No Error in AO’s Order, Interest Deduction u/s 24(b) on Property Loan Valid: ITAT overturns PCIT’s Order [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has set aside the revisionary order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961, allowing the interest deduction claimed under Section 24B for Assessment Year (AY) 2013-14 to 2019-20.

Raghav Bahl (assessee) faced scrutiny following a search operation under Section 132 at his premises, part of the M/s PMC Group of cases. The assessee filed his Income Tax Return (ITR) declaring a total income of Rs. 1,04,53,330.

After the search, a notice under Section 153A was issued, and the assessee filed a return on 11.02.2021, declaring the same income. The reassessment was completed assessing the income at Rs. 12,29,57,441 after additions under Sections 69A and 69C.

The PCIT initiated proceedings under Section 263, alleging the assessment order was erroneous and prejudicial to revenue interests. The PCIT contended that the interest deduction of Rs. 3,88,43,773 claimed under Section 24B for a loan was not for property acquisition, as no property was purchased in AY 2013-14.

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The PCIT also observed that the assessee failed to declare assets and liabilities for 2007-09. The PCIT set aside the assessment and directed the Assessing Officer (AO) to conduct fresh inquiries. Aggrieved by the PCIT’s order, the assessee appealed to the ITAT.

The counsel for the assessee argued that the AO conducted thorough inquiries during the original and reassessment proceedings. The counsel for the assessee also contended that the property at L&T Cyber Park, Bengaluru, was purchased in 2009 with a loan from the State Bank of India and later refinanced by Standard Chartered Bank.

The counsel submitted documents, including the deed of assignment, lease agreement with Robert Bosch Engineering and Business Solutions Ltd., and interest certificates, proving the loan’s purpose and interest payments.

The two-member bench, comprising Ms. Madhumita Roy (Judicial Member) and Naveen Chandra (Accountant Member), observed that the AO had verified all relevant documents during the reassessment.

The tribunal observed that the property was acquired in 2009, and the interest deduction was consistently allowed since AY 2012-13. The tribunal observed that the PCIT’s claims regarding non-disclosure of assets and misuse of loan funds were unsubstantiated, as no such reporting was required for the cited years, and loan details were adequately documented.

The tribunal held that the assessment was neither erroneous nor prejudicial to revenue interests. The tribunal relied on the Delhi High Court’s decisions in PCIT v. Clix Finance India (P) Ltd. 2024, which stated that a plausible view taken by the AO cannot be revised under Section 263 unless it was unsustainable in law.

The tribunal quashed the PCIT’s revisionary orders for AY 2013-14 to 2019-20 for Raghav Bahl and Ritu Bahl, whose appeals raised identical issues. The appeals of the assessee were allowed

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