SMT. PRIYANKA GANGULY,KOLKATA vs. D.C.I.T.(IT)-CIRCLE-2(1), KOLKATA

Per Anikesh Banerjee, Judicial Member: The instant appeal of the assessee was filed against the order of Ld.

Commissioner of Income-tax (appeals)-22, Kolkata [in brevity ld. ‘CIT(A)’]

dated 30.09.2019passed u/s 250 of the Income Tax Act, 1961 (in brevity the

‘Act’) for assessment year 2016-17. The impugned order was emanated from

2 I.T.A. No.2619/Kol/2019 Assessment Years: 2016-17 Smt. Priyanka Ganguly the order of the ld. ACIT, Circle-2(1), Kolkata (in brevity the ‘AO’) passed u/s

143(3) of the Act dated 02.12.2018.

1.The appellant objects to the order dated 30 September 2019, (served on 22 October 2019)passed by the Commissioner of Income-tax (Appeals) - 22, Kolkata [hereinafter referred to asthe CIT(A)], on the following amongst other grounds: i. Restricting claim of Interest deduction against house property income up to 50% under section 24 of the Income-tax Act, 1961 (the Act) ii. The CIT(A) erred in confirming the action of the Deputy Commissioner of Income Tax (International Taxation), Circle - 2(1), Kolkata (hereinafter referred to as the DCIT) in restricting the claim of home loan interest deduction under section 24 of the Act to 50% only, though the entire repayment of housing loan was made by me. 3.Addition on account of refund of loan advanced to a friend considered as income The CIT(A) erred in confirming the action of the DCIT, that receipt of refund of INR 237,459 advanced to a friend as income without allowing me an opportunity to provide additional details/evidences. 4. The CIT(A) erred in upholding levy of interest under section 234B and section 234D of the Act. 5. Each one of the above grounds of appeal is without prejudice to the other. 6. The appellant craves leave to add to, amend, alter, vary, omit or substitute the aforesaid grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing of the appeal.” 3. Tersely, we advert the facts of the case, the assessee is an individual and

filed the return of income. The assessee has possessed the property with the co-

ownership with her sister. During the impugned assessment year, the assessee

declared the total notional rent u/s 23 amount of Rs. 6 lakhs with 50% share and

has claimed house building rent amount to Rs.3,00.000/- in her share. The

assesse claimed the deduction amount to Rs. 11,77,507/- u/s 24(b) of the Act in

3 I.T.A. No.2619/Kol/2019 Assessment Years: 2016-17 Smt. Priyanka Ganguly full amount. The assessee has taken the benefit of the full house building rent

interest in her account though the income from property is with 50% share and

assessee is the co-owner of the property. The Ld. AO assessed and disallowed

50% of the HBL interest amount to Rs. 11,77,507/- and 50% was disallowed

which amount to Rs. 5,88,753/-. The assessee further claimed the standard

deduction u/s 24(a) in full. The ld. AO has rejected the 50% of standard

deduction which works out amount to Rs. 90,000/-. The Ld. AO after

calculation, a sum of Rs. 6,00,000/- was rejected from the total deduction

claimed u/s 24 and added back with the total income of the assessee. Further the

assessee received the amount of Rs. 2,37,457/- in her Indian Bank account dated

16.06.2015. The assessee explained that the amount was received from her

friendon account of repayment of loan but unable to establish the evidence

before the authorities. So, the entire amount of Rs. 2,37,459/- was added back

with the total income of the assessee.

the issues. But the Ld. CIT(A) upheld the order of the ld. AO.

Being aggrieved, the assessee filed an appeal before us.

kept in record. The Ld. A.R first invited our attention in appeal order page 15

4 I.T.A. No.2619/Kol/2019 Assessment Years: 2016-17 Smt. Priyanka Ganguly which are related to argument and the relevant paragraphs are reproduced as

below:

“v. Disallowance of deduction claimed under section 24(b) of the ' Act amounting to INR 11,77,507, 30% standard deduction claimed under section 24(a), and proposition made to make Incorrect addition of coowner's income in my total income. I wish to hereby submit that the house property in question (Oberoi Exquisite ) was considered as deemed to be let out property and I am a co-owner of the property. My share being 50 percent of the house property, I had duly offered 50 percent of the deemed rental income to tax. Further, I discharged the entire interest on home loan on the aforementioned property, and hence I claimed deduction for entire interest paid during FY under consideration. A copy of interest certificate alongwith a copy of my ICICI bank account statement reflecting payment of interest by me was filed In submission dated 04 July 2019, (please refer Annexure 2a pg no 73 and pg no 80 to 82 of the submission enclosed asabove) and 9 July 2019 (please refer Annexure 2b pg no 119 to 121 of the submission enclosed as above). As the above claims for loss on account of interest on payment of home loan is correct, the proposed addition is without any basis. c. Disallowance of credit entry INR 2,37,459 On the proposed addition on account of INR 2,37,459 appearing in my India bank account, I would like to clarify that this is a refund of amount advanced to my friend earlier when my friend was in Dubai. This amount was reimbursed back to me without any interest. This was also clarified by me in my submission dated 09 July 2019 (please refer pg number 120 of Annexure 2b enclosed as above). However, the AO has proposed to make the addition without any basis. Accordingly, this proposed addition needs to be struck down.” The Ld. A.R respectfully relied on the order of Hon’ble High Court of Bombay

in the case of CIT vs. Abdullabhai M. Moonim in [1981] 7 Taxman 332

(Bombay) where the interest of the loan of the co-owner was duly accepted by

the authority and the entire cost paid by the assessee was allowed. So, the Ld.

A.R prayed for allowing the balance interest of the assessee. We respectfully

consider the order of the Hon’ble Bombay High Court (supra) and held that the

assessee personally borrowed money to contribute his share of cost of

5 I.T.A. No. I.T.A. No.2619/Kol/2019 Assessment Year Assessment Years: 2016-17 Smt. Priyanka Ganguly Smt. Priyanka Ganguly construction of said property construction of said property. So, the order is distinguishable with the existing . So, the order is distinguishable with the existing

case.

related to the amount received by the assessee related to the amount received by the assessee in Indian Bank account to Rs. in Indian Bank account to Rs.

2,37,549/-. The Ld. A.R explained that the assessee p . The Ld. A.R explained that the assessee paid the amount on behalf aid the amount on behalf

of Mrs. Priyanka Singh, friend of the assessee in Dubai through her HSBC of Mrs. Priyanka Singh, friend of the assessee in Dubai through her HSBC of Mrs. Priyanka Singh, friend of the assessee in Dubai through her HSBC

credit card on dated 15.06.2022 the money was duly returned back by the 15.06.2022 the money was duly returned back by the 15.06.2022 the money was duly returned back by the

creditor on 16.06.2015 in the ICICI Bank bearing account no. 000201043669. creditor on 16.06.2015 in the ICICI Bank bearing account no. 000201043669. creditor on 16.06.2015 in the ICICI Bank bearing account no. 000201043669.

So, the confirmation was duly submitted which is reproduced as below: the confirmation was duly submitted which is reproduced as below: the confirmation was duly submitted which is reproduced as below:

6 I.T.A. No.2619/Kol/2019 Assessment Years: 2016-17 Smt. Priyanka Ganguly 7. The Ld. A.R in argument placed that the evidence is first time placed

before the ITAT. It was not being adjudicated by any other lower authorities.

The Ld. A.R is admitted and accepted that the matter should be returned back to

Ld. AO for further verification.

authorities. The Ld. D.R invited our attention in the relevant paragraph of the

appeal order which are reproduced as below:

“10. Dispute regarding House Property income, and claim of interest deduction against such House Property income: I have carefully examined the submission made by the appellant regarding the disallowance of deduction claimed under section 24(b) of the Act amounting to Rs.11,//,507/-, 30% standard deduction claimed under section 24(a), and dispute regarding income from house property in the hands of the co- owner. Having examining the matter, I make the following observations: a. The appellant has disclosed an amount of Rs.3,00,000/- as her deemed income from house property, as she is a co-owner of such property, After availing of other deductions against such deemed income of Rs.3,00,000/-, the appellant has claimed losses against house property income. I find that there is no dispute about her co-ownership, and the AO has raised the issue of non disclosure of rent/deemed rent in the hands of other co-owner of the property. Such non- disclosure by the other co-owner, if any, in my considered view does not adversely affect the position of the appellant individual. However, I take the view that as the appellant has disclosed income as a co-owner, she would be eligible for deduction of half the interest paid on account of the housing loan. This should be irrespective of the fact that she may have borne the entire interest against the housing loan of the impugned property. The Ld. AO is directed to work-out and re-compute the income/loss from the house property in terms of the above principles. b. Rs. 2,37,459/- : Accordingly to Ld. AO, during the assessment stage, the assessee did not provide the bank statement bearing A/c No. 000201043669. Further the Ld. AO has also stated that verification of the said bank account revealed that the assessee received Rs.2,37,459/- in her bank account in the subject assessment year. The Ld. AO has requested this authority to enhance the impugned assessment order by such amount. In this matter it has been explained by the appellant that the said amount of Rs.2,37,459/- represents a sum refunded by a friend of the appellant without any interest. It was submitted by the appellant that

7 I.T.A. No.2619/Kol/2019 Assessment Years: 2016-17 Smt. Priyanka Ganguly these matters were explained before the Ld. AO during the stage of remand proceedings, which however was not accepted by the Ld. AO. I have carefully examined the bank account and find that the impugned amount of Rs. 2,37,549/- has been received by the assessee in her bank account on 16.06.2015 with the narration “from friend”. I observe that the appellant has not mentioned the name or address of such friend, an therefore, without necessary details any verification of the claim as made by the appellant is prevented. As such the Ld. AO is directed to add back this impugned amount to the return income.”

the record. The assessee disclosed the notional rent @50% of Rs. 6,00,000/-

which works out to Rs. 3,00,000/- in the return of income. But in the case of

claim of HBL interest U/s 24(b) of the Act, the assessee claimed full amount as

the assessee paid the amount from her own account. The Loan was taken by

both the parties and 50% of the loan interest is on behalf of the co-owner of the

assessee which is not at all allowable in the assessee’s hand.

Ownership in Transfer of Property Act,1882 is the legal right to possess, use,

and dispose of a property. It is also known as the title or the interest in the

property. Ownership can be transferred from one person to another by various

modes, such as sale, gift, exchange, mortgage, lease, etc. The Transfer of

Property Act, 1882, regulates the transfer of ownership of immovable property

in India.

According to Section 41 of the Act, a person who transfers a property with the

express or implied consent of the real owner is called an ostensible owner. The

transfer by an ostensible owner is valid and binding on the real owner, if the

8 I.T.A. No.2619/Kol/2019 Assessment Years: 2016-17 Smt. Priyanka Ganguly transferee acts in good faith and pays valuable consideration for the property.

The transferee must also not have any notice of the defect in the title of the

ostensible owner. This section protects the rights of the innocent transferees

who rely on the apparent authority of the ostensible owner.

According to Section 44 of the Act, a co-owner of a property can transfers his

own share or interest in the property to another person, without the consent of

the other co-owners. The transferee acquires the rights and liabilities of the

transferor as a co-owner. The transferee can enjoy the joint possession of the

property with the other co-owners and can also enforce a partition of the

property.

Here, we are not interfering in the appeal order and the addition of the ld. AO

amount to Rs. 6,00,000/- is upheld.

In the case of refund of loan amount to Rs. 2,37,459/- by the assessee’s friend,

we accept the documents placed by the assessee and the Ld. D.R also did not

make any objection against the submission of the assessee. Accordingly, the

issue in case of ground no. 3 is remitted back to the file of Ld. AO for

verification of the payment and refund of loan in the assessee’s account related

to the loan amount of Rs. 2,37,459/-. The assessee is also directed to submit the

evidence in favour of the claim. Needless to say, the assessee should get a

reasonable opportunity of hearing in set aside proceedings before the Ld. AO.

9 I.T.A. No.2619/Kol/2019 Assessment Years: 2016-17 Smt. Priyanka Ganguly 10. In the appeal of the assessee ground no. 1 and 2 are dismissed.

nature and do not need any adjudication.

is partly allowed for statistical purposes.

Order is pronounced in the open court on 19th February, 2024

Sd/- Sd/- (Dr.Manish Borad/डॉ मनीष बोरड) (Anikesh Banerjee /अ�नकेश बनज�) Accountant Member/लेखा सद�य Judicial Member/�या�यक सद�य Dated: 19th February, 2024 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- Smt. Priyanka Ganguly, 9B, Ekta Heights, Block-3, 56, Raja SC Mullick Road, Kolkata-700032. 2. Respondent – DCIT(IT), Circle-2(1), Kolkata 3. Ld. CIT(A)- 22, Kolkata 4. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)