2017 (12) TMI 667 - AT - Income Tax

Computation of capital gain - AO treated the expenses incurred by the assessee on the construction to be bogus - Held that - The assessing officer or revenue did not brought on record any evidence proving that bills are not genuine or bogus even no confirmation except Axiom Buildwell Pvt. Ltd. was asked for. The assessing officer simply treated the expenses incurred by the assessee on the construction to be bogus. As decided in the case of Daulat Ram Rawatmull 1972 (9) TMI 9 - SUPREME Court that onus is on the party which alleges that apparent is not real. No cogent material or evidence is brought to our knowledge by the ld. DR which may prove that the expenditure incurred by the assessee were bogus, not only this, we noted from the copy of the balance sheet audited balance sheet of the assessee along with schedule of the fixed assets available at page 67 that the assessee has duly shown the addition in the building at Noida amounting to ₹ 1,06,08,738/-. The assessing officer in correctly mentioned in the assessment order that in the schedule of the fixed assets cost of the building has been shown only at ₹ 6763526/-. Thus we set aside the order of the CIT(A) and delete the addition made by the assessing officer confirmed by the CIT(A) which was just based on the assumption and the presumptions without bringing any evidence on record. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of construction expenses while computing capital gain.

Analysis:
The appeal was filed against the order of the CIT(A) regarding the disallowance of a sum towards construction expenses while computing capital gain. The assessing officer treated the construction expenses as false, alleging that they were created to reduce capital gain. The assessing officer based this on the verbal agreement of property sale made in June 2009 and a significant cheque received by the assessee. However, the assessee claimed that the construction was carried out over several years and submitted detailed bills and documents. The CIT(A) upheld the assessing officer's decision. The ITAT noted that the addition amount had been reduced by the CIT(A) and focused on the sustenance of this reduced addition. The contractor, to whom a substantial sum was paid, confirmed the work done, and bills from various suppliers were submitted. The ITAT found no evidence to support the assessing officer's claim that the expenses were bogus. The ITAT emphasized the principle that the onus is on the party alleging falsity. The ITAT also observed discrepancies in the fixed assets schedule, where the building cost was significantly lower than the claimed construction expenses. Consequently, the ITAT set aside the CIT(A) order and deleted the addition made by the assessing officer, ruling that it was based on assumptions without concrete evidence.

In conclusion, the ITAT allowed the appeal, emphasizing the lack of evidence supporting the assessing officer's disallowance of construction expenses. The decision was based on the principle that the burden of proof lies with the party alleging falsity, and discrepancies in the fixed assets schedule further supported the assessee's claim. The ITAT's ruling highlighted the importance of concrete evidence in such matters and underscored the need for a factual basis for any disallowances in tax assessments.