2022 (11) TMI 1249 - AT - Income Tax

Reduction of the land development expenses - Disallowance of unverifiable expenses - AR submitted that the persons to whom the payment was made are not to be found, and their addresses could be culled out only from the sale deeds executed by them in favour of the assessee - HELD THAT - As no evidence is produced in support of the claim of the assessee. It could be seen from the assessment order, basing on the PAN details, an attempt to verify the claim of the assessee was made, but such persons were not to be found in such address. Subsequently on the orders has been furnished by the assessee, the Income Tax Inspector was deputed to cause enquiries at the address is given by the assessee, but such addresses were found to be incorrect. In the circumstances, there is no course open to the Assessing Officer to verify the alleged expenditure - So also in respect of the other expense said to have been paid to the marketing executive towards salary incentives etc., no occasion for such payments seems to be probable because admittedly the commercial activity of the assessee had not commenced and not even a single plot was sold or book for sale during the relevant assessment year. All the circumstances would go to show that there is no possibility to verify the expenses and therefore it cannot be said that the authorities below went wrong in reducing such expenses. We accordingly find that the grounds of appeal are devoid of merits and the appeal of assessee is liable to be dismissed.

Summary

Issues Involved:
Assessment year 2007-08 - Appeal against order under section 143(3) read with section 263 of the Income Tax Act, 1961 - Addition of Rs. 3,20,051 as income from other sources and Rs. 80,46,778 on account of reduction of land development expenses.

Detailed Analysis:

1. Background and Appeal: The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax(Appeals) for the assessment year 2007-08. The initial return of income declared a loss, which was later revised by the Assessing Officer. Subsequently, a new assessment was made under section 143(3) read with section 263 of the Act, resulting in a higher income determination, leading to the appeal by the assessee.

2. Grievance of the Assessee: The primary grievance of the assessee in the appeal was related to the addition of Rs. 3,20,051 as income from other sources and Rs. 80,46,778 due to the reduction of land development expenses. During the proceedings, the assessee decided not to press the ground regarding the addition of Rs. 3,20,051 and focused on contesting the addition of Rs. 80,46,778.

3. Contentions: The assessee argued that the payments made were for legitimate business purposes, even though the recipients could not be located, and their addresses were only available through sale deeds. On the other hand, the Revenue contended that without concrete evidence supporting the claims, the authorities were justified in disallowing the expenses.

4. Decision and Findings: The Assessing Officer reduced the land development expenses based on the lack of proof for payments made towards land levelling and marketing executive salaries. The Commissioner of Income Tax(Appeals) also upheld this decision, noting the absence of evidence and the failure to show progress in commercial activities by the assessee. Despite attempts to verify the expenses, the addresses provided by the assessee were found to be incorrect, leading to the conclusion that the expenses were not verifiable.

5. Final Verdict: The Tribunal found that the grounds of appeal lacked merit as no evidence was produced to substantiate the claims made by the assessee. Given the inability to verify the expenses and the lack of commercial activity during the relevant assessment year, the appeal was dismissed, affirming the decision of the lower authorities.

In conclusion, the judgment upheld the decision to dismiss the appeal, emphasizing the importance of providing concrete evidence to support expense claims and the necessity of demonstrating progress in commercial activities to justify deductions.