As regards to the allowances of discount, commission and development expenditure, no evidence were filed before us establishing the genuineness of the expenditure. Mere entries in the books of accounts does not establish the genuineness of the expenditure.
The contention that profit arising on account of sale of property cannot be brought to tax as the land was sold in the capacity of holding power of attorney cannot be accepted, since the profits were assessed under the head ‘’profit and gain of business”.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the Assessee directed against the order of the Commissioner of Income Tax (Appeals)-7, Chennai (‘CIT(A)’ for short) dated 23.08.2018 for the Assessment Year (AY) 2013 -2014.
2. The Assessee raised the following grounds of appeal:
1. ‘The order of the C.l.T Appeals is against the Principles of Consistency and hence to be dismissed.
2. The impugned order is against the Principles of Equity and Natura l Justice and hence ought to be dismissed.
3. The order of the C.l.T Appeals is against Established canons of Law and established judicial pronouncements.
4. The C.I.T Appeals assessed the appellant for A.Y 2012-13 under the Head Capital gains. The same approach should have been followed by the A/O/C.I.T Appeals for A.Y 2013-14. There has been deviation in A.Y 2013-14. Hence, the C.I.T Appeal orders to be set aside.
5. The C.I.T Appeals (7) allowed the appeal of the Appellant deleting his liability to tax because he is a POA Holder. The same situation prevails for the A.Y 2013-14 also. Hence, the order of the C.I.T Appeals (7) upholding the A.O order, taxing the Appellant is to be annulled on the basis of Consistency.
6. The C.I.T Appeals (7) and the A.O have assessed a sum of Rs 16,59,818/- as net profit not offered. This is totally disputed as the Proforma Land Account for A.Y 2013-14 submitted showed a net loss of Rs 8,40,182/- and not profit. Further the transactions on the POA Land business as per the Audited Balance Sheet shows a credit balance of Rs 6,83,150/- which is owed by the Appellant to the land owners.
7. On the ground that the entire POA transactions are outside the tax ambit, the entire disallowances are to be deleted namely
1. Discounts Rs 77,58,200/-
2. Commission Rs 5, 00,000/-
3. Development Cost Rs19,72,951/-
Therefore, the entire transactions and disallowances are to be voided totally.
8. Therefore it is prayed that the CIT Appeals (7) order upholding the assessment be set aside and Justice and Equity rendered’’.
3. The brief facts of the case are as under:
The appellant is an individual engaged in the business of executing civil and structural steel contracts. The return of income for the assessment year 2013-14 was filed disclosing total income of Rs.55,46,350/-. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Non Corporate Circle 7(1), Chennai (herein after referred as ‘’AO’) vide order dated 31.03.2016 passed u/s. 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) at total income of Rs.1,78,43,133/-. During the course of assessment proceedings, the Assessing Officer found that assessee had sold a property for a consideration of E4,42,47,900/-against which he claimed E77,58,200/- as discount, E85,00,000/- as development cost and E5,00,000/- as commission expenditure. Out of these, the Assessing Officer disallowed discount claim of E77,58,200/-for want of details, disallowed commission payment of E5,00,000/-for non deduction of TDS and in respect of development charges at E85,00,000/-, a sum of E19,72,951/- was found to be non verifiable, accordingly, brought to tax. The Assessing Officer also brought to tax difference between sale consideration and purchase cost of E16,59,818/-, accordingly made an addition of E1,18,90,969/-. In respect of sale of property. The Assessing Officer also made an addition of E4,05,814/- u/s.14A of the Act.
4. Being aggrieved by the above additions, an appeal was preferred before ld. CIT(A), who vide impugned order confirmed the additions in respect of sale of property, discount, development expenditure, commission paid and deleted the addition made u/s.14A of the Act.
5. Aggrieved by the order of the ld. Commissioner of Income Tax (Appeals), assessee is in appeal before us. It is contended that the profit cannot be brought to tax since the property was sold in the capacity of holding power of attorney. In respect of the claim for deduction of discount, development expenditure and commission paid, copies of ledger abstract were filed.
6. On the other hand, the ld. Sr. Departmental Representative placed reliance on the orders of lower authorities.
7. We heard the rival submissions and perused the material on record. The contention that profit arising on account of sale of property cannot be brought to tax as the land was sold in the capacity of holding power of attorney cannot be accepted, since the profits were assessed under the head ‘’profit and gain of business”. As regards to the allowances of discount, commission and development expenditure, no evidence were filed before us establishing the genuineness of the expenditure. Mere entries in the books of accounts does not establish the genuineness of the expenditure. Hence, we do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). The grounds of appeal are dismissed against the appellant.
8. In the result, the appeal filed by the assessee is dismissed.
Order pronounced on 30th day of May, 2019, at Chennai.