ACIT vs Parag Dalmia: Interest Income Dispute for Assessment Year 2016-17

ACIT vs Parag Dalmia: Interest Income Dispute for Assessment Year 2016-17

In a notable decision by the Income Tax Appellate Tribunal, Delhi Bench ‘SMC’, a dispute involving the Assistant Commissioner of Income Tax (ACIT), Central Circle-26, New Delhi, and Shri Parag Dalmia regarding undisclosed foreign bank interest income for the assessment year 2016-17 was adjudicated. The case, bearing the number ITA No.6283/Del/2019, was pronounced on March 31, 2021.

The central issue was the addition made by the Assessing Officer (AO) concerning the interest income allegedly earned from foreign bank accounts which the AO deemed undisclosed. This income pertained to the balance in foreign bank accounts which the AO claimed had accrued interest. The appellant, Shri Parag Dalmia, contested these additions, leading to an appeal before the CIT(A) and subsequently the ITAT.

During the initial assessment, the AO computed interest income based on the balances from the previous years, assuming a continuation without substantiating the actual accrual of interest, thus leading to a significant addition to the taxable income of Shri Dalmia. This method was contested on the grounds of lack of concrete evidence of the interest income’s existence and the actual status of the bank accounts, which were reportedly closed in previous fiscal years.

The CIT(A) deleted the addition for lack of substantial evidence, prompting the Revenue to appeal to the ITAT. The ITAT scrutinized the approach of both the AO and CIT(A), particularly focusing on the procedural aspects and the evidence—or lack thereof—supporting the addition of presumed interest income. The ITAT eventually set aside the CIT(A)’s order and remanded the matter back to the AO with specific directions to reassess the case based on factual material evidence rather than presumption.

This case highlights the critical nature of concrete evidence in tax assessment proceedings and underscores the tribunal’s role in ensuring that tax assessments are based on clear, factual grounds rather than assumptions or incomplete information.

ACIT vs Parag Dalmia: Interest Income Dispute for Assessment Year 2016-17