Reopening Invalid for Want of Lender Certificate Under Section 24(b) | HC

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Section 24(b) interest deduction

Case Details: Shantilal Gulabchand Muttha vs. Assistant Commissioner of Income-tax [2026] 183 taxmann.com 328 (Bombay)

Judiciary and Counsel Details

  • B. P. ColabWalla & Firdosh P. Pooniwalla, JJ.
  • Percy Pardiwala, Sr. Adv., Ramesh Soni, Ameya Gokhale, Kriti Kalyani & Swarupini Srinath, Advs. for the Petitioner.
  • Vikas Khanchandani, Adv. for the Respondent.

Facts of the Case

The assessee filed its return of income and offered income from house property for tax. The assessee had claimed a deduction for interest on borrowed capital while computing income from house property. The return was selected for scrutiny, and assessment was completed under section 143(3).

After four years, the Assessing Officer (AO) issued a notice for reassessment. The reason for reopening the assessment was that the deduction under section 24(b) had been allowed without a lender’s certificate. The assessee contended that no such certificate was statutorily required and none had been called for during the original assessment. Unsatisfied with the assessee’s response, the AO issued a notice under section 148 for reopening the assessment. Aggrieved by the order, the assessee filed a writ petition to the Bombay High Court.

High Court Held

The High Court held that the only basis on which the AO formed his belief that income had escaped assessment was that the deduction of interest claimed under section 24(b) was allowed despite there being no certificate from the recipient of the interest on record. It was an undisputed position that the property in respect of which the deduction of interest is claimed is one which is let out throughout the previous year and in respect of which the assessee has received rental income which has been offered for tax under the head “Income from house property”. Thus, it was apparent that the belief formed by the AO was bereft of any legal basis.

A deduction under section 24(b) is allowed in respect of interest paid on capital borrowed, which was utilised for the purpose of acquiring, constructing, repairing, renewing or reconstructing the house property. The deduction is to be allowed in its entirety without any other condition to be fulfilled in terms of clause (b).

The link between the material and the formation of the belief has no rational connection and is so tenuous that one would have no option but to conclude that the first jurisdictional condition, that the AO does not have the requisite material to form a belief that income has escaped assessment, was not satisfied. Hence, the impugned notice must be quashed.

List of Cases Reviewed

List of Cases Referred to

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied