Kalpana Nitin Shah Vs ITO (ITAT Mumbai)
Interest Income Addition Restored for Verification; Jet Airways Principle Held Inapplicable Where Reopening Issue Already Offered
The Mumbai SMC Bench of the ITAT partly allowed the appeal of Kalpana Nitin Shah for AY 2011-12, restoring the issue of interest income addition to the Assessing Officer for fresh adjudication.
The reassessment was initiated on the ground of capital gains from sale of property. In response to the section 148 notice, the assessee suo motu disclosed and offered the entire capital gains, and no further addition was made on that issue. The AO, however, made an addition of interest income reflected in Form 26AS as income from other sources, which was confirmed ex-parte by the CIT(A).
Before the ITAT, the assessee invoked the Jet Airways (Bom HC) principle, contending that once no addition was made on the recorded reason, no other addition could survive. The Tribunal rejected this legal plea, holding that where the assessee voluntarily offers the income forming the basis of reopening, the AO is not barred from examining and adding other escaped income. Hence, the Jet Airways ratio was held inapplicable on facts.
On merits, the assessee contended that the interest income belonged to Hiraco Jewellery (India) Pvt. Ltd., as the fixed deposits were held by the assessee in a fiduciary capacity as Director, and the interest was already offered to tax by the company—raising an issue of possible double taxation. Since this factual aspect was not verified by the AO or CIT(A), the ITAT set aside the issue to the file of the AO for fresh verification and adjudication, after granting due opportunity of hearing.
Accordingly, the appeal was allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the assessee, challenging the order of Addl/JCIT(A), Faridabad [for short “ld. CIT(A)”] dated 24.08.2025 for the AY 2011-12, arises from the assessment order passed under section 143(3) r.w.s.147 of the Income Tax Act, 1961 (the Act) dated 19.12.2018 by the ITO, W-19(2)(2), Mumbai. The grounds of appeal raised by the assessee are as under:
“1. That on the facts and in the circumstances of the case and in law, the entire reassessment proceedings initiated by issuance of notice under Section 148 dated 28/03/2018 are void ab initio as the said notice was issued without obtaining the mandatory prior satisfaction and approval from the Principal Chief Commissioner of Income Tax/Chief Commissioner of Income Tax, as required by Section 151 of the Income-tax Act, 1961.
2. That on the facts and circumstances of the case and in law, the Ld. AO acted without jurisdiction and erred in making an addition on an issue (Interest Income of ‘13,52,618) other than the ground based on which the reassessment was opened (Capital Gains), especially since the original ground was offered for assessment in the return filed in response to the Section 148 notice.
3. That on the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) erred in dismissing the appeal for non-prosecution/non-compliance, thereby denying the Appellant a proper opportunity to be heard and violating the principles of natural justice.
4. That on the facts and circumstances of the case and in law, Ld. AO has grossly erred in determining the taxable income of the Appellant for the subject assessment year at Rs 32,23,380/- as against the returned income of Rs 18,70,760/- and, accordingly, the assessment order passed by Ld. AO is bad in law and void ab initio,
5. That on the facts and circumstances of the case and in law, the Ld. AO has erred in making the addition of Rs 13,52,618/- based on mere conjectures and surmises, ignoring the factual matrix of the case as well as the nature of the transaction undertaken by the Appellant.
6. That the addition of 26,30,218/- on account of interest income is legally untenable as the Fixed Deposit was held by the Appellant in a fiduciary capacity for and on behalf of Hiraco Jewellery (1) Pvt. Ltd, the true owner of the funds, and was created solely as collateral security for the company’s loan from the bank.
7. That the lower authorities erred in law by making an addition which leads to double taxation of the same income, as the interest earned on the said Fixed Deposit has been offered to tax by Hiraco Jewellery (I) Pvt. Ltd in its return of income for the relevant Assessment Year.
8. That on the facts and circumstances of the case and in law, the Ld. AO grossly erred in the addition of ‘7,22,400/- under the interest head, which is actually Rental Income, as evident from Form 26AS (u/s 1941) and was already considered in the computation of total income, thereby taxing the same income twice, which is impermissible.
9. That on the facts and circumstances of the case and in law, the Ld. AO has erred in charging interest under sections 234A, 234B, and 234C and initiating penalty proceedings u/s 271(1)(c), which are consequential and should be deleted once the core additions are deleted.”
2. Brief facts of the case are that, the assessee is an individual, who had not filed his return of income for the relevant year. Information was available in the NMS Module (Non filer Management System) ofi-taxnet that the assessee has sold an immovable property for consideration of Rs. 55,00,000/- during AY 2011-12. Since no ITR was furnished by the assessee within the time limit mandated under the Income Tax Act, whereas there was a transaction of sale of property, so to examine the capital gain income earned on account of sale of property, the case of assessee was re-opened under section 148 of the Act. Assessee furnished response to notice under section 148 and had declared a total income of Rs. 18,70,760/-, which includes Short Term Capital Gain (STCG) of Rs. 14,67,190/- on account of the said sale of property. Further it is noticed by the AO that the interest income reflecting in 26AS was also not offered by the assessee as Income from Other Sources amounting to Rs. 13,15,618/-, therefore, an addition for the said amount was made.
