Reopening Quashed as No Lender Certificate Required for Let-Out Property Interest: Bombay HC

Shantilal Gulabchand Muttha Vs ACIT (Bombay High Court)

The petition challenged a notice dated 28 March 2021 issued under Section 148 of the Income-tax Act, 1961 for Assessment Year 2014-15, a subsequent notice under Section 143(2) read with Section 147, and the order dated 9 February 2022 rejecting the petitioner’s objections. The petitioner had originally filed his return declaring total income of Rs. 5.87 crore, including rental income from eight let-out properties. In respect of Muttha Chambers II, he received rental income and claimed deduction of interest on borrowed capital under Section 24(b) amounting to Rs. 4.10 crore. The assessment was completed under Section 143(3) on 23 November 2016 accepting the returned income after detailed scrutiny, during which rental income, interest deduction, financial statements, and related clarifications were furnished.

Subsequently, the Assessing Officer (AO) issued a notice under Section 133(6) seeking a lender’s certificate for the interest claimed under Section 24(b). The petitioner replied that no such statutory requirement applied and that no certificate had been sought during original assessment. Despite this, reassessment proceedings were initiated beyond four years from the end of the relevant assessment year on the ground that the certificate had not been furnished, leading to alleged escapement of income.