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Facts
The assessee, owning four properties, declared only one as self-occupied. The AO deemed two other properties as let-out, adding Rs. 2,82,090/- as deemed rent, and disallowed Rs. 10,13,201/- for housing loan interest due to insufficient evidence. The CIT(A) confirmed both additions.
Held
The Tribunal upheld the deemed rental income addition of Rs. 2,82,090/-, finding the market-based estimation valid as per Section 23(4). However, it remanded the housing loan interest disallowance back to the AO, granting the assessee another opportunity to provide supporting documents for verification under Section 24(b).
Key Issues
Whether the addition of deemed rental income for properties treated as let-out was justified, and whether the disallowance of housing loan interest due to lack of evidence was correct.
Sections Cited
250, 23(4), 143(3), 144B, 24(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-SHRI T.R. SENTHIL KUMAR
PER DR. B.R.R. KUMAR, VICE-PRESIDENT :
This appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "CIT(A)" for short) dated 18.08.2025 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short], for Assessment Year (AY) 2018-19.
The grounds of appeal raised by the Assessee are as follows:-
“1. The learned CIT(A) erred in law and on facts in confirming the addition made by AO of Rs.2,82,090/- (1,30,970 + 1,51,120) being the deemed house rent income, such addition is requested to be deleted.
2. The learned CIT(A) erred in law and on facts in confirming the Housing Loan Interest disallowance of Rs.10,13,201/-, such deduction is requested to be allowed.”
The brief facts of the case are that the assessee filed his return for the year under consideration on 30.03.2019, declaring total income of Rs. 29,54,020/-. The case was selected for limited scrutiny under the e-Assessment Scheme, 2019, to verify income from house property and securities. The Assessing Officer noted that the assessee owned four immovable properties, namely—(i) Devnandan Platina, (ii) Dharnidhar Pride, (iii) Samatwa Bungalow, and (iv) Ambica House, but had disclosed only Devnandan Platina as a self-occupied property in his return of income. The Assessing Officer held that the other two properties, Samatwa Bungalow and Ambica House, were not self-occupied and accordingly determined deemed rent of Rs. 2,82,090/- on these properties based on market data. The Assessing Officer also disallowed the assessee’s claim of Rs. 10,13,201/- towards housing loan interest on the ground that supporting evidence such as interest certificates and loan details were not furnished. The assessment was completed under Section 143(3) r.w.s. 144B of the Act vide order dated 22.05.2021, determining total income at Rs. 32,36,110/-.
Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Ld. CIT(A) who confirmed both the additions in question made by the Assessing Officer.
Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.
Before us, the Ld. AR reiterated the submissions made before the lower authorities and contended that the Assessing Officer and Ld. CIT(A) erred in adopting notional rent based on online data instead of municipal valuations. He further submitted that interest deduction under section 24(b) should be allowed since the deemed rent was brought to tax.
The Ld. DR supported the findings of the lower authorities and submitted that both additions were correctly made in accordance with law.
We have carefully considered the rival submissions and perused the material available on record.
(i) Deemed Rental Income 8.1 It is an undisputed fact that the assessee owned more than one house property. As per Section 23(4) of the Act, only one property can be treated as self-occupied, while the others are to be treated as deemed let-out. The assessee failed to furnish credible evidence that the other two properties were self-occupied or uninhabitable. In such circumstances, estimation of fair rental value based on comparable market data cannot be faulted. The AO’s reliance on data from property portals was a reasonable approach in the absence of authentic municipal or comparable rental data from the assessee. Accordingly, we find no infirmity in the orders of the lower authorities. The addition of Rs. 2,82,090/- towards deemed rental income is hereby upheld.
(ii) Disallowance of Housing Loan Interest 8.2 As regards the interest deduction under section 24(b), the same was disallowed for want of supporting evidence such as loan sanction letters and interest certificates. In the interest of justice, however, we deem it appropriate to grant the assessee one more opportunity to substantiate the claim. Accordingly, this issue is restored to the file of the Assessing Officer for limited verification of necessary documents. The assessee shall produce relevant bank certificates and loan statements, and the Assessing Officer shall allow deduction as per law after due verification.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
The order is pronounced in the open Court on 13.11.2025