Alliance Books Suppliers Pvt Ltd Vs ACIT (ITAT Kolkata)
FDs Given as Bank-Guarantee Margin Cannot Be Taxed as Unexplained Money – Matter Remanded; Only Interest Income Taxable
Assessee purchased bank guarantees from Central Bank of India backed by FDRs of ₹1,67,21,259 placed as margin. Later, business became NPA & bank invoked SARFAESI, taking possession & appropriating the FDRs. AO reopened assessment & treated the entire FDR amount as unexplained money u/s 69A, additionally taxing interest of ₹1,70,676. CIT(A) affirmed.
Assessee submitted letters showing repeated requests to bank for details, explaining that FDRs were security margin against ₹4 crore bank guarantee, not unexplained assets; bank had invoked FDs after NPA classification. Assessee had no access to old records as business had shut down.
Tribunal observed that:
- FDRs were security/guarantee given to bank;
- Bank appropriated them under SARFAESI;
- Principal of FDRs cannot be treated as income;
- Only interest income arising on such FDRs is taxable;
- Authorities failed to obtain bank records despite assessee’s explanation.
To meet ends of justice, Tribunal restored matter to AO with direction to issue summons to Central Bank of India, obtain full details & reassess correctly. It clarified that principal FDR amount is not taxable if already disclosed/recorded; only interest must be brought to tax.
