2018 (3) TMI 890 - AT - Income Tax

Revision u/s 263 - AO has not called for and taken on record all the necessary details, has not even examined the bank statement of the assessee company to see whether the interest was paid to the directors or whether the TDS was deducted on that or not, and has not sought any detail as to whether the loans were utilized for the purpose of construction at 3, Kapashera Estate, the rented property or the other property at 3A, Kapashera Estate - Held that - There was no want of enquiries on the part of the Ld. assessing officer and as a matter of fact all the relevant material was submitted before the Ld. CIT also. However, without adverting to the circumstances and material pleaded by the assessee, Ld. CIT has recorded a finding that the AO has not called for and taken on record all the necessary details of the Ld. assessing officer has not even examined the bank statements of the assessee company to see whether the interest was paid to the directors or whether the tedious was directed or not. Further, when the explanation was offered by the assessee wide letter dated 08/02/2017, Ld. CIT recorded a finding that the details as to whether the loans were utilized for the purpose of construction at 3, Kapashara estate the rented property or the other property. All the details were available before the Ld. CIT. In the circumstances, we find that the exercise of revision proceedings by the Ld. CIT is not justified - Decided in favour of assessee.

Summary

Issues:
1. Revision under Section 263 of the Income-tax Act, 1961 regarding deduction of interest against rental income.
2. Adequacy of enquiry by the Assessing Officer.
3. Verification of interest payment to directors and TDS deduction.

Issue 1: Revision under Section 263
The appeal was filed against the order of the Principal Commissioner of Income-tax -9, New Delhi, passed under Section 263 of the Income-tax Act, 1961. The Principal Commissioner noticed that the assessee claimed a deduction of interest payable under Section 24(b) of the Act without proper documentation. The Principal Commissioner doubted the admissibility of the interest claim against rental income and questioned if the loan amount was used for property construction. The Principal Commissioner concluded that the assessment by the Assessing Officer was erroneous and prejudicial to revenue due to inadequate details and lack of verification.

Issue 2: Adequacy of Enquiry
The Assessing Officer was criticized for not obtaining necessary details, not examining bank statements, and not verifying if loans were used for property construction. The assessee argued that sufficient evidence was provided, and the Principal Commissioner's decision for de novo assessment was unwarranted. The Tribunal agreed that the Assessing Officer had made adequate enquiries and all relevant material was submitted, thus quashing the revision proceedings.

Issue 3: Verification of Interest Payment
The dispute also involved whether interest was paid to directors and TDS was deducted. The Tribunal examined TDS returns and bank receipts, concluding that proper documentation existed. The Tribunal found no justification for the Principal Commissioner's doubts regarding interest payment verification. The Tribunal held that revision proceedings were unjustified, leading to the quashing of the impugned order and allowing the appeal of the assessee.

In summary, the Tribunal ruled in favor of the assessee, determining that the revision under Section 263 was unwarranted due to the adequacy of the Assessing Officer's enquiries and the availability of relevant documentation. The Tribunal found no fault in the interest payment verification process, ultimately allowing the appeal and quashing the impugned order.