If interest on deposit is earned on accrual basis than it should be added in the income of the relevant year and in case of receipt basis than in the current year

Last updated: 26 December 2011

Court :
Income Tax Appellate Tribunal

Brief :
I have heard Ld. DR Shri R. Gupta and gone through facts and circumstances of the case. I find that the assessee has purchased fixed deposit from ITC Classic Finance Ltd. On 27.06.1995 vide receipt no. 02/199506/53666C/53667C/53702C at Rs.12,600/- (i.e.4200x3) and these were matured in June, 2000 amounting to Rs.24,000/-. According to Assessing Officer, this was not declared in accounts of assessee. Hence, he considered this as income from undisclosed sources. The CIT(A) also confirmed the action of Assessing Officer. I find that prima facie this addition cannot be sustained reason being the assessee has purchased these fixed deposits on 27.6.1995 i.e. in FY 1995-96 relevant to Assessment Year 1997-98. If any addition is to be made in respect to original investment of Rs.12,600/- that can be made in Assessment Year 1997-98 and not in Assessment Year 2001-02. In respect to accrued interest, it is not clear whether the interest is received by assessee on accrual basis or on receipt basis. If the interest received on accrual basis the addition qua this year interest can be made in this year and not of entire interest. In case, interest is received on receipt basis the amount of Rs.24,000/- - Rs.12,600/- can be added in this year.

Citation :
Sri Suman Bose (PAN-AEAPB 1232 R)(Appellant) Vs Income-tax Officer, Wd-1, Malda (Respondent)& Smt. Bapi Bose (PAN-ADSPB 1149 C)(Appellant)Vs Income-tax Officer, Wd-1, Malda (Respondent)