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TMI Blog2022 (11) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of the business of the assessee. The onus was on the assessee to establish that expenditure was incurred wholly and exclusively for the purpose of the business of the assessee. In the case, the Assessing Officer was required to verify two things. Firstly, whether the payments has been made by the assessee or on behalf of the assessee to the seller parties. Secondly, the payment has been made for the purpose of the business of the assessee. Since in the case it is claimed by the assessee that payments have been made for purchase of legal or illegal tenanted premises, therefore the assessee was required to substantiate with documentary evidence to the effect that the payment have made to the seller parties and that too for the purpose of purchase of relevant properties. The assessee attempted to substantiate with the help of non-registered agreement and declaration of the seller parties. But in the facts of the case, the assessee was required to produce those parties before the AO for confirmation of the facts stated in their affidavits and to show deposit of said payment in the bank accounts. The seller parties were also required to show from Income-tax Returns filed that pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer issued a notice under section 148 of the Income-tax Act, 1961 (in short the Act ) on 29/10/2013, which was duly served upon the assessee. In response, the assessee filed return of income on 18/02/2014 declaring Nil income. Subsequently, statutory notices under the Act were issued and complied with. In the assessment completed on 31/03/2015 under section 147 read with section 143(3) of Act, the Assessing Officer though assessed the total income at NIL, however disallowed work-in-progress in respect of Kirti Chambers Property amounting to ₹2,99,40,000/- and denied carry forward of the same for subsequent years. On further appeal, the Ld. CIT(A) also upheld the disallowance. Aggrieved, the assessee is in appeal before the Tribunal, raising the grounds as reproduced above. 3.1 The sole ground raised by the assessee relates to disallowance of work in progress in respect of Kirti Chambers. 3.2 The facts qua the issue in dispute raised in ground are that the property Kirti Chambers was originally standing in the name of M/s Sahib Enterprises, from it was purchased by Sh Ashwan L Shah and Smt. Kalpana Shah (i.e. promoters of the assessee company) through a registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lpana Shah (i.e. prior to incorporation of the assessee company). 4.2 The Assessing Officer observed that M/s Vedang Builders LLP had purchased tenancy rights of shop (Old No. 1 and New No. 3) admeasuring 304 ft in Kirti Chambers from M/s Asian machinery at nil cost vide registered agreement dated 30/12/2010. Similarly, vide registered agreement dated 12/01/2011, M/s Vedang Builders LLP had purchased rights of the office admeasuring 405 square fit in Kirty Chambers from m/s Zuber Investments at Nil cost. 4.3 Whereas, the assessee company also submitted a nonregistered (document) dated 27/03/2013 relating to surrender of tenement, wherein it was mentioned that M/s Vedang builders LLP had paid ₹95,40,000/- and ₹1,70,00,000/- to M/s Asian Machinary and M/s Zuber investments Ltd respectively for acquisition of tenancy rights. 4.4 The claim of the assessee is that payment has been made for acquisition of tenancy rights as noted in the unregistered agreements, whereas the claim of the Assessing Officer is that as per registered agreements, no payment has been made for acquisition of the tenancy rights and therefore, he disallowed the work-inprogress to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence technically it did not exist before that date. Therefore, the entries passes in appellant's accounts before that date is nothing but a back dating of entries, which is not acceptable. 7.8 I find that the corresponding debit entries are not passed in books of counter party M/s Vedaang Builders LLP on given dates. The appellant has submitted confirmation of its account in books of Ms Vedaang Builders LLP for the period from 01.04.2010 to 31.03.2015 [Page 89 of Paper Book). The said account does not show any transaction during FY 2010-11. The alleged payments on behalf of the appellant of Rs. 95,40,000/-, Rs. 1,70,00,000/-, Rs. 9,00,000/-, Rs. 25,00,000/-are debited to appellant's account by journal entry only on 01.04.2014, i.e. after a long period of more than 3 years since close of FY 2010-11 in which entries are passed in appellant's books. Also, it is observed that the date of corresponding entry passed in books of Vedaang Builders LLP, i.e. 01.04.2014, falls soon after the date of filing return by the appellant in response to notice us 148, i.e. 28.03.2014. It cannot be ruled out that the fear of reconciliation issue arising in said assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Looking at these circumstances, any such agreement even if produced would not find any evidentiary value. 7.12 The appellant has heavily relied upon two Declaration , i.e. (i) Declaration dated 30.12.2010 showing payments of Rs. 95,40,000/- by Vedaang Builders LLP to partners of Asian Machinery [Page 11-14 of Paper Book], (ii) Declaration dated 12.01.2011 showing payment of Rs. 1,70,00,000/- by Vedaang Builders LLP to Zuber Investments [Page 37 to 40 of Paper Book]. I find that the said documents are executed on stamp paper of Rs. 100/- each, on same date on which respective registered agreements were executed by these parties showing Nil consideration for transfer of tenancy rights. The reason given by the AR in written submissions for not disclosing respective consideration in registered agreements is that the said consideration exceeded stamp duty value. Therefore to save the stamp duty as Prudent businessman actual consideration agreed and paid at the time registration of the purchase documents of tenancy rights transferred from the above referred parties were not incorporated in the said transfer documents which was not required to be disclosed mandatorily. I find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted as evidence towards any such payment having made by the appellant company towards cost of WIP. 7.14 The aforesaid facts of the case make it clear that the appellant has grossly filed to substantiate the payments aggregating to Rs.2,99,40,000/- towards cost of WIP. Hence, I confirm the disallowance made of said amount as reduction in WIP cost in hands of the appellant. In view of the same, Ground No. 2 is dismissed. 5. The main reasons cited by the lower authorities for disallowance are as under: (i) The unregistered document submitted by the assessee did not bear any signature/confirmation of the alleged recipient of the proceeds of transfer of tenancy rights. It was not having any legal or evidentiary value and was merely self-serving document, prepared to inflate the amount of work in progress. (ii) The cost of acquisition of tenancy right which had been mentioned as nil in the registered document for transfer of tenancy rights, had been duly confirmed by the owner of said premises. (iii) The entries in books of accounts of the assessee company in respect of work in progress are for the period when the company was not in existence itself. Corresponding ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for adjudicating the issue in dispute and accordingly submitted to restore the issue in dispute to the file of the Assessing Officer. 6. The Ld. DR on the other hand relied on the order of the lower authorities. 7. We have heard rival submission of the parties and perused the relevant material on record. We find that issue in dispute here is in relation to the genuineness of the amount of work in progress, which has been claimed by the assessee. The lower authorities has mainly rejected the genuineness of the expenditure incurred against payment to tenanted authorized/unauthorized dwellers (i.e. which has been acclaimed as work-in-progress) mainly on the ground that in the registered deed of transfer, purchase value was recorded at nil as compared to the value recorded in unregistered agreements and declaration of seller parties. In our opinion, the registered or unregistered sale agreement are in the nature of the agreement between the parties and in law those agreements can we challenged by the parties and it is not within the powers or authority of the Income-tax Authority to challenge or dispute the terms and condition mentioned in those agreements. The Income-tax auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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