in its foreign bank account as well. I am also in agreement with the findings of CIT(A) that it is a matter of common knowledge that the rate of interest on time deposit/FDRs in developed countries banking system, are generally from low and nowhere in comparison to the Indian banking system. In fact, the rate of interest in the current/saving bank account could sometimes be negative in terms of operational cost of maintaining such an account. This only highlights the absence of certainty in AO's presumption based upon Indian banking system, it clearly shows that there is no documentary evidence to support such a presumption. 5.6.The facts involved in the case of appellant are identical to the case of Sh. Parag Dalmia, the earning of interest in the hands of appellant cannot be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted the addition made by the assessing officer holding that since no corroborative evidence has been brought out by the assessing officer to substantiate that the assessee has actually earned any interest income, therefore, the addition made only on the basis of estimate and presumption is not sustainable. 6.3 In support of the aforesaid ground, the Ld. CIT-DR/ Departmental Representative heavily relied on the order of the assessing officer and contended that the addition of Rs. 1,64,962/- made on account of interest should be confirmed and the finding of the CIT(A) to this extent should be reversed. In rebuttal, the Ld. Senior Counsel vehemently argued that the addition on account of notional interest has been rightly deleted by Ld. CIT (A) since the said addition was made by the assessing officer in the absence of any bank statement or any other documents, merely on the basis of presumption that interest @4% p.a. would have been credited on the balance in the account, without even first establishing the existence of the alleged foreign bank account in the period under consideration. The Ld. Counsel contended that under the scheme of the Act, liability to pay tax is attracted at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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