2016 (12) TMI 234 - AT - Income Tax

Allowability of development expenses incurred in respect of land sold by the assessee - Held that - In respect of first person, Shri Namdeo Vishwanath Karale, to whom the assessee claimed to have paid ₹ 1 lakh, the said person has categorically stated that he had not done any work in 2002-03. He states that he had received an amount of ₹ 1,50,000/- with the work completed in 2009-10. First of all, there is difference in the amount claimed and received by the said person. The assessee s claim was of ₹ 1 lakh, whereas the said person claimed to have received ₹ 1,50,000/- for work completed in the later years. The assessee has failed to establish its case and hence, the disallowance of ₹ 1 lakh is warranted. In respect of second disallowance of ₹ 1 lakh, amount being paid to Shri Vishal Ashok Gaikwad for removal of encroachments. The assessee has failed to establish that the said person was residing at the said property against which, the said charges for removal of encroachments have been paid in cash. In the absence of any proof of residence of said person on the said property, there is no merit in the claim of assessee and the same is dismissed. Coming to the last claim of assessee of ₹ 1 lakh, which is claimed to be incurred on construction of compound wall. The recipient has admitted to have carried on the said work and also admitted to have received the amount. However, he did not remember exact number of poles and only for this minor issue, the claim of assessee cannot be rejected. The Assessing Officer is directed to allow the claim of assessee to the extent of ₹ 1 lakh. Accordingly, the order of CIT(A) is modified in restricting the disallowance to ₹ 2 lakhs and allowing the claim of assessee to the extent of ₹ 1 lakh. - Decided partly in favour of assessee As in the case of wife of assessee part of claim of assessee has been accepted out of total expenditure of ₹ 12,90,000/- and only balance of ₹ 7,50,000/- has been disallowed for want of source of making the said payment and whether the expenditure was incurred by the assessee and was allowable in the hands of assessee is a secondary factor. The first fact it has to be proved by the assessee in the present set of facts is whether the assessee had requisite cash available with her to undertake the development work. In the absence of assessee proving the same, there is no merit in the claim of assessee and the same is rejected. The grounds of appeal raised by the assessee are thus, dismissed.

Issues Involved:
1. Allowability of development expenses incurred in respect of land sold by the assessee.
2. Disallowance of development expenses and aggregate addition claimed by the assessee.
3. Verification of the genuineness of expenses claimed for development and removal of encroachments.
4. Evaluation of supporting evidence and statements of recipients regarding the expenses claimed.

Issue-wise Detailed Analysis:

1. Allowability of Development Expenses:
The primary issue in the appeals is the allowability of development expenses incurred by the assessee in respect of land sold. The assessee claimed expenses on account of commission, development, and expenses for removing encroachments. The Assessing Officer (AO) disallowed these claims, citing insufficient evidence and discrepancies in the statements of the recipients.

2. Disallowance of Development Expenses and Aggregate Addition:
The CIT(A) upheld the AO's disallowance of development expenses and aggregate addition. The assessee had claimed development expenses of ?7,50,000/- and an aggregate addition of ?7,84,033/-. The CIT(A) observed that the assessee had made ingenuine deductions by making false claims of expenses with the intention to reduce income from capital gains. This conclusion was drawn after the AO conducted investigations.

3. Verification of Genuineness of Expenses:
The AO issued summons to the persons to whom the assessee claimed to have paid the development expenses. The statements of these persons were recorded, and discrepancies were found. For instance, Shri Namdeo Vishwanath Karale, who was claimed to have been paid ?1 lakh, stated that he had not done any work in 2002-03 but received ?1,50,000/- for work done in 2009-10. Similarly, Shri Vishal Ashok Gaikwad, who was claimed to have been paid for removing encroachments, could not provide proof of residence at the said property. The CIT(A) and the Tribunal found these discrepancies significant enough to uphold the disallowance.

4. Evaluation of Supporting Evidence and Statements:
The Tribunal evaluated the evidence and statements provided by the assessee. In the case of Shri Namdeo Vishwanath Karale, the Tribunal noted the discrepancy in the amount claimed and the year of work done, leading to the disallowance of ?1 lakh. For the claim of ?1 lakh paid to Shri Vishal Ashok Gaikwad, the absence of proof of residence led to the disallowance. However, for the claim of ?1 lakh for the construction of a compound wall, the Tribunal found the recipient's admission of work done sufficient to allow the claim.

Separate Judgments for Related Assessees:
In the case of the wife of the assessee, the facts differed slightly. The assessee had sold immovable properties and claimed development expenses of ?7,50,000/-. The AO noted discrepancies in vouchers and bank statements, leading to the disallowance. The CIT(A) upheld the AO's disallowance, noting the lack of supporting evidence for cash payments and the inability of the assessee to produce corroborative evidence. The Tribunal dismissed the appeal, emphasizing the need for the assessee to prove the availability of cash for development work.

Conclusion:
The Tribunal partly allowed the appeal of the assessee in ITA No.1428/PN/2016, allowing the claim for the construction of the compound wall while disallowing other claims. The appeal in ITA No.1429/PN/2016 was dismissed due to the lack of evidence supporting the availability of cash for development expenses. The judgments highlight the importance of substantiating claims with credible evidence and the consequences of discrepancies in supporting documents and statements.

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