2019 (10) TMI 984 - AT - Income Tax

Disallowance of claim of expenditure incurred on improvement of property - HELD THAT - The initial burden of proof rested on the assessee to substantiate his claim of having incurred expenditure on improvement of the property to the stated extent of ₹ 9lacs. But as is evident from the facts noted in the order of the CIT(A), the assessee failed on this count. Except for filing copies of so called invoices of the contractor through whom the work was done no other evidence was filed by the assessee. Also the so called invoices were deficient in several respects ,as pointed out by the Ld.CIT(A). There was no mention of the nature of work done for which the invoices were raised, the address on the same was also incomplete since letters issued by the department on the said address were returned back by the postal department with the comment incomplete address . No evidence regarding payment made to the contractor was filed by the assessee. CIT(A) has mentioned that it was not clear whether the bills raised served as receipts also and even if they did, they did not bear any Revenue stamp to evidence receipt of money by the contractor. Further the inquiry by the department at the address of the contractor mentioned in the bills drew a blank since the postal authorities remarked that the address was incomplete and despite the assessee being specifically asked to give complete details/address of the contractor, no information was provided by the assessee. The certificate furnished by the assessee, of the father of the contractor stating that he had been engaged in the activity of contract and had left for England in 2011, since not duly verified, we hold, serves no purpose. We therefore agree with the Ld.CIT(A) that merely making entries in the books of accounts and producing bills which are deficient in providing basic information regarding the transaction, is not sufficient for discharge of initial burden of proof on the assessee. Undoubtedly the assessee failed on all counts and parameters to establish the genuineness of its claim. - Decided against assessee

Summary

Issues:
Appeal against disallowance of expenditure on property improvement.

Analysis:
The assessee appealed against the disallowance of a claim for expenditure on property improvement. The Assessing Officer disallowed the deduction as the assessee failed to provide sufficient evidence to substantiate the claim. The assessee contended that the improvement was made through a local contractor at a settled rate, and payments were duly recorded in the books. However, the AO noted that no evidence of improvement or tax deduction at source was provided. The CIT(A) forwarded the submissions to the AO for comments, who stated that the contractor's details were incomplete and efforts to verify were unsuccessful. The CIT(A) upheld the disallowance, stating that the burden of proof was on the assessee, and the bills provided lacked clarity and description of work done.

The CIT(A) examined the bills raised by the contractor, which lacked clarity, revenue stamps, and detailed descriptions of work. The AO did not make inquiries regarding the contractor's existence or accounting during assessment. The CIT(A) held that merely producing deficient invoices and entries in account books did not discharge the burden of proof. The Tribunal agreed with the CIT(A), emphasizing the lack of evidence and clarity in the bills. The certificate from the contractor's father about migration was deemed irrelevant. Ultimately, the appeal was dismissed as the assessee failed to establish the genuineness of the claim for property improvement.

The Tribunal concurred with the CIT(A) that the assessee did not meet the burden of proof, as evidenced by incomplete and deficient invoices. The lack of clarity, absence of necessary details, and failure to provide payment evidence led to the dismissal of the appeal. The Tribunal upheld the decision to disallow the claim for property improvement expenditure.