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2016 (9) TMI 648 - AT - Income TaxPenalty under section 271(1)(c) - disallowance of loss of income from house property - Held that:- The assessee did got the possession from the builder after the completion of building and occupation certificate obtained from Bombay Municipal Corporation (BMC) and had also made the entire payment as agreed in the sale agreement. It is also an admitted fact that, the assessee in the return of income had taken municipal ratable for the purpose of ALV under section 23(1)(a). From such computation, the assessee has claimed the interest paid on the borrowed capital for the said house property. The Ld. AO has disallowed the loss claimed under the head “income from house property” on the ground that, the assessee himself has admitted that, he has not taken the actual possession in the relevant financial year. Such contention of the Ld. AO cannot be upheld, because it cannot be denied on the present facts that the assessee was the actual owner of the said property during the relevant previous year and once the assessee was the owner of the house property, then charge is created for the determination of income from house property by way of ALV. The basis of assessing the tax and income from house property is the ownership of the property and not the actual realization of income. The ownership by itself attracts the charge. The assessee was thus under the law liable to disclose the ALV from the said property. In fact, the assessee had shown the ALV on the municipal ratable value which again is one of the accepted method for showing the ALV in terms of various decisions which has been relied upon before the authorities below. Hence, it cannot be held that, income from house property was not assessable in the case of the assessee in this year. Once the income from house property is assessable, then as a natural corollary deduction of interest paid on the borrowed funds for the purpose of house property has to be allowed in terms of section 24(b). Accordingly, the claim of the assessee was not only bona fide but also was duly supported under the provisions of law. Thus, we hold that, no penalty for disallowance of loss of income from house property can be made and we direct the AO to delete the penalty - Decided in favour of assessee
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