2024 (5) TMI 1204 - AT - Income Tax

ITAT Delhi deletes penalty under section 271(1)(c) for notional interest on HSBC Geneva account balance

ITAT Delhi allowed the assessee's appeal regarding penalty u/s 271(1)(c) for concealment of income related to notional interest on foreign bank account ... Penalty u/s 271(1)(c) - accruals/interest on foreign bank account balance in alleged HSBC Bank, Geneva - concealment of particulars of income/furnishing inaccurate particulars of income qua the said addition - HELD THAT:- Hon’ble Delhi High Court [2024 (2) TMI 401 - DELHI HIGH COURT] has held that notional interest on the addition originally made in AY 2006-07 by the AO could not be made in AY 2008-09 to 2011-12. The facts, circumstances and prevailing law admittedly remain the same in AY 2012-13 as well. Respectfully following the order (supra) we delete the impugned addition made by the AO which has been sustained by the Ld. CIT(A) and decide the appeal of the assessee in his favour. Issues:Appeal against addition of interest on foreign bank account balance and penalty under section 271(1)(c) of the Income Tax Act, 1961 for concealment of income.Analysis:The case involved appeals by the assessee against the orders of the Ld. CIT(A) confirming the addition of Rs. 3,87,075 on account of accruals/interest on a foreign bank account balance in HSBC Bank, Geneva, and the penalty under section 271(1)(c) of the Income Tax Act, 1961. The Ld. CIT(A) upheld the addition based on the appellant's details matching the bank account information, rejecting the appellant's claim that the account belonged to another entity. The appellant challenged this decision before the Tribunal, raising various grounds including violation of natural justice, lack of evidence, and suspicion-based addition. The Tribunal noted similar additions in previous years but referred to cases where such additions were deleted due to lack of basis or evidence of actual receipt of interest. The Tribunal also cited a High Court decision where notional interest was not justified without incriminating material. Consequently, the Tribunal deleted the addition, following the High Court's precedent.The Tribunal's decision was based on the lack of incriminating material and the absence of evidence supporting the addition of notional interest. The Tribunal referred to previous cases where similar additions were deleted due to lack of basis or evidence of actual receipt of interest. The Tribunal also highlighted a High Court decision that supported the deletion of notional interest without incriminating material. Therefore, the Tribunal ruled in favor of the assessee, deleting the addition of Rs. 3,87,075 made by the Ld. AO and upheld by the Ld. CIT(A).Regarding the penalty under section 271(1)(c) of the Act, since the addition of Rs. 3,87,075 was deleted in the quantum appeal, the penalty had no basis and was directed to be vacated by the Tribunal. As a result, both the quantum appeal and the penalty appeal were allowed in favor of the assessee. The Tribunal's decision was in line with the High Court's ruling and the lack of justification for the addition of notional interest, leading to the deletion of the penalty as well.