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Facts
The assessee claimed an interest expense of Rs. 53,09,817/- under 'income from house property'. The AO disallowed this deduction as the assessee failed to provide necessary certificates and details regarding the loan. This led to the disallowance and completion of assessment at Rs. 1,536/-.
Held
The Tribunal admitted additional evidences submitted by the assessee, stating there was sufficient reason for their late submission due to circumstances beyond control and directions from the Hon'ble Karnataka High Court. The issue was remitted back to the AO for examination and decision.
Key Issues
Whether the interest expense deduction u/s 24(b) was rightly disallowed by the lower authorities? Whether additional evidence produced by the assessee should be admitted and considered?
Sections Cited
24(b), 143(3), 142(1), 250
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Income Tax Appellate Tribunal, “SMC’’BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 24.01.2025 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1072516062(1) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2018-19.
The assessee has raised the following grounds of appeal:
1. The orders of the lower authorities are opposed to law, facts and circumstances of the case.
2. The orders of the lower authorities are passed in haste, without providing sufficient and reasonable opportunity of being heard.
3. The orders of the lower authorities are passed against the principles of natural justice and are liable to be quashed.
Page 2 of 6 4. The Ld. AO erred in disallowing deduction u/ s. 24(b) amounting to Rs. 53,09,817/- and the Ld.CIT(A) erred in confirming the same.
The lower authorities ought to have appreciated that deduction u/s. 24(b) is available on accrual basis and that the matter is pending before the Debt Recovery Tribunal.
The lower authorities failed to appreciate that the matter was sub judice and there was sufficient and reasonable cause which prevented the Appellant from obtaining relevant documents owing to circumstances on account of Covid-19 which prevailed at the time of framing the assessment.”
Brief facts of the case are that the assessee filed his return of income for the assessment year 2018-19 on 24.7.2018 declaring total income of Rs. NIL. Subsequently, the case of the assessee was selected for complete scrutiny under E-assessment scheme-2019 through CASS on the issue of “income from house property”. Consequently, notices u/s 143(2) as well as 142(1) of the Act was issued and the assessee had made part submissions. On perusal of the ITR filed by the assessee, the AO found that the assessee has claimed interest expense of Rs.53,09,817/-under head House property situated at No.113, Krishna Industrial Area, 7th Mile, Hosur Road, Bangalore. The assessee during the course of assessment proceedings submitted a copy of the order of Debt Recovery Tribunal only. The AO was of the opinion that the assessee failed to provide any details like Date, amount of loan taken and whether the borrowed capital was used for acquiring, constructing, repairing, renewing or reconstructing the property? Further, the AO was of the opinion that no deduction u/s 24(b) of the Act can be availed if the assessee failed to furnish such certificate as prescribed in proviso to section 24(b) of the Act. Since the assessee had submitted only the copy of Debt Recovery Tribunal’s order and did not furnish the certificate from the person to whom any interest is payable on the capital borrowed and hence
Page 3 of 6 the entire interest expense of Rs.53,09,817/- under the head “income from house property” by the assessee was disallowed u/s 24(b) of the Act. The AO accordingly completed the assessment on a total income of Rs.1,536/- u/s 143(3) of the Act after setting off the carry forward of loss for assessment year 2018-19 amounting to Rs.53,08,281/-.
Aggrieved by the assessment completed u/s 143(3) of the Act dated 27.3.2021, the assessee preferred an appeal before the ld. CIT(A)/NFAC.
5. The ld. CIT(A)/NFAC dismissed the appeal of the assessee as in spite of providing 6 nos. of opportunities, the assessee neither responded to any of the notices nor filed any detailed submission to substantiate her claim and accordingly the ld. CIT(A)/NFAC left with no option but to upheld the AO’s decision due to lack of further evidence supporting the assessee’s contention.
6. Again aggrieved by the order of ld. CIT(A)/NFAC, the assessee has filed present appeal before this Tribunal. The assessee has also filed a paper book comprising 51 pages containing therein the petition for admission of additional evidences, sanction letters issued by ING Vysya Bank, Assignment agreement between ING Vysya Bank Ltd and M/s Phoenix ARC Pvt. Ltd., Statement of dues on loans availed by the assessee issued by M/s. Phoenix ARC Pvt. Ltd., table summarizing the interest dues claimed by M/s. Phoenix ARC Pvt. Ltd. for F.Y 2017-18 along with statement of total income of the assessee for the assessment year 2018-19.
Before us, the ld. A.R. of the assessee vehemently submitted that the assessee by way of additional evidences has submitted the Page 4 of 6 sanction letters dated 09/09/2005 & 05/03/2007 issued by ING Vysya Bank for sanction of loan, Assignment agreement between ING Vysya Bank Ltd and M/s Phoenix ARC Pvt. Ltd., Statement of dues on loans availed by the assessee issued by M/s. Phoenix ARC Pvt. Ltd., table summarizing the interest dues claimed by M/s. Phoenix ARC Pvt. Ltd. for F.Y 2017-18. Further, the ld. A.R. of the assessee vehemently submitted that since the assessee was not in possession of these documents prior to the direction issued by Hon’ble Karnataka High Court, the same could not be furnished before the AO as well as before the ld. CIT(A)/NFAC and accordingly prayed to admit these additional evidences u/r 29 of the Income Tax Rules, 1961 and dispose the case on merits.
The ld. D.R. on the other hand has no objection if these additional evidences produced for the first time are remitted to the file of AO for examination and reconsideration.
We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that the case of the assessee was selected on the issue of “income from house property”. It is also an undisputed fact that the assessee had claimed deduction of Rs.53,09,817/- u/s 24(b) of the Act. It is also an undisputed fact that during the course of assessment proceedings the assessee could not produced the certificate from the person to whom any interest is payable on the capital borrowed. Now before us, the assessee by way of additional evidences produced sanction letters issued by ING Vysya Bank, Assignment agreement between ING Vysya Bank Ltd and M/s Phoenix ARC Pvt. Ltd., Statement of dues on loans availed by the assessee issued by M/s. Phoenix ARC Pvt. Ltd., table summarizing the interest dues claimed by M/s. Phoenix ARC Pvt. Ltd. for F.Y 2017-18 along with Page 5 of 6 statement of total income of the assessee for the assessment year 2018-19. The counsel for assessee vide petition dated 12/06/2025 submitted that these documents were made available to the assessee upon the directions of the Hon’ble Karnataka High Court during the course of hearing matters challenging the recovery proceedings initiated against the assessee. Since the assessee was not in possession of these documents prior to the directions issued by the Hon’ble Karnataka High Court, the same could not be furnished before the Authorities below. Under these circumstances, we are of the considered opinion that there is good and sufficient reason in not filing these additional evidences on earlier occasion before the lower authorities and accordingly, we admit these additional evidences. After admitting the same, in our opinion, these additional evidences are filed for the first time before this Tribunal and the AO had no occasion to examine these additional evidences. This being so, in the interest of justice and fair play and as requested by the ld. DR, we deem it fit and proper to remit the issue in dispute to the file of AO to examine & consider these additional evidences produced before us & decide in accordance with law. Needless to say, a reasonable opportunity of being heard must be granted to the assessee. It is ordered accordingly.
In the result, appeal filed by the assessee is partly allowed for statistical purposes.