The Tax Publishers2020 TaxPub(DT) 3877 (Jp-Trib)

INCOME TAX ACT, 1961

Section 143(3)

Where even the assessee had challenged the addition on account of alleged advances, the question of taxing interest does not arise as there was no material on record to establish that assessee received interest on the alleged advances, the interest had been calculated notionally and addition had been made accordingly, no addition can therefore, be made on notional basis.

Search and seizure - Assessment under section 153A - Addition of interest on advances computed notionally -

Addition of Rs. 1,34,410 upheld by CIT(A) on account of notional interest was stated to be unjustified. As per the AR, not only that AO was unjustified in making addition of Rs. 33,00,000 on account of alleged unexplained advances but he further erred in making addition of Rs. 1,34,410 on account of interest on such advances. The interest had been calculated purely on presumptive basis. Not a single paper was found during search relating to receipt or payment of interest. AO had made addition simply on suspicion and doubt that when the assessee had advanced loans, therefore, interest was bound to follow. It was submitted that no addition can be made under section 153A on basis of presumption. Presumption, however strong, cannot take the place of evidence. Held: It is established position of law that interest cannot be taxed on notional basis. In this case, there was no evidence that interest accrued to the assessee or interest was received by him. Even the assessee had challenged the addition on account of alleged advances and hence, the question of taxing interest does not arise. There was no material on record so as to establish that assessee received interest on the alleged advances. It was the working of the mind of the AO that had resulted in addition on account of interest. The interest had been calculated notionally and addition has been made accordingly. No addition can be made on notional basis.

REFERRED : Uma Charan Shaw & Brothers (1959) 37 ITR 271 (SC) : 1959 TaxPub(DT) 184 (SC), CIT v. Anupam Kapoor (2008) 299 ITR 179 (P&H) : 2008 TaxPub(DT) 500 (P&H-HC), CIT v. Dhiraj Lal Girdhari Lal (1954) 26 ITR 736 (SC) : 1954 TaxPub(DT) 120 (SC), Dhakeshwari Cotton Mills (1954) 26 ITR 775 (SC) : 1954 TaxPub(DT) 123 (SC), State v. Gulzari Lal Tondon 1979 AIR 1382 SC, J.A. Naidu v. State of Maharastra 1979 AIR 1537 SC, CIT v. Excel Industries Ltd. (013) 358 ITR 295 (SC) : 013 TaxPub(DT0 2414 (SC), Sushila Mallik v. ITO (2011) 61 DTR 437 (Lkw-Trib) : 2012 TaxPub(DT) 487 (Lkw-Trib), Kesri Chand Jai Sukhlal v. CIT (2001) 248 ITR 47 (Guw-HC) : 2001 TaxPub(DT) 661 (Gau-HC), Kishanchand Jaisukh Lal v. CIT (2001) 248 ITR 47 (Guwahati) : 2001 TaxPub(DT) 661 (Gau-HC), CIT v. Asian Hotels Ltd. (2010) 323 ITR 470 (Del-HC) : 2008 TaxPub(DT) 1341 (Del-HC), CIT v. Shoorji Vallabh Das & Co. (1962) 46 ITR 144 (SC) : 1962 TaxPub(DT) 307 (SC) and CIT v. Balbir Singh Mani (2017) 398 ITR 531 (SC) : 2017 TaxPub(DT) 4346 (SC).

FAVOUR : In assessee's favour.

A.Y. : 2010-11 to 2014-15


INCOME TAX ACT, 1961

Section 153A Section 143(3)

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