Home Loan used Entirely for Business: ITAT orders Fresh Adjudication on Interest Expense Disallowance after Additional Evidence [Read Order]
Tribunal allows appeal for additional evidence received at a later date than the last order. Issue based on utility of ‘home loan’ for commercial construction.
The Income Tax Appellate Tribunal (ITAT) Pune Bench has ordered the Commissioner of Income Tax (CITA) (Appeals)/National Faceless Appeal Centre (NFAC), Delhi to admit new evidence in the matter of disallowance of loan interest expenditure. The contention that the home loan was used entirely for business purposes to be re-examined, to set the facts straight.
The appeal was filed by assessee - appellant, Praksh Katariya, against the order dated 30.05.2025 relating to assessment year 2020-21. According to the facts, the case was selected for limited scrutiny.
The other two borrowers for the two loans from L & T are namely Mr. Vishak Prakash Katariya and Allison Vishal Katriya, they are family members of the assessee - appellant Prakash Katariya. It had been submitted that the entire EMI had been paid by the assessee and that the premises is being used by him as his clinic.
Through the mechanisms of Section 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter “the Act”), notices were issued and served. During the inquiry, it was found that L & T Finance Home Loans issued two certificates as the housing loan for a property in Pune.
In the second loan taken, Mr. Prakash Katariya was a co-borrower, sharing with two other borrowers. Due to the absence of proper justification of business expenses for the use of interest expenses, Rs. 46,24,948/- was added to the total income of the assessee.
The matter was brought up before the CIT(A) where it was argued that the loans were sanctioned for the purpose of construction of commercial business asset (Clinic) under the ‘home loan’ category. Since the clinic was valued at Rs.70,61,053/- and the balance sheet labelled the total value of clinic premises at Rs.1,20,75,096/-, due to the discrepancy, the action of the Assessing Officer was upheld.
The appellant aggrieved by this order of CIT(A), highlighted that he was not given appropriate opportunity to furnish an appropriate response and that there had been a failure in the application of Section 36 of the Act. The argument by the assessee was that since Mr. Katariya was a senior citizen, the loan could not be sanctioned against his name thereby attracting two family members as co-borrowers. The counsel for the assessee drew attention to the letter issued by the L & T Housing Finance Ltd which was issued by them after the hearing of appeal before the CIT(A). The Vice President R. K. Panda held that the case should be brought back to the CIT(A) with this additional evidence in the interest of principles of natural justice after which the facts would be set clear. Additionally, the ground contended by the assessee that he was unable to establish that the loan was utilized for the purpose of construction of business was observed with merit. The certificate dated 11.09.2025 by L & T Housing Finance Ltd. was issued after the order by the Ld. CIT(A) dated 30.05.2025. Any other admissions could be made at that stage in front of the CIT(A). Conclusively, the appeal was allowed for statistical purposes on 07.10.2025. The assessee was represented by Sudin Sabnis and the department by Sailee Dhole.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
