The power to revise under Section 263 requires the assessment to be both erroneous and prejudicial to revenue; mere reliance on proposals contradicts this principle.

आदेश/ORDER

PER NARENDRA KUMAR BILLAIYA, AM :

This appeal by the assessee is preferred against the order dated 26/03/2024, framed u/s 263 of the Act by the PCIT (Central), Mumbai-3 (in short ‘PCIT’), pertaining to Assessment Year 2018-19.

2. The sum and substance of the grievance of the assessee is that the PCIT erred in assuming jurisdiction u/s 263 of the Act and further erred in holding that the assessment order dated 16/04/2021 framed u/s 143(3) of the Act is erroneous and prejudicial to the interest of the revenue.

3. The cause for assumption of jurisdiction is the claim of deduction of pre-construction interest u/s 24B of the Act on the ground that pre- construction interest has to be allowed to the extent of the property which is acquired/constructed.

4. Representative of both the sides were heard at length, case records carefully perused and relevant documentary evidences brought on record, considered in the light of Rule 18(6) of the ITAT Rules.

5. During the course of scrutiny assessment proceedings, vide notice dated 01/09/2020 issued u/s 142(1) of the Act, the AO served a questionnaire having 53 questions. The relevant question for our consideration are question nos. 4, 9 and 17 which read as under:-

“4. Please furnish the purpose of obtaining secured/term loans from banks alongwith sanction letter of the bank and its actual utilization. Please furnish copy of ledger accounts showing working of interest capitalized till the date of putting to use of assets if such loan were used for capital expenditure.

9. Furnish the details of the investment in property made during the year along with copy of registered deed, source of investment and income from these investments.

17. Please furnish details of Income from House Property alongwith Rent Agreement and other supporting evidences with respect to taxes paid to local authorities and interest payment on borrowed capital.”

6. The assessee filed its reply on 16/09/2020. In its reply, the assessee furnished the details of borrowed funds, the details of income from house property along with sample rent agreement and further supporting evidences. The details from income from house property was as under:-

This space has been left blank intentionally, P.T.O.

6.1. Not satisfied with the reply of the assessee, the AO again issued a notice dated 15/04/2021 specifically asking the assessee the following questions:-

“2. It is observed that you have claimed interest on loan of Rs.4.71 crores and pre-construction interest of Rs.2.8 crores with respect to income from house property. You are required to furnish documentary evidence in support of your claim.”

6.2. The assessee once again furnished a reply dated 15/04/2021 along with necessary details, which reads as under:-

6.3. From the above, it can be seen that specific queries were raised by the AO to which specific replies were furnished by the assessee along with documentary evidence. After considering the reply and the documentary evidence, the AO framed the assessment order. A perusal of the computation of income of the assessee shows that under the head “income from house property”, the assessee has claimed 1/5th of construction period interest amounting to Rs.2,79,61,136/-.

7. In would not be out of place to mention that in previous two assessment years, similar deduction was claimed and was allowed by the AO which means that this year is not the initial year of claim.

8. Considering the assessment proceedings and the past history, we are of the considered opinion that the AO has examined each and every issue thoroughly with supporting evidences. Therefore, it would be unjust to say that, the PCIT says that the impugned assessment order wa