Dear All,
Please give your expert comments in following situation:
"A property was purchased by husband and wife in their joint names and the same was considered deemed let out since two houses were in their possession. Since the wife's income was not sufficient, the loan was applied by the husband and got sanctioned mainly on the strength of his income though the wife was also made co-borrower as she was co-owner.
The Installments were also paid by the Husband only and he claimed total rental Income and also total interest paid for that year and no claim was made by the wife in her IT Return. No objection was raised by the Department during the Assessment and the claim was allowed in toto.
After 2-3 years, based on the observation of the outside Audit team, Assessing officer reopened the case and passed the order under section 154 for disallowing 50% of the interest expenses since the property was taken in joint name.
In this scenario, I have specific queries:
1 ) If the AO is justified in his action and if not whether appeal can be made against the assessment.If yes please provide case laws also.
2) In case the Assessment is correct, if the wife is entitled to claim the abovesaid disallowed interest expenses in her current year tax computation.
Thanks in advance
CAclubindia
