While hearing the case between Gowri Dhawan vs Income Tax Officer (ITO), Delhi bench of Income Tax Appellate Tribunal (ITAT) proclaimed in its recent order that Revisional Assessment is void since it is merely a second opinion.
Assessee, an individual filed his return of income for the relevant assessment year and declared a total loss of Rs. 37,63,341 and the assessee claimed interest on loan. During the assessment proceedings the Assessing Officer (AO) also admitted the loss and allowed the claim of the assessee on interest on loan.
Thereafter the Commissioner of Income Tax observed that interest so claimed and allowed by Assessing Officer in the assessment order under section 143 (3) of the Income Tax Act was not correct as excess interest of Rs. 28,91,8777 has been allowed to the assessee. Accordingly a show cause notice was issued by him to revise the said order under section 263 of the Income Tax Act 1961.
Counsel for the assessee, Advocate Abhimanyu & Mohit Jhama submitted that As per provisions of section 24(b) of the Act, the interest payable on borrowed capital borrowed for acquiring/constructing/ repairing/ renewal /reconstruction of property from which rental income was taxable and was allowable deduction and further argued that the loan borrowed was utilized to repay the loan and indirectly interest was claimed to have been paid on borrowed funds against said property.
After considering the rival submissions, Tribunal bench comprising of Judicial Member Suchitra Kamble and President G.D.Agarwal observed that “the funds were totally explained by the assessee during the assessment proceedings before the Assessing Officer and the same fact was stated before the CIT as well as while giving objection to 263 notice. The order passed by the Commissioner in capacity of Section 263 is merely a second opinion and does not fall in the category of prejudicial to the interest of Revenue”.
The division bench further observed that “it is another fact that the Assessing Officer fails in his/her duty to assess the income properly and because of that there is a prejudicial interest of the Revenue and declared that revisional assessment is void, since it is merely a second opinion”.
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