2014 (10) TMI 1028

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....d.. It is engaged in the business of real estate development. It filed its return of income on 25.9.2009 declaring a loss of Rs. 3,18,650/-. The AO has passed an order u/s 143(3) on 26.12.2011 at an income of Rs. 3,75,85,219/- inter alia making an addition of Rs. 2,88,98,869/- u/s 68 and Rs. 90,50,000/- as notional interest on interest free advances. 3. Aggrieved the assessee carried the matter in appeal. The first appellate authority deleted the addition. Aggrieved with this order the revenue is in appeal on the following grounds :- 1. "The CIT(A) has erred in deleting the addition of Rs. 2,88,98,869/- made by the AO on account of sundry creditors remained unestablished." 2. The CIT(A) has erred in deleting the additio....

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.... of the sundry creditors giving name address and PAN vide letter dated 7.11.2011 to establish the identity of the creditors. Most of the creditors are "Trade Creditors" brought forward from earlier years as per the details submitted by the appellant. These credit balances were accepted in the earlier years and assessment orders were passed u/s 143(3). It was also stated by the appellant that as the transactions were conducted through banking channels and were examined and accepted in the assessment order for the earlier years. On perusal of the assessment record, I find that the Assessing Officer issued summons under section 131 of the I.T. Act 1961 to all the sundry creditors and vide his remand report dated 8.1.2013, the Assessing Officer....

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....d or having a running account with the appellant which is apparent from the chart showing the balances of the parties as on 1.4.2008 and 1.4.2009 and the copies of accounts in the books of the appellant as well as their confirmations which have already been furnished. On perusal of the observations of the Assessing Officer in the remand report pertaining to the account of M/s. Chevaliers Builders and Construction Pvt. Ltd. I find that the said party had a credit balance of Rs. 11,46,86,625/- as on 1.4.2008 i.e. at the beginning of the assessment year 2009-10 which was reduced during the financial year 2008-09 to 12,52,625/- as on 31.3.2009 thereby implying that during the year the appellant had paid back the total amount of Rs. 11,34,34,000....

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....not bargained for interest, or had not collected interest, the income-tax authorities could not fix a notional interest as due, or as collected by the assessee. There was no provision in the Income-tax Act empowering the income-tax authorities to include in the income interest which was not due or not collected. The addition of amounts as notional interest was not justified." 8. The Hon'ble Supreme Court in the case of Excel Industries 358 ITR 295 (SC ) held as follows :- "Applying the three tests laid down by various decisions of this court, namely, whether the income accrued to the assessee is real or hypothetical ; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the....