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2021 (8) TMI 686 - AT - Income TaxRevision u/s 263 by CIT - claim for deduction of interest expenditure - interest expenditure on the capital borrowed for purchase /acquisition of the property - HELD THAT - There would be no gainsaying that as per the Proviso to Sec. 36(1)(iii) of the Act, verification of the fact as to when the aforesaid new property, viz. Property Nos. 1001 and 1702 at Brindavan Terrace, Mumbai was occupied and put to use by the assessee for the purpose of his profession was indispensably required to have been done by the A.O for determining of the interest expenditure on the capital borrowed for purchase /acquisition of the said property, that would be allowable as a deduction, which we find he had failed to do. Apart from that, we concur with the Pr. CIT that the A.O had also failed to verify the claim of the assessee that the balance amount of interest expenditure pertained to the loans that were raised by the assessee for acquiring/purchasing the other three office premises of his at South Mumbai, Delhi and Chembur in the earlier years. As regards the claim of the ld A.R that the A.O in the course of the assessment proceedings had duly verified the assessee s claim for deduction of the interest expenditure, we are unable to persuade ourselves to accept the same. As is discernible from the reply dated 04.02.2017 filed by the assessee in compliance to the queries that were raised by the A.O u/s 142(1), dated. 29.01.2017, we find, that the assessee had therein only furnished the bifurcated details of the interest expenditure with reference to the banks/financial institutions from whom the same were raised. We are of a strong conviction that no infirmity emanates from the order passed by the Pr.CIT, who had rightly observed that the A.O without verifying the assessee s claim for deduction of interest expenditure had summarily accepted the same on the very face of it. Our aforesaid conviction is fortified by the Explanation 2(a) to Sec. 263 of the Act, as per which, where an order is passed by an A.O without making an inquiry and verification which in the opinion of Principal Commissioner or Commissioner should have been made, the order therein passed by him shall be deemed to be erroneous in so far it is prejudicial to the interest of the revenue. We, thus, are of the considered view that the Pr.CIT had rightly set-aside the assessment order passed by the A.O u/s 143(3), dated 18.03.2020, with a direction to him to pass a fresh assessment order after considering the aforesaid issue and allowing an opportunity of being heard to the assessee - Appeal filed by the assessee is dismissed.
Issues Involved:
1. Whether the Principal Commissioner of Income Tax (Pr.CIT) erred in initiating proceedings under Section 263 of the Income Tax Act, 1961. 2. Whether the assessment order passed by the Assessing Officer (A.O) was erroneous and prejudicial to the interest of revenue. 3. Whether the Pr.CIT provided adequate opportunity of being heard to the assessee. Issue-wise Detailed Analysis: 1. Initiation of Proceedings under Section 263: The assessee contended that the Pr.CIT erred in initiating proceedings under Section 263 as the issue in question had already been examined by the A.O. The A.O had accepted the assessee's returned income after proper inquiry and verification. The Pr.CIT, however, observed that the A.O had allowed the assessee’s claim for deduction of interest expenditure of ?79,67,173/- without proper verification. The Pr.CIT noted discrepancies, such as the purchase of two flats and the claim of interest deduction related to a flat on which no depreciation was claimed, suggesting it was self-occupied. The Pr.CIT concluded that the assessment order was erroneous and prejudicial to the interest of revenue, justifying the initiation of proceedings under Section 263. 2. Erroneous and Prejudicial to Revenue: The Pr.CIT observed that the A.O failed to verify whether the properties for which interest deductions were claimed were used for business purposes. The assessee had purchased two office premises but did not claim depreciation on them, indicating they might not have been used for business purposes. The Pr.CIT found that the A.O did not verify the details of the loans and interest deductions claimed. The Pr.CIT noted that the assessee failed to provide sufficient documentary evidence to support the claim that the properties were used for business purposes during the year under consideration. Consequently, the Pr.CIT deemed the assessment order erroneous and prejudicial to the interest of revenue. 3. Adequate Opportunity of Being Heard: The assessee argued that the Pr.CIT did not provide sufficient opportunity of being heard during the proceedings under Section 263. However, the tribunal found no evidence to support this claim. The tribunal noted that the Pr.CIT had issued a show-cause notice and the assessee had responded. The tribunal concluded that the Pr.CIT had provided adequate opportunity for the assessee to present his case. Conclusion: The tribunal upheld the Pr.CIT’s decision to set aside the assessment order and directed the A.O to pass a fresh assessment order after considering the issues and allowing an opportunity of being heard to the assessee. The tribunal found no infirmity in the Pr.CIT’s order, emphasizing that the A.O had failed to verify the assessee’s claim for deduction of interest expenditure adequately. The appeal filed by the assessee was dismissed.
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