2010 (12) TMI 621 - AT - Income Tax

Tribunal Partially Allows Assessee's Appeal, Directs Re-examination

Dinesh K. Kargal Versus Addl. CIT

The tribunal partly allowed the assessee's appeal and also allowed the revenue's appeal for statistical purposes. The tribunal directed the AO to ... Disallowance of expenses - The assessee is a civil and telecom contractor - The assessee has incurred expenses as labour and sub-contract charges - Held that: it is evident from the record that the assessee has not produced any evidence in the form of bills/vouchers and even the complete details of the expenditures in support of the claim made by the assessee - Therefore, the assessee has failed to prove the claim to the satisfaction of the lower authorities - Do not find any reason to interfere with the order of the CIT(A) on this issue who has already restricted the disallowance to 10% which is, just and proper - Hence, appeal decided against the assessee.Exemption of capital gain u/s 54 - the assessee has simply stated that he has complied with the provisions of by investing capital gain with Neelsiddhi Enterprises. However, as mentioned above and as per the receipts, there is no investment. An investment as require u/s 54 may be of direct purchase or booking of a property under construction. However, the assessee has not even booked a flat - He has given an amount to the builder and now the builder has stated that the amount is not for booking but reservation of a flat which may be converted into booking later on but at the same time the reservation may be cancelled also and not necessary to be converted into booking - Therefore, assessee's claim of exemption u/s 54 is disallowed.Addition for capital introduced - Though the assessee has filed the ledger account showing the capital introduced as well as bank statement and the account of the assessee in the Corporation Bank of India - However, it is not clear from the details filed by the assessee about the cash amount introduced by assessee of Rs.80,000/- and also an amount of Rs.1 lakh through cheques dated 20.08.2005 because corresponding entries is not in the statement of bank account - Hence, issue required proper verification and examination at the level of the AO and the assessee has to reconcile all the amounts introduced in the capital account during the year - Accordingly, set aside this issue to the record of the AO for verification and examination of the relevant record to be filed by the aseseee then decide the same as per law. Issues Involved:1. Condonation of Delay2. Disallowance of Expenses3. Exemption of Capital Gain under Section 544. Addition for Capital IntroducedDetailed Analysis:1. Condonation of Delay:The assessee filed an appeal with a delay of 53 days, citing reasons such as waiting for the outcome of a rectification application and the illness of their Chartered Accountant. The assessee argued that the delay was neither intentional nor motivated. The opposing party (DR) objected to the condonation. After hearing both sides, the tribunal found the explanations satisfactory and condoned the delay in the interest of justice and fair play, allowing the appeal to be decided on its merits.2. Disallowance of Expenses:The assessee, a civil and telecom contractor, faced disallowance of various expenses by the AO due to lack of supporting evidence such as bills and vouchers. The expenses in question included:- Rs. 4,56,000/- for Lucknow site expenses.- Rs. 3,04,150/- for labour charges (OMS).- Rs. 2,49,251/- for labour expenses.- Rs. 6,42,608/- for labour charges within Maharashtra.The AO noted that the expenses were paid in cash and were not adequately supported by documentation. Consequently, the AO disallowed a total sum of Rs. 42,99,929/- on account of these expenses. On appeal, the CIT(A) restricted the disallowance to 10% of the expenditure. The tribunal upheld the CIT(A)'s decision, noting that the assessee failed to produce sufficient evidence to substantiate the claims. Thus, grounds of appeal regarding disallowance of expenses were decided against the assessee.3. Exemption of Capital Gain under Section 54:The assessee claimed exemption under Section 54 for a long-term capital gain of Rs. 6,95,210/- by investing Rs. 11,91,998/- in a new property. The AO disallowed the exemption, arguing that the assessee had not acquired a residential house but merely reserved a flat with the builder. The AO erroneously added the entire investment amount of Rs. 11,91,998/- instead of the capital gain amount. The CIT(A) directed the AO to rectify this error. The tribunal set aside the issue to the AO to pass a necessary order as per law, considering the assessee's contention.4. Addition for Capital Introduced:The AO noted that the assessee introduced a capital of Rs. 10,65,000/- during the year and questioned its source. The assessee claimed it was from personal accounts, verifiable from bank statements and balance sheets. The AO found the personal balance sheet insufficient and made an addition of Rs. 10,65,000/-. On appeal, the CIT(A) accepted the claim to the extent of amounts received from the sale of a flat, restricting the addition to Rs. 3,20,000/- introduced in cash. The tribunal found discrepancies in the bank statements and ledger accounts provided by the assessee. Therefore, it set aside the issue to the AO for proper verification and examination of the relevant records.Conclusion:The appeal by the assessee was partly allowed for statistical purposes, and the appeal by the revenue was also allowed for statistical purposes. The tribunal directed the AO to re-examine specific issues and pass necessary orders as per law. The judgment emphasized the importance of adequate documentation and evidence to support claims made by the assessee.