SRI ALFRED CHRISPANOUS,MANGALURU vs. DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) CIRCLE-2(2), BANGALORE

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ITITA 776/BANG/2022Status: DisposedITAT Bangalore20 January 2023AY 2018-196 pages
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What did the Tribunal hold?

The Tribunal held that the Assessing Officer (AO) had not followed the directions of the Dispute Resolution Panel (DRP) in the final assessment order. Specifically, the AO failed to adhere to the DRP's directions concerning the allowance of claims under Section 24(a) and 24(b) of the Act, and the deduction under Section 80C. The Tribunal noted that the assessee was an NRI and that COVID-19 pandemic restrictions were in force. Considering the submissions and the DRP's directions, the Tribunal decided to remand the issues back to the AO. The AO was directed to follow the DRP's directions as per specific paragraphs cited in the judgment (2.1.16, 2.1.17, 2.1.18, 2.1.8, 2.1.10, 2.1.15, and 2.1.19). The assessee was directed to produce necessary documents, and the AO was mandated to provide a reasonable opportunity of being heard. All grounds raised by the assessee were allowed for statistical purposes.

What were the facts?

The assessee, Shri Alfred Chrispanous, filed an appeal before the Income Tax Appellate Tribunal (ITAT) challenging the final assessment order passed by the Assessing Officer (AO) under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the Assessment Year 2018-19. The assessee declared Nil income in his return. The AO, after scrutiny, determined the Annual Lettable Value (ALV) for various properties. The assessee filed objections before the Dispute Resolution Panel (DRP), which issued directions to the AO. However, the assessee contended that the AO failed to follow these directions in the final assessment order, particularly concerning deductions under Section 24(a) and 24(b) of the Act, and deduction under Section 80C. The assessee also cited a delay of 96 days in filing the appeal, attributing it to COVID-19 restrictions, which the Tribunal condoned.

What were the issues?

1. Whether the AO erred in not following the directions of the Honourable DRP regarding the allowance of claims under Section 24(a) and 24(b) of the Act, and Section 80C of the Act? (Question of law and fact, concerning Sections 24(a), 24(b), and 80C of the Income Tax Act, 1961). Assessee's Contentions: - The AO grossly erred in not following the directions of the Honourable DRP regarding claims under Section 24(a) & (b) and Section 80C. - The AO arbitrarily fixed fair rentals based on conjecture without a rational basis. - The AO failed to allow statutory deduction of 30% of rental value u/s 24(a). - The AO failed to allow the claim of interest paid on House property amounting to Rs.39,52,023/- and carry forward of loss as directed by the DRP. - The AO failed to allow deduction u/s 80C for repayment of housing loan as directed by the DRP. - The AO did not provide a proper opportunity to the assessee, giving only 7 days to reply to a show cause notice. - The assessee requested the matter be remanded back to the AO to follow DRP directions. Revenue's Contentions: - The learned DR relied on the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 24(a),Section 24(b),Section 80C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENGALURU (SMC

Before: Shri Laxmi Prasad Sahu

For Appellant: Shri B.R. Kamath
For Respondent: Shri Ganesh R. Ghale
Hearing: 11.01.2023Pronounced: 20.01.2023

IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU (SMC) “C” BENCH, BENGALURU Before Shri Laxmi Prasad Sahu, Accountant Member IT(IT)A No. 776/Bang/2022 (Assessment Year: 2018-19)

Shri Alfred Chrispanous vs DCIT (IT), Circle - 2(2) 1601, 16th Floor, Ashirvad BMTS Building, 2nd Floor Maharaja Heights, 16th Floor Koramangala Falnir Road, Mangaluru 575002 Bengaluru 560095 PAN – AMQPC3218C (Appellant) (Respondent) Assessee by: Shri B.R. Kamath Revenue by: Shri Ganesh R. Ghale Date of hearing: 11.01.2023 Date of pronouncement: 20.01.2023 O R D E R Per: L.P. Sahu, A.M. This appeal is filed by the assessee against the final assessment order passed by the AO under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act) dated 28.01.2022.

2.

The assessee has raised the following grounds of appeal: - “1. The order of the learned AO is against the law, fact and circumstances of the case. 2. The learned AO has grossly erred in not following the directions of Honourable DRP 1 in its order dated 21.12.2021. 3. The learned AO has arbitrarily fixed the fair rentals of 002, Maharaja Heights based on conjecture & surmises without providing any rational basis or logic in his order. 4. The learned AO has grossly erred in arbitrarily fixing the fair rentals of residential house at 17-20-1458 situated at Falnir,

2 IT(IT)A No. 776/Bang/2022 Shri Alfred Chrispanous Mangalore based on conjecture and surmises without providing any rational basis or logic in his order. 5. The learned AO has grossly erred in not allowing the statutory deducting of 30% of the rental value u/s. 24(a) of the Act for both the properties. 6. The learned AO has grossly violated the direction of the Honourable DRP to allow the claim of interest paid on House property amounting to Rs.39,52,023/- and allow the carry forward of loss Rs.37,52,023 to further years for set off as provided in law. 7. The learned AO has grossly erred in not allowing the deduction u/s. 80C in respect of repayment of Housing loan up to Rs.1,50,000/- as provided under the law and as directed by the DRP.” 3. There is a delay of 96 days in filing the appeal before the Tribunal considering to the judgment of Hon’ble Apex Court decision. The learned A.R. submitted the delay was due Covid-19 restrictions. Therefore, following the Supreme Court decision of Collector, Land Acquisition Vs. MST. Katiji and Others (1987) 167 ITR 471 (SC), we are of the view that there was reasonable cause for the delay in filing the appeal and condone the delay.

4.

The brief facts of the case are that the assessee filed return of income on 30.08.2018 declaring total income at Nil. The return was processed under Section 143(1) of the Act. The case was selected for scrutiny and notices under Section 143(2) of the Act are issued to the assessee and subsequently other notices were also issued to the assessee. From the details filed by the assessee it was seen that the assessee admitted income in respect of the following properties as under: - Sl. No. Property Income 1 1601, Maharaja Heights, Falnir Road, Nil Mangalore 2 2, Maharaja Heights, Falnir Road, Dakshina 8,400 Kannada 3 14-6-674/9, Light House, Hill Road, Dakshina Nil Kannada 4 17-20-1458, Falnir Road Daskhina Kannada (-39,18,423)

3 IT(IT)A No. 776/Bang/2022 Shri Alfred Chrispanous The AO, from the website observed that the rental accommodation in the area ranges from Rs.8,000/- to Rs.20,000/- per apartment depending upon the built up area. In respect of Light House Hill Road property the assessee received rent in the preceding year of Rs.2,49,000/- and he also observed that the assessee had made a claim of interest u/s 24(b) on borrowed capital of Rs.39,52,023/- and a loan certificate issued by the Corporation Bank was also submitted. According to the bank certificate the assessee had taken loan of Rs.4,47,75,000/- which was sanctioned on 28.10.2016 but proof for utilization of loan could not be established .

5.

The AO after examining the details of the issue determined the Annual Lettable Value (ALV) as under: -

Item Maharaja Heights Falnir Light Hill Road Apartment Road Property Property Rent 96,000 4,20,000 2,52,000 Less 30% u/s. 24 of the Act 28,800 1,26,000 75,600 Balance taxable income 67,200 2,94,000 1,76,400 Less already offered for tax 29,18,423 Additional amount brought to tax 58,800 42,12,423 1,76,400

Hence property No. 1 was allowed a self occupied property and no income was calculated. Accordingly the AO passed draft assessment order on 25.03.2021. Aggrieved by the draft assessment order the assessee filed objections before the ld. DRP. The ld. DRP gave directions to the AO and allowed marginal relief to the assessee and after considering the remand report, directed the AO on other points also which is as under: - 2.1.16 Having considered the submissions, In respect of the claim of interest on borrowed capital relating to "Falnir" property amounting to Rs.39,52,023, the AO in the draft order under section 144C observed that the nexus between the interest accrued and the loan taken for purchase of property has not been established by the assessee. In this regard a remand report was called for from the AO. 2.1.1.7 Assessing Officer vide remand report dated 21.09.2021 stated that "The assessee has furnished copy of the bank statement which shows the utilization of the loan funds towards the acquisition of the property and the claim of the assessee is rendered admissible which has already been brought out at para 13 of the draft assessment order, The Panel may therefore consider allowing the objections on this count as per law.

4 IT(IT)A No. 776/Bang/2022 Shri Alfred Chrispanous It is also submitted that it appears that the assessee has not taken into account the fact that the carry forward of loss which was claimed on account of interest also requires to be considered. It is to be noted that the claim of interest is fully made and the loss so arrived at is set off only to the extent of Rs 2 lakhs and the balance carried forward due to the limiting fiction created in the statue for current year claim and future year claims of losses. The issue is rendered academic in the wake of the evidence adduced by the assessee during the proceedings before the DRP and the remand proceedings as brought out para 4 above," 2.1.18 The ground taken by the assessee in this regard is allowed after taking into account the remand report of the AO and the AO is directed to allow the claims of the assessee.” 6. The ld. DRP also gave directions for giving deduction under Section 80C of the Act after verifying the claim of the assessee. After receipt of the DRP directions the AO passed final assessment order on 28.01.2022. Aggrieved by the final assessment order the assessee is in appeal before the Tribunal.

7.

The learned A.R. submitted that the AO did not follow the direction of DRP for allowing the claim under Section 24(a)&(b) of the Act and he has also not allowed deduction as per Section 80C of the Act on repayment of housing loan. These are gross negligence made by the AO by passing the final assessment order. He submitted that the AO while passing the final assessment order did not give proper opportunity to the assessee. He gave only 7 days time to reply to the show cause notice whereas he took more 4 months to raise queries in the show cause notice. The assessee is an NRI and employed in Dubai and there was also Covid-19 pandemic period . He submitted that the assessee had sufficient material to prove the genuineness of the income shown in his return of income. Therefore he requested that the matter may be remitted back to the AO for following the direction of the ld. DRP and decide the issue as per law. The learned A.R. also filed a small paper book containing 8 pages.

8.

On the other hand, the learned D.R. relied on the orders of the lower authorities.

5 IT(IT)A No. 776/Bang/2022 Shri Alfred Chrispanous 9. After hearing the rival submissions, I observed that the assessee had shown income from house property which the AO has not accepted. During the impugned year the assessee was owner of four properties which are as under: -

S.No Description and Name, Address, Covered Area Self- Address of Property PAN of the Occupied Tenant or Let Out 1 Apartment 1601, NA 1785 sq.ft. SOP Maharaja Heights, Falnir Road, Mangalore 2 Apartment 002, NA 736 sq.ft Deemed Let Maharaja Heights, OUT Falnir Road, Mangalore 3 14-6-674/9, Maximas VACANT 383 sq.ft VACANT Complex, LHH Rd, Mangalore 4 17-20-1458, Falnir VACANT 4710 sq.ft Deemed Road, Managlore Let Out

From the above four properties the assessee has chosen property No. 1 as self occupies property. Property No. 2 was deemed to be let out @Rs.1,000/- per month and has shown rental income of Rs.12,000/-. Property No. 3, was vacant and no income has been offered by the assessee and in respect of property No. 17-20-1458 Falnir Road, Mangalore, which was vacant and deemed to the let out @ Rs.4,000/- per month resulting annual letting value of Rs. 48,000/-. From property No. 4 assessee claimed deduction under Section 24(a) of the Act of Rs.14,400/- and under Section 24(b) of the Act of Rs.39,52,023/-. Accordingly there is a loss of Rs.39,10,023/- restricted to Rs.2,00,000/- and the balance loss was carried forward for future years. The ld. DRP, after examining the details, given directions but the AO did not follow the same. Considering the above directions I also direct the AO to follow the direction of the ld. DRP as per paras 2.1.16, 2.1.17 and 2.1.18.

6 IT(IT)A No. 776/Bang/2022 Shri Alfred Chrispanous 10. Further from the submissions it was observed that the assessee was an NRI and Covid-19 pandemic restrictions were in force during that period. The assessee has also produced paper books containing SAS form for properties with buildings which is placed on pages 11 to 18. The ld. DRP has also directed to AO in his order at para No. 2.1. 8, 2.1.10 & 2.1. 15. Considering the prayer of the assessee this issue is also remanded back to the AO for determination of fresh ALV in line with the directions of ld. DRP. The assessee is directed to produced necessary documents to substantiate his claim and needless to say that reasonable opportunity of being heard be given to the assessee.

11.

Further the assessee has also raised the issue that the AO had not followed the directions of the DRP for giving deduction u/s 80C. In this regard I direct the AO to follow the direction of the DRP as per para 2.1.19. 12. To sum up, all the grounds raised by the assessee is allowed for statistical purposes. 13. In the result, the appeal filed by the assessee is allowed for statistical purposes. Dictated and pronounced in the open Court on 20th January, 2023.

Sd/- (LAXMI PRASD SAHU) Accountant Member Bengaluru, Dated: 20th January, 2023 Copy to: 1. The Appellant 4. The CIT - 2. The Respondent 5. The DR, ITAT, Bengaluru 3. The CIT(A) - 6. Guard File By Order //True Copy// Assistant Registrar ITAT, Bengaluru n.p.

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