JAYARAMARAJA JAYAKRISHNAN,CHENNAI vs. ACIT NON CORPORATE CIRCLE 1, CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 2, Chennai, dated 01.03.2017 relevant to the assessment year 2012-13.

Facts are, in brief, that the assessee is in the business of real estate and film distribution. During the year under consideration, the assessee along with others entered into a development agreement on 06.10.2011 with M/s. Casa Grande Private Ltd. For construction of a 2 residential complex in an extent of 12.95 acres of land situated at Thalambur village, Chengalpattu Taluk, Kancheepuram Dist. The sharing ratio of the constructed area is 36.5% to the land owners and 63.5% to the developer. The profit for the entire project has been arrived at Rs.23.54 crore and the same has been admitted on percentage completion method. For the year under consideration the assessee has admitted an amount of Rs.4.62 crore which is 20% of the overall profit. In the assessment order, the Assessing officer has noted that the assessee has paid an amount of Rs.75,00,000/- through three cheques drawn at HDFC Bank Account No. 13052320000185 to Shri Sundaram, S/o Shri Permal Naidu on 27.06.2011. The Assessing Officer has noted that the above amount of Rs.75,00,000/- paid for development of 25 cents of land and the assessee has not filed any details such as invoice or bills. Though the amount was paid through banking channel, the Assessing officer has held that the payment is not genuine payment. On appeal, the ld. CIT(A) confirmed the assessment order.

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the assessee has offered an amount of Rs.4.62 crores as profit and the 3 project developed by the assessee was not doubted by the Assessing Officer and only the development expenses has been disallowed on the ground that the bills and vouchers are not produced. Therefore, he prayed that the same has to be allowed.

On the other hand, the ld. DR supported the orders of authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. It is an admitted fact that the assessee has entered into a development agreement with M/s. Casa Grande Pvt. Ltd. for construction of residential complex and admitted profit of Rs.4.62 crores on percentage completion method for the year under consideration. The Assessing Officer has doubted only the genuineness of the development expenses. It is an admitted fact that the assessee has paid Rs.75 lakhs through HDFC bank by 3 cheques, each cheque for Rs.25 lakhs and TDS has also been deducted under section 194C of the Act. According to the Assessing Officer, the assessee has not produced any bills and vouchers and therefore, the payment was made to a known person and thereby disallowed the same. It is not the case of the assessee that the assessee paid the amount and received back the same. The case of the assessee is that a piece of land is a crucial to the entire project and until that land is developed, it was difficult to proceed with the development of the entire project. Therefore, under business compulsion, the payment was made by the assessee and it is an allowable expenditure under the Act. We find that the expenditure incurred by the assessee is only for the business and it is allowable expenses. However, the assessee has not been able to file bills and vouchers. Thus, we are of the considered opinion that the expenses to the extent of 20% incurred by the assessee may be disallowed. Accordingly, the Assessing Officer is directed to allow 80% of the expenses claimed by the assessee.