2022 (12) TMI 334 - AT - Income Tax

Tribunal upholds CIT (A) decision limiting tax on interest income. Assessee rectifies undisclosed amount.

DCIT, Circle : 2 (1), Gurgaon. Versus Mr. Micheal Robert Barclay, C/o. Cairn India Limited

The Tribunal upheld the CIT (A) decision, dismissing the Revenue's appeal. The addition was limited to interest income of Rs. 11,76,379/-, as other credit ... Unexplained credits in the foreign bank accounts - addition on account of peak balance lying in the foreign bank accounts - most of the credit entry corresponded to the salary and interbank transfer within the account held by the assessee and loan payment by the friends and colleagues - CIT-A deleted the addition - HELD THAT:- As rightly observed by the CIT(A) that out of the total addition made by the A.O on account of peak balance lying in the foreign bank accounts only the interest income credited to the Natvest Account 954336157165 was not accounted for the return filed by the appellant. It is also noticed by the A.O. in his remand report dated 08/11/2017 that most of the credit entries corresponding to salary, which was already offered to tax in the ITR for the period under consideration: inter bank transfers within the accounts held by the assessee and loan repayment by friends/relatives which is not an income of the assessee for the period under consideration. A.O. has noticed that only income of Rs. 11,76,379/- had not been shown by the assessee in his return of income for the year under consideration, which has been later offered by the assessee himself for taxation and paid the tax. Therefore, the Ld.CIT (A) has rightly restricted the addition of Rs. 11,76,379/. The approach of the Ld.CIT(A) is in order which is not erroneous and the same requires no interference at our hands. Thus, we do not find any merit in the grounds of appeal of the Revenue. Issues:Appeal by Revenue against CIT (Appeals) order deleting addition of unexplained credits in foreign bank accounts.Analysis:1. Background: The appeal was filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-1, Gurgaon, for the assessment year 2014-15. 2. Substantive Ground of Appeal: The Revenue challenged the deletion of an addition of Rs. 4,09,71,232/- on account of unexplained credits in foreign bank accounts out of a total addition of Rs. 4,21,47,611/- made by the Assessing Officer. The AO did not provide clear findings on the issue, while the CIT (A) highlighted that most credit entries corresponded to salary, interbank transfers, and loan repayment by friends/relatives.3. Assessment Proceedings: The assessee initially declared an income of Rs. 3,70,86,780/-. The AO, however, made an addition of Rs. 4,21,47,611/- as the assessee could not substantiate the amount credited in the foreign bank account. The AO treated this amount as income of the assessee.4. CIT (A) Order: The assessee appealed against the assessment order, and the CIT (A) partly allowed the appeal by limiting the addition to Rs. 11,76,379/-.5. Current Appeal: The Revenue appealed against the CIT (A) order, arguing that the deletion of Rs. 4,09,71,232/- was erroneous. The Revenue contended that most credit entries were explained as salary, interbank transfers, and loan repayments.6. Hearing: With the absence of the assessee, the appeal was heard with the presence of the Ld. DR, and the material on record was reviewed.7. Revenue's Argument: The Ld. DR emphasized that the CIT (A) erred in deleting the addition of Rs. 4,09,71,232/-, as the explanation provided in the remand report clarified the nature of the credit entries.8. Additional Evidence: During the appellate proceedings, the assessee submitted additional evidence, leading to a remand report by the AO. The report highlighted that most credit entries were related to salary, interbank transfers, and loan repayments, not constituting income for the assessee.9. Assessee's Response: The assessee acknowledged the interest income not included in the tax return, provided revised tax computation, and paid the due taxes on the undisclosed amount.10. CIT (A) Decision: The CIT (A) correctly observed that only the interest income of Rs. 11,76,379/- was not accounted for in the return, while other credit entries were explained as non-taxable sources. The CIT (A) restricted the addition to Rs. 11,76,379/-.11. Conclusion: The Tribunal upheld the CIT (A) decision, dismissing the Revenue's appeal as the approach taken by the CIT (A) was deemed appropriate and non-erroneous. The addition was limited to the interest income not initially shown in the return, which was later rectified by the assessee.In conclusion, the appeal by the Revenue was dismissed, affirming the CIT (A) decision to restrict the addition to the interest income of Rs. 11,76,379/-, as the other credit entries were explained and not constituting taxable income for the assessee.