2022 (7) TMI 939 - AT - Income Tax

Disallowance of land leveling expenses - AO disallowed expenditure and held that the expenditure has been incurred for the land to make saleable cannot be allowed as deduction from the sale consideration - HELD THAT - As expenditure claimed in respect of land development expenditure, all are in round figure viz. the payment of sand leveling, advance payment for purchase of fencing, purchase of fencing and final payment for fencing - There are no corresponding bills or invoices produced before us to substantiate the above claimed made by the assessee. Page No. 11 of paper book is an estimate with quotation given by Mamta Industries for digging of borewell - However, this is not an invoice or bill given by the said Mamta Industries. It is simply an estimate with quotation only. There are no details of ST/GST of the party concerned in this estimate memo. Thus, these documents cannot be accepted for substantiating the claim of expenditure of borewell. Also as noticed that the assessee filed his Return of Income in Form No. 2 which is meant for individuals HUF, NOT having income from Business or Profession. Thus, the assessee was not in clear mind to file the prescribed form and also claimed allowable expenditure, within the provisions of law. Thus, the lower authorities' finding of disallowance does not require any interference. Thus, the grounds raised by the assessee are hereby rejected. Unexplained cash credits u/s 68 - HELD THAT - As stated in this confirmation accounts, PAN of the party was not furnished and one Mr. Dilip has signed on this document. The assessee also failed to produce Return of Income and bank statement relating to these transactions. Thus, the assessee failed to prove identity of the creditors and their capacity and genuineness of the transactions. It is well settled principle of law that onus of proving the source of the sum of money said to have been received by an assessee is on the assessee to prove identity, genuineness and credit worthiness of the party as held by the Hon'ble Supreme Court in the case of Kale Khan Mohammad Hanif 1963 (2) TMI 33 - SUPREME COURT . Having not discharged the initial onus of proving identity, credit-worthiness and genuineness of the transaction of cash credit, the additions made by the lower authorities do not require any interference. Thus, the grounds raised by the assessee are hereby rejected and the appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Disallowance of land leveling expenses of Rs. 27,64,744/-
2. Unexplained cash credits of Rs. 3,70,224/-

Detailed Analysis:

1. Disallowance of Land Leveling Expenses:
The assessee, an individual, filed a return of income for the Assessment Year 2011-12, declaring income from other sources. During the scrutiny assessment, it was found that the assessee sold a piece of land for Rs. 65 lakhs and claimed expenses totaling Rs. 58,14,544/-, which included Rs. 27,64,744/- for land leveling expenses. The Assessing Officer (AO) disallowed this expenditure, stating it was incurred to make the land saleable and could not be deducted from the sale consideration. The AO noted that the expenses were for items like cleaning, rent, construction, sand leveling, fencing, security salaries, and borewell, which did not yield long-term benefits and appeared to be for year-to-year maintenance.

The Commissioner of Income-tax (Appeals) [CIT(A)] upheld the AO's decision, emphasizing that the appellant failed to provide cogent supporting evidence for the expenses, which were deemed not to be capital in nature and thus not part of the land's cost. The Tribunal, upon reviewing the self-made vouchers and lack of proper invoices or bills, agreed with the lower authorities. The Tribunal noted the absence of detailed supporting documents, such as ST/GST details, and found the expenses to be in round figures, further questioning their authenticity. Consequently, the Tribunal rejected the grounds raised by the assessee, affirming the disallowance of Rs. 27,64,744/-.

2. Unexplained Cash Credits:
The AO found unsecured loans of Rs. 1,43,96,816/- in the assessee's balance sheet, of which Rs. 5,09,316/- was from Damini Hemalbhai Patel and Rs. 3,87,500/- from Wagad Concrete U. The assessee failed to provide adequate confirmation, genuineness, and capacity of the parties involved. The confirmations lacked addresses, PAN, and verifiable signatures. The AO added these amounts as income under Section 68 of the Income Tax Act, 1961, due to the failure to prove the identity, capacity, and genuineness of the cash credits.

The CIT(A) partly allowed the appeal, reducing the addition to Rs. 3,70,224/- for the current year, acknowledging that Rs. 1,39,092/- was an opening balance from previous years. However, the CIT(A) upheld the addition for the current year, citing the appellant's failure to prove the transactions' identity, capacity, and genuineness. The Tribunal, reviewing the confirmations provided, noted the absence of PAN and proper acknowledgment, and the failure to produce return of income and bank statements. The Tribunal upheld the lower authorities' findings, emphasizing the assessee's failure to discharge the initial onus of proving the identity, creditworthiness, and genuineness of the transactions, as required by law.

Conclusion:
The appeal was dismissed in its entirety, with the Tribunal affirming the disallowance of land leveling expenses and the addition of unexplained cash credits. The Tribunal highlighted the lack of proper evidence and documentation to substantiate the claims made by the assessee.