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TMI Blog2023 (11) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... ES SEZ, Construction of Residential Flats and Sales, Hospitality Business. Assessing Officer passed the Assessment Order u/s. 143(3) of the Act on 25.12.2019 accepting the return of income filed by the assessee. Ld. Pr.CIT, Mumbai -2, while examining the records, observed that assessment order dated 25.12.2019 passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, and requires revision. Accordingly, he issued show cause notice to the assessee and recorded the reasons for revision. In the reasons recorded Ld. Pr.CIT mentioned that assessee has claimed deduction u/s. 24(b) of the Act of Rs.. 11,83,44,908/- and assessee has not furnished documentary evidences in support of its claim during the assessment proceedings. Further, he mentioned that on perusal of notices issued u/s 142(1) dated 30.09.2019 and 10.12.2019, that Assessing Officer has not raised any query on deduction claimed u/s 24(b) in its return of income. The Assessing Officer did not make any further verification on this issues. He also mentioned that as per the provisions of section 24(b) no deduction is to be allowed to an assessee in absence of the requisite certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we invite your Honour's attention to the fact that the finance cost debited to the profit and loss account is Rs. 20,19,03,981/-. The said amount along with other expenses have been apportioned between the income from house property' and 'income from business and profession' - a detailed working of apportionment of expenditure between various heads of income forms part of our statement showing computation of total income, which was filed with the Assessing Officer during the course of the assessment proceedings vide letter dated 03 October 2019 a copy of the said letter along with the statement showing computation of total income is also forwarded herewith for your Honour's ready reference- refer " Appendix-I". 7. For your Honour's ready reference, we reproduced hereunder the apportionment of the finance cost from the aforesaid statement showing computation of total income Debited to the profit and loss account Claimed under business income Claimed under house property income Finance Cost 20,19,09,981 8,35,59,073 11,83,44,908 {The calculation of Ratio is given below) 100% 41.3855% 58.6145% Ratio: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." 2. On a plain reading of the above it is clear that the power to revise u/s. 263 of the Income tax Act, 1961 can be invoked only if the following two conditions are satisfied * * the Order of the Assessing Officer sought to be revised is erroneous and * it is prejudicial to the interests of the Revenue 3. In this case the Assessment Order dated 25 December 2019 passed is neither erroneous nor is prejudicial to the interest of the revenue since the same has been passed in accordance with the provisions of the Income-tax Act, 1961. 4. In this connection your Honour's attention is invited to the meaning of the term Erroneous Assessment' as given on page 542 of Black 's Law Dictionary: 'Erroneous Assessment refers to an assessment that deviates from the law and is therefore invalid and is a defect that is jurisdictional in its nature, and does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents. He observed that vide its letter dated 15.03.2022, the assessee has submitted copy of term loan agreement evidencing that it had taken term loan from HSBC Bank Ltd., against hypothecation of some property at Pune. As per clause of Facility Advise Letter, in Annexure 1d which is Schedule IV Master Schedule which is defined in Annexure 1d, however, assessee has not annexed the Annexure 1d. Assessee has furnished loan agreements for term loan and overdraft facility and nowhere in this document it is stated that these loans are for acquisition or construction of properties in connection with which rental income is received and deduction u/s. 24(b) of the Act is claimed. 6. Further, Ld. Pr.CIT observed that in submissions assessee has stated that purpose of the loan is to "finance of existing term loan, additional capital expenditure or any other loan as per RBI guidelines". He observed that there is no mention of any building or property for acquisition or construction of which the loan would be used. Further, he observed that the assessee has submitted an email confirmation from bank about payment of interest made by assessee however, he observed that confirmation by Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Order dated 29 March 2022 u/s. 263 of the Income-tax Act, 1961. 1:2 The Principal Commissioner of Income-tax has erred in holding that the Assessment Order dated 25 December 2019 passed by the Assessing Officer was erroneous and prejudicial to the interests of revenue. 1:3 The Appellant submits that the impugned Order u/s. 263 of the Principal Commissioner of Income-tax be struck down. Without prejudice to the aforesaid: 2.0 Re: Disallowance of Rs. 11,83,44,908/-- being interest expense u/s. 24(b); 2:1 The Principal Commissioner of Income-tax has erred in holding that the interest expenditure of Rs. 11,83,44,905/- is not allowable u/s. 24(b) of the Income-tax Act, 1961. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the interest expenses amounting to Rs. 11,83,44,908/- is allowable under the head income from house property' while computing its total income for the year and the stand taken by the Principal Commissioner of Income-tax in this regard is erroneous and not in accordance with law. Without prejudice to the foregoing: 2:3 The Principal Commissioner of Income-tax has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Year in [Page No. 175 of the Paper Book] wherein assessee has declared revenue from operation and submitted that it consists of sale of residential flats, sale of services and other operating income [Page No. 190 of the Paper Book]. He also brought to our notice sale of services includes licence charges, common area maintenance receipts. At the same time, he also brought to our notice Page No. 191 of the Paper Book which is the finance costs and assessee has incurred the total interest expenditure of Rs.. 19.75 crores and brought to our notice Page No. 204 of the Paper Book which is computation of statement of property income in which assessee has claimed interest deduction u/s. 24(b) of the Act and the basis of allocation. Ld. AR of the assessee has submitted that without prejudice that even if the interest expenditure claimed by the assessee is not allowed u/s. 24(b) still assessee is eligible to claim the deduction u/s. 37 of the Act. 14. Considered the rival submissions and material placed on record, we observe that while verifying the assessment records the Ld. Pr.CIT observed that assessee has claimed interest expenditure u/s. 24(b) of the Act and according to him ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n individual who intend to claim deduction u/s. 23(2) of the Act. Therefore, the proviso contained in section 24(b) is not applicable to assessee who borrows the capital for the purpose of earing income by letting out the property under the head "income from house property". Therefore, the interpretation of third proviso to 24(b) in isolation is not proper and we are not inclined to agree with the findings of the Ld. Pr.CIT u/s. 263 of the Act. As per the facts on record, we observe that assessee is in business of construction and letting of the property as well as maintenance of the property, in such combined business, it is normal in the construction business to borrow the capital for the overall business and apportion the same based on the head of income. It is not in dispute that assessee has paid the relevant interest to the bank. 18. We observe from the record that Assessing Officer has collected the information from the assessee and as per the assessment records there is no evidences to show that Assessing Officer has verified the same in detail. However, the assessee has submitted all the relevant information, the basis of allocation before the Assessing Officer. Even othe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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