2023 (2) TMI 526 - AT - Income Tax

Disallowance of development expenses - assessee could not produce the supporting evidences - grievance of the assessee is that the authority erroneously disallowed the expenses purely on estimation basis - HELD THAT - Undisputedly, the Assessing Authority has made the impugned addition on the basis of estimation. Coupled with the fact that the Valuation Report was not supported by the relevant evidences. The assessee has filed Valuation Report by Sabharwal Associates who has computed total cost of construction at Rs.44,44,000/-. AO has recorded the finding that the assessee failed to produce complete vouchers/bills in support of his claim. Looking to the facts of the present case where the assessee has claimed to have incurred expenses on development for claiming deduction of such expenditure, it was incumbent upon the assessee to produce complete vouchers and other credible evidence for proving the veracity of expenses. Therefore, do not see any infirmity into the impugned order of authorities below. Thus, Ground No.1 raised by the assessee is therefore, dismissed. Valuation of stock at a higher rate - HELD THAT - AO has valued stocks at the rate of Rs.2,500/- per square meter and Rs.466/- per square meter on development charges. The assessee failed to controvert the finding of lower authorities.Ground Nos. 2 3 raised by the assessee are dismissed.

Summary

Issues:
1. Disallowance of development expenses
2. Valuation of stock at a higher rate

Issue 1: Disallowance of Development Expenses

The appeal was against the disallowance of Rs. 3,20,000 from development expenses. The assessee claimed to have incurred expenses of Rs. 45,00,000, supported by a valuation report and electrification charges totaling Rs. 47,85,909. The AO accepted Rs. 16,00,200 but disallowed 20% due to lack of complete documents. The Tribunal found that the valuation report was an estimate without supporting documents, leading to an estimated addition. The assessee failed to provide complete vouchers and evidence, resulting in the confirmation of the disallowance. The Tribunal dismissed Ground No. 1, upholding the addition of Rs. 3,20,000.

Issue 2: Valuation of Stock at a Higher Rate

Ground Nos. 2 & 3 challenged the valuation of stock at a higher rate, leading to an addition of Rs. 10,25,844. The AO valued stocks at Rs. 2,500 per square meter and Rs. 466 per square meter on development charges. The assessee did not dispute these findings. The Tribunal upheld the lower authorities' decision, stating there was no reason to disturb the valuation made by the Ld. CIT(A). Consequently, Ground Nos. 2 & 3 were dismissed.

In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the disallowance of development expenses and the valuation of stock at a higher rate. The decision was based on the lack of complete documentation and failure to provide supporting evidence by the assessee. The judgment was pronounced on 13th February 2023 by the Appellate Tribunal ITAT Delhi.