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Income Tax Appellate Tribunal, BANGALORE BENCH “ B ”
Before: SHRI ABRAHAM P GEORGE & SHRI VIJAY PAL RAO
Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt. 9.1.2015 of Commissioner of Income Tax(Appeals)-11, Bangalore for the Assessment Year 2009-10.
The assessee has raised the following grounds :
“ An amount of Rs.47 lakhs received in cash has been treated as income. Hence the expenses incurred, in connection with this income should be treated as revenue expenditure. Rs.47 lakhs has been received as commission including the expenses to vacate the tenants. An amount of Rs.18,10,000 paid in cash for vacating the tenants should be treated as an expenditure.”
There was a search under Section 132 of the Income Tax Act, 1961 (in short 'the Act') in the case of M/s. Davanam Constructions Pvt. Ltd. ( ‘DCPL’ ) on 2.9.2010. During the search and seizure operation, certain transactions between the assessee and M/s. DCPL were found showing receipt of unaccounted income of the assessee. The assessee in its revised return of income declared income of Rs.19,73,210. In the reassessment proceedings, the Assessing Officer proposed to assess the amount of Rs.47 lakhs received by the assessee in cash from M/s. DCPL. The assessee contended before the Assessing Officer that though he received Rs.47 lakhs for getting the property cleared from the encroachers/occupants however, he has spent Rs.18,10,000 for vacating the occupants of property in question and therefore this expenditure should be allowed against the receipt of Rs.47 lakhs. The Assessing Officer disallowed the claim of the assessee that the payments made were all in cash and not verifiable as the assessee has failed to produce the parties. The assessee challenged the action of the Assessing Officer before the CIT (Appeals)
but could not succeed. The CIT (Appeals) has confirmed the action of the Assessing Officer rejecting the claim of expenditure of Rs.18,10,000/-.
Before us, the learned Authorised Representative submitted that the assessee is dealing in real estate and received a sum of Rs.47 lakhs from M/s.
DCPL which took the property on lease from M/s. Rao Bahadur B.P. Annasamy Mudaliar CIES Public Charities Trust. The assessee claimed to have negotiated the settlement between the parties and since there were illegal tenants who were running small time businesses for long time, M/s. DCPL entered into a contract with the assessee to get the vacant land possession of the property.
Consequently, the assessee negotiated with the tenants and received Rs.47 lakhs from M/s. DCPL. The assessee has in turn paid a sum of Rs.18,10,000 to the tenants as a compensation to vacate the property illegally occupied by these tenants. Thus the learned Authorised Representative has submitted that the said expenditure is allowable against Rs.47 lakhs as the assessee has received only net amount after payment of Rs.18,10,000 to the tenants. The Assessing Officer instead of verifying the claim by summoning the persons as well as other relevant parties has rejected the claim of the assessee on the ground that the claim is not verifiable as the assessee did not produce the Assessing Officer. The learned Authorised Representative submitted that it is beyond the control of the assessee to produce these third parties before the Assessing Officer. Thus the learned Authorised Representative has submitted that when the assessee has furnished all the relevant details including the receipts of the payments, then the Assessing Officer should have allowed this claim of expenditure. He has relied upon the relevant details as well as receipts issued by these parties.
On the other hand, the learned Departmental Representative has submitted that the entire payment is in cash and the assessee has failed to produce these parties for verification. Therefore the payment in question is not verifiable from the record produced by the assessee. He has relied upon the orders of the authorities below.
We have heard the rival submissions as well as considered the relevant material on record. The assessee has claimed to have been paid Rs.18,10,000 to ten tenants who were occupying the property in question illegally. The said payment was claimed by the assessee to have been made on behalf of M/s.
DCPL for getting the property vacated from the tenants and therefore the Rs.47 lakhs for this purpose. The assessee produced the details of these payments and name of the parties as under :
Sl. No. Name Rs. 1. A.D. Bhaskar 2,00,000 2. Rama Reddy 1,50,000 3. Ramachandra Gowda 1,80,000 4. Liyaz Ahmed 1,75,000 5. Amalamma 1,60,000 6. Puttaswamy 1,95,000 7. Prabhakaran 1,90,000 8. Sattar 2,00,000 9. Purushottaman 1,60,000 10. Selvaraj 2,00,000 18,10,000 We further note that the assessee has filed receipts from all the ten persons as well as confirmation from person namely Mr. Sattar who has received Rs.2 lakhs. Once the assessee has claimed to have paid these amounts to the alleged tenants for vacating the property in question then it was incumbent upon the Assessing Officer to conduct a further enquiry to verify the claim of the assessee. We find substance in the contention of the assessee that the production of these parties is beyond the control of the assessee and therefore the Assessing Officer was required to summon these parties provided the assessee furnished the relevant details and addresses of these parties. Since a Assessing Officer in this regard, therefore, in the facts and circumstances of the case, we set aside this issue to the record of the Assessing Officer for conducting a proper enquiry subject to furnishing of all the relevant details (addresses of these parties) by the assessee. Needless to say, the Assessing Officer shall afford an opportunity of hearing to the assessee before passing a fresh order on this issue.
In the result, the appeal of the assessee is allowed for statistical purpose.