2015 (7) TMI 693 - HC - Income Tax

Expenditure towards granite raising expenses disallowed - Held that - The Tribunal has rightly held that when an assessee claims expenditure for business purpose, the onus is on the assessee to prove and it has also found that on facts, assessee had failed to establish this fact. At this juncture itself, it would be appropriate to deal with the contention raised by the learned counsel namely, the assessing Officer not affording opportunity to the assessee to cross examine Sri Nagendra. Records would clearly indicate that copy of the statement recorded by assessing Officer was supplied to the assessee but the assessee did not chose to cross examine Sri Nagendra. Hence, assessee cannot be heard to contend that the order of the assessing Officer smacks of violation of principles of natural justice when the onus of proof is upon the assessee with regard to expenditure incurred and on failure to prove the same, the expenditure could not be allowed as has been done rightly so by the assessing Officer in the instant case. The payments which the assessee claims to have paid to these three persons relates to granite extraction charges. This Court cannot lose sight of the fact that for extraction of granite apart from manual labour, equipments and machineries would be used by the labour contractors and the payments are made on weekly basis to the manual labourers. In the instant case, it has been rightly noticed by the assessing Officer that the payments have been made after a year which would be an additional factor to doubt the transaction. Hence, the burden cast on the assessee to prove the expenditure incurred was genuine, has not been discharged. - Decided against assessee.

Summary

Issues:
Disallowed expenditure of Rs. 28,40,160 for "granite raising expenses" in the assessment year 2008-09.

Analysis:
The appellant filed a return of income declaring Rs. 4,26,160 besides agricultural income. The assessing officer disallowed the claimed expenses of Rs. 28,40,160 for "granite raising expenses" as unproved liability, bringing it to tax. The CIT (A) upheld the addition, and the Income Tax Appellate Tribunal allowed the appeal in part. The appellant contended that payments were made via cross cheques with taxes deducted at source, challenging the disallowance. The assessing officer relied on a statement without allowing cross-examination, leading to erroneous assessment upheld by appellate authorities.

The appellant argued that granite production and sales details were undisputed, implying genuine expenses. The respondent supported the authorities' orders, deeming them factual without legal infirmity. The appellant debited the amount to three persons for granite extraction but failed to provide sufficient proof. Only one creditor appeared, denying any transaction with the appellant, raising doubts on the liability's genuineness.

The assessing officer concluded the liability was not genuine due to lack of evidence. The CIT (A) noted the relationship between the appellant and one recipient, directing further evidence submission, which was not done. The Tribunal upheld the onus on the appellant to prove business expenses, finding the appellant failed to do so. The delay in payments and lack of evidence raised suspicion on the transaction's veracity.

The court affirmed the assessing officer's findings, supported by the CIT (A) and the Tribunal, as factual and non-perversive. The appellant's failure to discharge the burden of proof led to the dismissal of the appeal, affirming the Tribunal's order without costs.