Notional interest not taxable as bank statement doesn’t show credit of any interest

Sh. Vikram Dhirani Vs ACIT (ITAT Delhi)

ITAT Delhi held that notional interest cannot be taxed as income as bank statement of the foreign bank account doesn’t show that any interest has been credited.

Facts- In regard to assessment year 2007-08, assessee has found to have not disclosed HSBC Bank account at Dubai. Thereafter based on statement of the assessee u/s 132(4) of the Act dated 28.07.2011 and 04.08.2011, the Ld. AO observed that the said account had balanced of 19,15,148 Euros in April, 2006 and applying a conversion rate of Rs. 62 it was treated as undisclosed income of the assessee for the F.Y. 2006-07 relevant to A.Y. 2007-08. Ld. AO also added to the income, interest income on the credit balance up to 31st March, 2007 @ Rs. 4% per annum at Rs. 43,53,770/-.

Thereafter as a consequence to addition made in assessment year 2007-08 as above, addition of interest income on the credit balance was made in the subsequent assessment years 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13.

In appeal Ld. CIT(A) had sustained the substantial addition on account of balance with foreign bank account remaining unexplained however, directing that recomputation be done of the undisclosed income by adopting currency in the relevant bank account as Dollars, instead of Euro, however, the additions on account of interest income in the said account on notional basis was deleted.

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