Income Tax Appellate Tribunal on Notional Interest Addition: Revenue’s Appeals Dismissed.

The ITAT Delhi dismissed nine Revenue appeals challenging the deletion of notional/ad-hoc interest additions made on balances in an alleged HSBC Geneva bank account of the assessee. The Tribunal held that notional interest cannot be taxed in absence of any evidence of actual accrual, and the Assessing Officer had made additions merely on hypothetical 4% estimated interest. As there was no corroborative material or certainty of income accrual, the CIT(A)’s deletion of additions was upheld for all years, including consequential penalty appeals.

1. The batch comprised nine appeals filed by the Revenue against Shri Anurag Dalmia for AYs 2006–07 to 2011–12.
2. The additions primarily arose from assessments under Sections 153A/143(3) and rectification proceedings under Section 154.
3. In several years, penalties under Section 271(1)(c) were also challenged.
4. The Assessing Officer made additions of notional interest at 4% on alleged balances in an offshore HSBC Geneva account, treating it as unexplained income under Section 69.
5. The CIT(A) deleted the additions holding that:
6. No evidence existed that any real interest was earned.
7. Notional income cannot be taxed.
8. The AO failed to bring any corroborative material on record.

1. Whether the CIT(A) erred in deleting the additions of notional/ad-hoc interest on alleged undisclosed foreign bank account(s).
2. Whether the Revenue could revive additions based solely on estimated interest without proof of accrual.

1. The AO did not add the alleged principal deposit itself—only estimated interest.
2. No material, direct or circumstantial, was provided to show that:
3. Interest was actually credited or accrued, or
4. Any specific rate of interest was applicable.
5. Taxing income requires reasonable certainty of accrual, as laid down by the Supreme Court in Chainrup Sampatram v. CIT (1953) 24 ITR 481 (SC).
6. Mere assumption of 4% interest rate lacks evidentiary basis and cannot constitute taxable income.
7. The CIT(A)'s reasoning was upheld as legally sound and factually correct.

1. The Tribunal dismissed all nine Revenue appeals (ITA Nos. 6516–6521 & 6539–6541/Del/2017).
2. The lead appeal ITA No. 6516/Del/2017 (AY 2006–07) was rejected first, and the same reasoning was followed for all remaining appeals.
3. Penalty appeals were dismissed as consequential.
4. A common order was directed to be placed in each case file.

Citation: 2025:ITAT-DEL:A-Bench

Case: DCIT, Central Circle-26, New Delhi v. Shri Anurag Dalmia

Forum: Income Tax Appellate Tribunal, Delhi Bench ‘A’, New Delhi

Coram: Shri Satbeer Singh Godara (Judicial Member) & Shri S. Rifaur Rahman (Accountant Member)

Date of Decision: 20 November 2025

ITA Nos.: 6516–6521/Del/2017 & 6539–6541/Del/2017

Assessment Years: 2006–07 to 2011–12