Tribunal denies expense claims, imposes interest on NRI for tax deduction failure

The tribunal upheld the disallowance of expenses claimed by the assessee for property improvement and transfer of capital asset due to lack of evidence supporting their relevance. Additionally, it confirmed the levy of interest under sections 234A, 234B, and 234C of the Income Tax Act on the Non-Resident Individual (NRI) assessee for failure to ensure tax deductions at the source. The appeal was dismissed, affirming the decisions of the lower authorities. The judgment was delivered by the Appellate Tribunal ITAT Hyderabad on 13th July 2021.

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Issues Involved:
1. Disallowance of expenditure towards cost of improvement of the property.
2. Disallowance of expenditure incurred for transfer of capital asset.
3. Levy of interest under sections 234A, 234B, and 234C of the Income Tax Act.

Issue 1: Disallowance of Expenditure Towards Cost of Improvement of the Property:
The assessee claimed various expenses as the cost of improvement of the property while computing Long Term Capital Gains (LTCG). The Assessing Officer (AO) disallowed specific amounts, such as expenses for construction of watchman quarters and stone cutting charges, due to lack of evidence and relevance to property improvement. The CIT (A) upheld the AO's decision. The tribunal concurred, stating that the expenses did not directly contribute to property improvement but were for maintenance. As the assessee failed to provide substantial evidence, the disallowance was confirmed.

Issue 2: Disallowance of Expenditure Incurred for Transfer of Capital Asset:
The assessee claimed expenses for brokerage and travel related to the property transfer. The AO disallowed a significant portion of these expenses due to insufficient evidence, except for a partial deduction for travel expenses. The CIT (A) upheld the AO's decision. The tribunal agreed, emphasizing the lack of concrete proof of payments made for brokerage and other expenses. The tribunal confirmed the disallowance, noting the absence of evidence regarding payment methods and recipients.

Issue 3: Levy of Interest Under Sections 234A, 234B, and 234C of the Act:
The assessee, being a Non-Resident Individual (NRI), argued that interest levied under these sections was not applicable as tax deductions should have been made at the source by the property purchaser. However, the tribunal held that the NRI remains responsible for tax remittance if deductions were not made at the source. Therefore, the tribunal upheld the levy of interest under sections 234A, 234B, and 234C, as it was consequential to the default on the part of the assessee.

In conclusion, the tribunal dismissed the appeal of the assessee, upholding the decisions of the lower authorities on all issues. The judgment was pronounced on 13th July 2021 by the Appellate Tribunal ITAT Hyderabad, with detailed reasoning provided for each issue addressed in the appeal.

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