9911796707
TMI Blog2022 (8) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... he grounds taken by the assessee read as under: 1. The order of the Commissioner of Income Tax (Appeals) 3, Chennai dated 30.06.2017 in I.T.A.No.146/2016-17/A-3 for the above-mentioned Assessment Year is contrary to law, facts, and in the circumstances of the Case. 2. The CIT (Appeals) erred in sustaining the disallowance of the payments made to the encroachers aggregating to Rs.8,11,75,000/- in computing the taxable total income without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the expenses incurred were wholly and exclusively for the purpose of business, allowable as deduction within the scope of section 37(1) of the Act. 4. The CIT (Appeals) failed to appreciate that the misreading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts assailing the orders of lower authorities and filed written submissions. The Ld. AR, inter-alia, submitted that impugned expenditure was incurred for business purposes and the same was allowable u/s 37(1). The Ld. Sr. DR, on the other hand, controverted the arguments of Ld. AR and justified the disallowance. The Ld. DR submitted that impugned payments were not the liability of the assessee and the sale agreement was done with respect to already encroached property. Having heard rival submissions and after due consideration of orders of lower authorities, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident corporate assessee is stated to be engaged in the business of real estate, promotion, develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with copy of receipts from the encroachers for the payment so made. At the same time, the assessee was directed to present the payees to whom sum of Rs.20 Lacs or more was paid as eviction charges. The assessee filed list of such encroachers but could not present the parties except two persons to whom the payment of Rs.75 Lacs and Rs.50 Lacs was stated to have been paid as eviction charges. It was noted by Ld. AO that the two evictees did not have PAN and not assessed to tax. The two evictees also failed to produce any passbook to establish that they had received the payments. 3.3 Since the assessee failed to substantiate the claim so made, the expenditure was disallowed by Ld. AO with following observations: - As the claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Ld. AO and both of them accepted receipts of amounts. The address of two more encroachers was produced since they were unwilling to present themselves before Ld. AO. It was also pointed out that the following documents were produced in support of the claim: - (a) Copy of Sale Deed in favor of the appellant and copies of the agreements with M/s Sree Venkataeswara Construction which acknowledges and evidence the presence of the encroachers on the property (b) Receipts obtained from encroachers in respect of the payments made to them and cross referencing to Bank statement (c) Copy of Bank statement of M/s. Sree Venkataeswara Construction duly highlighting the payments made to encroachers (d) Presentment of two encroachers in person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction seemed to be collusive one and the bona-fides of the transactions were doubtful. Accordingly, Ld. AO was right in rejecting the claim of eviction charges. Finally, the stand of Ld. AO was confirmed against which the assessee is in further appeal before us. Our findings and Adjudication 5. Upon careful consideration of material facts, it could be gathered that the assessee was engaged in the business of real estate development. It is undisputed fact that the property was an encroached property and the assessee was able to clear some of the encroachers by himself by paying some amount which were claimed as well as allowed in earlier years as noted by Ld. AO in the assessment order. Since the assessee was not able to fully clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thir continued to be in occupation of the property against whom the assessee was pursuing civil suit. In other words, there was continuous litigation at various fronts which led SVC wanting to cancel the deal. 7. Since M/s SVC incurred eviction charges, it sought reimbursement of the same from the assessee and accordingly, the expenditure has been debited as work-in-progress with corresponding credit to M/s SVC. It could also be seen that the payments were made by SVC through banking channel and acknowledgment / receipts from evictees were placed before Ld. AO. The details of payment so made were furnished to lower authorities. The assessee was also able to produce two of the evictees who confirmed having received the eviction charges. Mer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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