BHUSHAN LAL SAWHNEY,NEW DELHI vs. ACIT, CENTRAL CIRCLE- 7,, NEW DELHI

The assessee has raised the following grounds of appeal :-

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in charging interest u/s 234A and 234B of Income Tax Act, 1961.

We have heard the rival submissions and perused the material available on record. The return of income for AY 2014-15 was filed by the assessee on 08.09.2014 declaring loss of Rs. 6,86,251/- from business and profession. During the course of scrutiny assessment proceedings, information was called for from the assessee in respect of foreign bank account held with HSBC Bank, Geneva and interest income thereon. The ld AO also observed that there was search operation conducted on the assessee on 28.07.2011. As per information available with the department, the assessee has maintained an account with HSBC Bank, Geneva. The ld AO relied on the observation made by his processor for AY 2006-07 assessment orders framed in the case of the assessee. The assessee in response to the query raised by the ld AO submitted that no bank account with HSBC Bank, Geneva was Smt. Sneh Lata Sawhney maintained by him and accordingly there is no interest income thereon. The ld AO however did not heed to this contention of the assessee. Similar explanation given by the assessee in earlier years were rejected by the ld AO wherein, interest income @4% on the alleged deposit balance was added year on year. The ld AO during the year under consideration made the same addition of notional interest @4% on the deposit balance. The deposit balance was added in FY 2006-07 and thereafter interest @4% alone year on year was added. In this manner, the interest income added in AY 2014-15 was Rs. 53,92,649/-. The ld AO also observed that the assessee and his wife Smt. Sneh Lata Sawhney are the beneficiaries of the said bank account and accordingly added notional interest on alleged deposit in the hands of the assessee on substantive basis and same addition was sought to be made on protective basis in the hands of Smt. Sneh Lata Sawhney. This action of the ld AO was upheld by the ld CIT(A).

At the outset, the ld AR submitted that the assessee Mr. Bhushan Lal Sawhney had passed away on 02.12.2018 and that the legal heir of the assessee is Smt. Sneh Lata Sawhney. The ld AR submitted that no foreign bank account was ever maintained by assessee or his wife with HSBC Bank, Geneva and hence, there is no question of adding any notional interest income thereon @4% on the alleged deposit balance. Further, he submitted that though the ld AO in para 4.2 of his order had stated that protective assessment of the same notional interest income has been made in the hands of Smt Sneh Lata Sawhney, but no such protective assessment was ever framed in the hands of wife. The ld AR submitted that this may be taken as a statement made from the bar. He also placed on record the Tribunal order passed in the case of the assessee for AY 2006-07 to 2011-12 in dated 01.06.2021, wherein, the addition made on account of alleged deposit balance with HSBC Bank, Geneva and consequential interest income were deleted. The ld AR submitted that since the ld CIT(A) had Smt. Sneh Lata Sawhney placed reliance on the order passed by his predecessor for the same assessment years, when these orders are quashed by Tribunal, no addition towards interest income could be made for the year under consideration in the case of the assessee.

Per contra, the ld DR vehemently submitted that the assessee did not furnish any information despite material seized from the residence at the time of search. He vehemently placed reliance on the decision of the Mumbai Tribunal in the case of Renu T. Tharani in for AY 2006-07 dated 16.07.2020, wherein, the initial deposit was made in the foreign bank account by some trust where Renu T Tharani was treated as beneficiary and that the deposited amount was added in the hands of the beneficiary which was confirmed by ITAT. The ld DR pleaded that same fact situation arises in the present case also.

At the outset, we find that Renu T Tharani factual matrix per se is completely different. In that case, someone created a trust in favour of Renu Tharani and she was held beneficiary of monies lying in the foreign bank account. She did not sign the consent waiver form in that case whereas in the instant case before us, a mere existence of bank account per se was denied by the assessee right from the beginning and consent waiver form was not even asked by the department to be signed by the assessee. Hence, we hold that decision rendered in the case of Renu Tharani is factually distinguishable. Moreover, on perusal of the assessment order for AY 2006-07 u/s 153A read with section 143(3) of the Act dated 02.03.2015 which is enclosed in pages 1 to 9 of the PB, we find that there was a document found and seized during the course of search titled as Annexure A-1 of party SR-1 found and seized from Sri Praveen Sawhney (son of assessee). The said document containing seized document is reproduced in pages 6 and 7 of the paper book and form part of the assessment order dated 02.03.2015 for AY 2006-07. The said seized document nowhere mentions the name of the Page | 4

Considering the aforesaid orders passed in the case of the assessee and also considering the fact that the lower authorities had placed reliance on the orders passed by them for earlier years while making the addition towards notional interest income which stood deleted by the Tribunal vide its order dated 01.06.2021, we hold that there cannot be any addition towards notional interest income that can

In the result, the appeal of the assessee is allowed.