2016 (7) TMI 511 - AT - Income Tax

Revision u/s 263 - loss from house property which was set off from income of business and profession need to disallowed as there was no scope for taking possession of the flat in the financial year 2011-12 and claiming the loss in-house property - Held that - We find that the assessee had purchased a residential unit, vide agreement dated 08/09/2011, for ₹ 1. 06 corrodes, that he had taken a loan of ₹ 90. 54 lakhs from a bank, that he had submitted the copies of agreement for purchase of the flat along with the loan agreement and the confirmations of the family members who had advanced loan to him , that during the assessment proceedings the AO had directed the assessee in his notice issued u/s. 142 (1) to file details of investments made during the year, that the AO had also directed the assessee to explain as to why disallowance should not be made in respect of the income from house property where the assessee had declared the loss of ₹ 3, 00, 990/-(page 16 of PB). We find that the AO had made proper enquiries about the house property income and the loss claimed by the assessee during the assessment proceedings. After considering the available material the AO had arrived at a definite conclusion. In our opinion, the assessment passed by the AO with regard to house property income and loss claimed by the assessee cannot be termed as erroneous or prejudicial to interest of revenue. Revision order dismissed - Decided in favour of assessee

Issues:
1. Assessment u/s. 263 of the Act challenged by the assessee.
2. Claimed loss from house property set off against income of business and profession.
3. CIT found AO's order erroneous and prejudicial to revenue.
4. CIT directed AO to disallow the claimed loss and decide the issue afresh.
5. Assessee argued AO's order was not erroneous or prejudicial.
6. Assessee provided documents supporting possession of the flat.
7. Tribunal found AO's assessment regarding house property income not erroneous.
8. Tribunal referred to the judgment of the Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd.
9. Tribunal set aside CIT's revisionary order and allowed the appeal.

Analysis:
1. The assessee challenged the assessment under section 263 of the Act, where the AO determined the income and allowed the claimed loss from house property to be set off against business income. The CIT found the AO's order erroneous and prejudicial to revenue, leading to a show cause notice proposing to revise the order.

2. The CIT, upon examination, found discrepancies in the claimed loss from the house property. Despite the assessee providing documents like a letter from the builder and an electricity bill, the CIT concluded that the possession of the flat was not established, rendering the claim ineligible. Consequently, the CIT directed the AO to disallow the loss and reconsider the issue.

3. During the hearing, the assessee argued that the AO's order was not erroneous or prejudicial, emphasizing the documentation provided. The Tribunal noted that the AO had conducted proper inquiries regarding the house property income and the claimed loss, arriving at a valid conclusion. The Tribunal referenced the Malabar Industrial Company Ltd. judgment and concluded that the CIT's revisionary order was against the mandate of the section.

4. The Tribunal highlighted that the AO's treatment of the house property income and interest expenditure was in line with the Act, with no apparent mistakes in the order. The Tribunal emphasized that the AO had taken an appropriate view considering the circumstances, leading to the decision to set aside the CIT's revisionary order and allow the appeal filed by the assessee.

5. In conclusion, the Tribunal ruled in favor of the assessee, setting aside the CIT's revisionary order and upholding the AO's assessment regarding the house property income and claimed loss. The judgment referenced legal principles and the specific facts of the case to reach a decision beneficial to the assessee.

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