2014 (7) TMI 344 - AT - Income Tax

Depreciation on additional construction - proof - assessee contended that, unaccounted sales proceeds of scrap were utilized for the construction of factory building Held that - The decision in SV. Business Pvt. Ltd. C/o Shankarlal Jain and Associates Versus Dy. Commissioner of Income Tax 2014 (6) TMI 144 - ITAT MUMBAI followed - There was no infirmity in the order of CIT(A) confirming the disallowance made by AO on account of assessee s claim for depreciation on additional construction of factory building in MIDC, Dombivili - the unaccounted sales proceeds of scrap were partly used for building purposes it was not by itself sufficient to establish that the amount was incurred by the assessee on the construction of additional factory building in MIDC, Dombivili - The onus was on the assessee to substantiate its claim for the expenditure incurred on the construction of additional building by producing the relevant documentary evidence such as bills, vouchers etc. - Even if such bills /vouchers were not maintained by the assessee in support of expenditure incurred outside the books of account, the assessee could have and should have substantiated its case by Producing valuation report or building plans showing that the additional construction was indeed made at its factory building situated in MIDC, Dombivali. It is not a case where the statement or relevant seized documents are partly accepted and partly rejected by the authorities as sought to be contended by the assessee - It is the case where the statement and the relevant seized documents were not sufficient to establish the case of the assessee of having spent an amount for the construction of additional factory building and the claim of the assessee for depreciation on such additional building as disallowed by authorities below on the ground that the assessee failed to substantiate the claim by bringing any documentary evidence - thus, there was no infirmity in the order of the CIT(A) in disallowing the assessee s claim of and confirming the disallowance Decided against the assessee.

Summary

Issues:
1. Disallowance of depreciation without proper appreciation of facts and law.
2. Disallowance of depreciation on additional factory building construction.

Analysis:
1. The appellant challenged the disallowance of depreciation of Rs. 2.79 lakhs by the Assessing Officer (AO) in the current assessment year, following a disallowance in the earlier year. The First Appellate Authority (FAA) confirmed the disallowance, citing lack of documentary evidence. The Tribunal upheld the disallowance based on the appellant's failure to substantiate the claim with proper evidence, emphasizing the onus on the assessee to prove expenses for claiming deductions. The Tribunal dismissed the appeal, stating that the seized documents and the statement recorded during search were insufficient to establish the expenditure on the building construction, leading to the disallowance of depreciation.

2. The disallowance of depreciation on the additional factory building construction was disputed by the assessee before the CIT(A). The CIT(A) upheld the disallowance, emphasizing the lack of documentary evidence to prove the genuineness of the expenses incurred. The Tribunal, after considering the submissions and material on record, found no infirmity in the CIT(A)'s order. The Tribunal noted that while the seized documents indicated some utilization of unaccounted sales proceeds for building purposes, the appellant failed to provide sufficient evidence to establish the expenditure on the factory building construction. The Tribunal highlighted the importance of producing bills, vouchers, or valuation reports to substantiate the claim. Consequently, the Tribunal dismissed the appeal, upholding the disallowance of depreciation on the additional factory building construction.

In conclusion, the Tribunal affirmed the disallowance of depreciation in both instances due to the appellant's failure to provide adequate documentary evidence to support the expenses claimed. The Tribunal emphasized the requirement for the assessee to meet the burden of proof for claiming deductions, as per the provisions of the Income Tax Act. The appeal was dismissed, and the orders of the lower authorities confirming the disallowances were upheld.