Is interest paid to be treated as undisclosed income when the date of PDCs are extended?

Last updated: 11 August 2021

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This Income Tax Appellate Tribunal case concerns whether interest earned on Post-Dated Cheques (PDCs) should be considered undisclosed income when the PDC dates are extended. The tribunal found that the assessment was void ab initio, meaning it was invalid from the start. Therefore, the appeal was allowed, and the tribunal did not need to consider the merits of the additions made.

Court :
ITAT Delhi

Brief :
This appeal by the assessee is preferred against the order of the CIT(A) - XXXIII, New Delhi dated 31.10.2014 pertaining to A.Y 2006-07.

Citation :
ITA No. 769/DEL/2015

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘A’ BENCH,
NEW DELHI [THROUGH VIDEO CONFERENCE]
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND
SHRI K.N. CHARY, JUDICIAL MEMBER
ITA No. 769/DEL/2015
[A.Y 2006-07]

M/s BPTP Resort Pvt Ltd

[Formerly known as M/s Real Value

Overseas Pvt Ltd, M-11,

Middle Circle, Connaught Circus
New Delhi

PAN: AAACR 5360 H

[Appellant]

The A.C.I.T

Central Circle - 23

New Delhi

[Respondent]

Assessee by : Shri Ajay Bhagwani, CA
Revenue by : Shri Satpal Gulati, CIT-DR
Date of Hearing : 27.07.2021
Date of Pronouncement : 27.07.2021

ORDER

This appeal by the assessee is preferred against the order of the CIT(A) - XXXIII, New Delhi dated 31.10.2014 pertaining to A.Y 2006-07.

2. In addition to the aforementioned grievances, the ld. counsel for the assessee also vehemently stated that the material seized during the course of search on BPTP group of cases on 15.11.2007 did not belong to the assessee.

3. The present appeal relates to the addition on account of interest on PDC Rs. 1,68,750/- and disallowance u/s 40A(3) of the Act 7,24,112/-.

4. The ld. counsel for the assessee further stated that as no incriminating material was found and seized belonging to the assessee during the course of search on 07.12.2010, no addition should have been made in the assessment completed u/s 153A of the Act.

5. As no distinguishing decision has been brought to our notice in favour of the Revenue, respectfully following the findings of the coordinate bench, we hold that the entire assessment is void ab initio and, therefore, we do not find any reason to dwell into the merits of the addition.

6. In the result the appeal of the assessee in ITA No. 769/DEL/2015 is allowed.

The order is pronounced in the open court in the presence of both the rival representative on 27.07.2021.

Please find attached the enclosed file for the full judgement

FAQ :

The appeal primarily dealt with whether interest on Post-Dated Cheques (PDCs) should be treated as undisclosed income, especially when the dates of these cheques were extended.

The tribunal held that the entire assessment was void ab initio, meaning it was invalid from the very beginning.

No, because the assessment was deemed void ab initio, the tribunal did not need to delve into the specifics or merits of the additions, such as the interest on PDCs or the disallowance under Section 40A(3).

The appeal filed by the assessee was allowed by the Income Tax Appellate Tribunal.

The assessment year in question was 2006-07.