2012 (4) TMI 756 - AT - Income Tax

Summary

Issues Involved:

1. Determination of total income.
2. Disallowance of Rs. 9 lakhs for purchase of wood and making door frames.
3. Disallowance of Rs. 6,10,355 out of Rs. 10,20,355 incurred for labor charges and materials.
4. Other grounds not pressed or argued.

Summary:

Issue 1: Determination of Total Income

The Assessing Officer (AO) determined the total income at Rs. 54,94,225 against Rs. 25,73,876 declared in the return. The CIT(A) revised the income to Rs. 41,10,892, and the assessee appealed further.

Issue 2: Disallowance of Rs. 9 Lakhs for Purchase of Wood and Making Door Frames

The assessee contended that the CIT(A) erred in confirming the disallowance made by the AO of Rs. 9 lakhs received through Shri D. Shivakumar for purchase of wood and making door frames and other wooden materials required for the construction of the new residential house. The AO disallowed the claim based on Shri D. Shivakumar's statement that the amount was for making furniture, not construction materials. The CIT(A) concurred with the AO, noting no documentary proof or bills were provided, and the payments were made before the purchase of the residential site. The Tribunal upheld the disallowance, finding the AO's decision well-reasoned and supported by evidence.

Issue 3: Disallowance of Rs. 6,10,355 out of Rs. 10,20,355 Incurred for Labor Charges and Materials

The assessee challenged the CIT(A)'s action in allowing only Rs. 4,10,000 out of Rs. 10,20,355 incurred for labor charges and materials. The CIT(A) allowed partial relief based on the reasonableness of the explanation but sustained the disallowance of Rs. 6,10,355. The Tribunal found merit in the assessee's argument that if the CIT(A) found the documentary evidence convincing, the entire expenditure should have been allowed. However, recognizing the potential for excessive claims in construction activities, the Tribunal decided to sustain the disallowance to the extent of Rs. 4,00,000, granting the assessee further partial relief of Rs. 2,10,315.

Other Grounds:

The ground of appeal at S.No.1 was general and required no adjudication. The ground at S.No.6 was not pressed as the assessee intended to file a rectification application before the CIT(A). Grounds at S.Nos.7 to 10 were not argued and hence not adjudicated upon.

Conclusion:

The appeal of the assessee was partly allowed, with the Tribunal providing partial relief on the disallowed expenditures.

Order Pronounced:

Order pronounced in the open court on 27th April, 2012.