TaxTMI 
TaxTMI 
2023 (11) TMI 690
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....f Commercial leasing which includes IT Park an IT/ITES 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....
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....dix- H". Accordingly, we have to request your Honour to grant us a period of around 8-9 days to furnish the same. 6. Be that as it may, 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 ....
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....the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing) Officer is erroneous in so far as It is prejudicial to the Interests of the revenue, he may, after giving the assessee 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 inv....
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....f the assessee, Ld. Pr.CIT observed that assessee has not submitted the Interest Certificate from the Bank during the course of assessment proceedings, nor during the proceedings u/s. 263 of the Act. Further, he observed that onus lies on the assessee to substantiate any claim made in the return of income with substantiating 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 ....
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....iscussed in his order and frame the order of assessment denovo, after giving adequate opportunity of being heard to the assessee. 10. Aggrieved, assessee preferred appeal before us and raised following grounds in its appeal: - "1:0 Re: Validity of Order u/s. 263: 1:1 The Principal Commissioner of Income-tax has erred in passing 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....
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....ed its stud farm business undertaking w.e.f 01.04.2007, Ld.DR heavily relied on the findings of the Ld.Pr.CIT and he submitted that Ld. Pr.CIT is justified in invoking provisions of section 263 of the Act in this case. 13. On the other hand, Ld. AR in the rejoinder submitted that it is now engaged only in real estate development and brought to our notice Profit and Loss Account statement for the current Assessment 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 wit....
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....red a constructed with the borrowed capital [within five years from the end of the Financial Year in which capital was borrowed] the amount of deduction shall not exceed two lakhs rupees. 17. The third proviso is also closely linked to the proviso 1 and 2 and gives certain contingencies in order to claim the deduction mentioned in proviso 1 and 2 therefore all the proviso mentioned in section 24(b) are relation to an 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....