Assessment treats one house as self-occupied under s.23(4); others deemed let-out, fair rental valuation sustained, loan interest remanded for verification

ITAT, Ahmedabad upheld the assessment treating only one house as self-occupied under s.23(4), holding other properties as deemed let-out and sustaining additions based on fair rental valuation derived from comparable market data and property portals. The disallowance of housing loan interest for lack of sanction letters and interest certificates was set aside for limited remand: the matter is restored to the AO to verify bank certificates and loan statements, and to allow the deduction if substantiated.

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ISSUES PRESENTED AND CONSIDERED

1. Whether, where an assessee owns more than one house property, properties other than the one treated as self-occupied can be assessed as deemed let-out and whether estimation of fair rental value based on online market/comparable data is permissible in the absence of municipal valuation or credible evidence from the assessee (Section 23(4)).

2. Whether deduction of interest on housing loan under Section 24(b) can be disallowed for want of supporting documentation and, if so, whether the matter should be remanded for limited verification on production of bank/loan certificates and interest statements.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Deemed Rental Income for Multiple Properties; Reliance on Online Market Data

Legal framework: Section 23(4) provides that when an assessee owns more than one house property only one may be treated as self-occupied and the others are to be treated as deemed let-out, taxable on the basis of reasonable expected rent (fair rental value) less permissible deductions.

Precedent treatment: The judgment does not apply, follow, distinguish, or overrule any specific precedent; resolution rests on statutory provision and factual matrix.

Interpretation and reasoning: The Court accepted as undisputed that more than one house property was owned and that the assessee designated only one as self-occupied. The assessee failed to furnish credible evidence (e.g., proofs of occupation, municipal/other authoritative valuations, or documentary proof of uninhabitability) to rebut the statutory deeming under Section 23(4). In that evidentiary vacuum, the Assessing Officer resorted to estimation of fair rental value using comparable market data obtained from property portals. The Tribunal found this methodology reasonable and not impermissible when authentic municipal valuations or comparable rental evidence are not produced by the assessee. The Tribunal treated the AO's reliance on online property-portal data as a permissible and pragmatic approach to determine expected rent in the absence of better data from the assessee.

Ratio vs. Obiter: Ratio - It is a correct exercise of the taxing power under Section 23(4) to treat surplus properties as deemed let-out where the assessee fails to prove self-occupation or uninhabitability; in such circumstances estimation of fair rent using available market/comparable data (including online portals) is permissible. Obiter - No extended dicta on limits of types or sources of market data beyond the factual acceptance of property-portal data in the present record.

Conclusion: The addition of deemed rental income of Rs. 2,82,090 (computed from two properties) is upheld. The Tribunal found no infirmity in the AO's and first appellate authority's approach and confirmed the deemed rental inclusion under Section 23(4).

Issue 2 - Disallowance of Housing Loan Interest for Want of Evidence; Remand for Limited Verification (Section 24(b))

Legal framework: Section 24(b) allows deduction of interest on borrowed capital used for acquisition, construction, repair, renewal or reconstruction of a house property, subject to statutory limits and proof of the loan and interest payment as required by the assessing authority.

Precedent treatment: No precedents are cited; the Tribunal's approach is grounded in principles of documentary proof and opportunity to substantiate deductions.

Interpretation and reasoning: The AO disallowed housing loan interest of Rs. 10,13,201 for want of supporting documentary evidence such as loan sanction letters and interest certificates. The first appellate authority confirmed the disallowance. The Tribunal recognized the technical correctness of requiring proper documentary proof to substantiate a deduction under Section 24(b) but, weighing equitable considerations, directed a limited remand to permit the assessee to produce bank certificates and loan statements. The Tribunal did not substitute its own factual finding on the existence or correctness of the claim; instead it restored the issue to the file of the AO for verification of the documents and assessment of entitlement in accordance with law after such verification.

Ratio vs. Obiter: Ratio - Requirement of credible documentary proof (loan sanction letter, bank interest certificates, loan statements) is material to allow interest deduction under Section 24(b); however, where such proof is not on record at the time of assessment, the matter may be remitted for limited verification rather than being finally negatived if the assessee is given an opportunity to produce the documents. Obiter - The Tribunal's grant of another opportunity is guided by "interest of justice" language specific to the case facts rather than a blanket rule that all such disallowances must be remanded.

Conclusion: The disallowance is not finally sustained; the Tribunal restored the issue to the Assessing Officer for limited verification. On production of relevant bank certificates and loan statements, the AO is directed to allow deduction as per law after due verification.

Cross-References and Interaction Between Issues

The Tribunal treated the two issues distinctly: the deemed rental determination for surplus properties was affirmed on the record and on the assessee's failure to rebut the statutory deeming under Section 23(4), whereas the interest disallowance under Section 24(b) was reopened for document-based verification. The confirmation of deemed rent does not preclude allowance of interest on housing loan if the necessary evidence is subsequently produced and verified by the AO in accordance with law.

Disposition

The appeal was partly allowed for statistical purposes: deemed rental addition upheld; housing loan interest claim remitted to the Assessing Officer for limited verification and adjudication upon production of supporting bank/loan documents.

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