Tribunal allows partial appeal on building expenses but upholds disallowance due to lack of supplier confirmations.

The Tribunal partly allowed the appeal of the assessee, confirming a partial disallowance of Rs. 7,66,806 out of the total Rs. 51,12,040 claimed as expenses for building materials and labor charges. The Tribunal found the appellant's evidence substantial but noted deficiencies in confirmations from suppliers and delayed payments. The order was issued on 20.09.2019.

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Issues Involved:
1. Lack of opportunity to the appellant.
2. Disallowance of purchases amounting to Rs. 51,12,040/- as bogus expenses.

Issue-wise Detailed Analysis:

1. Lack of Opportunity to the Appellant:
The appellant contended that the order passed by the Ld. CIT(A) was without giving any opportunity to the appellant, thus violating principles of law, equity, and justice. However, this issue was not further elaborated in the judgment and seems to be a preliminary ground raised by the appellant.

2. Disallowance of Purchases as Bogus Expenses:
The main contention in the appeal was the disallowance of Rs. 51,12,040/- claimed as expenses for the purchase of building materials and labor charges, which were treated as bogus by the Assessing Officer (AO).

Facts and Proceedings:
- The assessee, an individual earning income from salary and capital gain, filed a return for A.Y. 2013-14 declaring an income of Rs. 21,75,220/-. The case was selected for scrutiny.
- The AO observed discrepancies in the expenses claimed for boundary wall construction and land leveling, leading to doubts about the genuineness of these expenses.
- The AO noted irregularities such as the timing of purchases, lack of storage facilities, and delayed payments. Information from the Commercial Tax Department indicated that the suppliers were engaged in issuing bogus bills.
- The AO disallowed the expenses totaling Rs. 51,12,040/- and added this amount to the income of the assessee, initiating penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income.

Appellant's Arguments:
- The appellant argued that the expenses were genuine, supported by invoices, bank statements, and photographs of the work done. It was claimed that the work was assigned to a local contractor who provided the materials and labor.
- The appellant criticized the AO for relying solely on information from the Commercial Tax Department without conducting independent inquiries or summoning the suppliers.

Tribunal's Findings:
- The Tribunal noted that while the AO had valid reasons to doubt the genuineness of the expenses, the appellant had provided substantial documentary evidence, including invoices and bank statements.
- The AO's failure to conduct a site visit or issue summons to the suppliers was seen as a lapse. The Tribunal found the AO's remarks about the suppliers being small retailers insufficient to disprove the expenses.
- However, the Tribunal also observed that the appellant could not provide confirmations from the suppliers or a valuation report, and the delayed payments raised doubts.

Conclusion:
- The Tribunal decided that a fair resolution would be to sustain a disallowance of 15% of the claimed expenses, amounting to Rs. 7,66,806/-, thereby partly allowing the appeal of the assessee.
- The final order confirmed the partial disallowance and directed the reduction of the disallowed amount to Rs. 7,66,806/-.

Outcome:
The appeal filed by the assessee was partly allowed, with the Tribunal confirming a partial disallowance of Rs. 7,66,806/- out of the total Rs. 51,12,040/- claimed as expenses. The order was pronounced on 20.09.2019.

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