Mar 192021
 

For the computation of capital gain under Section 48 of the Income-tax Act, 1961

Expenses claim to have spent on construction and/or renovation of property Rs 1,70,000/-

In support of its claim, the assessee filed a bill of the said amount issued by one ‘S’

However, it was found to be bogus and the signature stated therein was not of ‘S’

Now the question arises:

Whether genuineness of any claim is not proven merely on the production of some paper but only when same is substantiated?

Whether since there was nothing on record to suggest that sum in question was paid by the assessee so as to claim the cost of improvement of property sold is sufficient ground to disallow the said expenses?

Detail facts


The assessee sold his share of house property. While computing capital gains, the assessee claimed to have spent a sum of Rs. 1,70,000 on account of construction/renovation of property sold. In support of its claim, the assessee filed a bill of the said amount issued by one ‘S’. The Assessing Officer while verifying the bill in respect of alleged renovation found that same was bogus. The Assessing Officer, accordingly, disallowed the said amount. The Commissioner (Appeals), however, allowed the claim of the assessee.

Analysis of facts


Liability to prove that expanses claimed to be genuine:

  • The onus was upon the assessee to prove that particular deduction was admissible.
  • It also depends on him to lead evidence in that regard.

Issue No 1 -> The amount was stated to be spent on some civil nature and in the parking area. However, details of such renovation work were not filed.

Issue No 2 -> The bill issued by ‘S’ was found to be bogus. The signature stated therein was not of ‘S’.

Issue No 3 -> The amount stated in the bill was also not paid to date.

Thus, there was nothing on record to suggest that the sum of Rs. 1,70,000 was paid by the assessee so as to claim the cost of improvement of property sold.

It is wrong to say that once the voucher for expenditure was produced, the expenses should have allowed the same. The allowability of the expenditure do not depend upon the mere production of voucher but such voucher should also be authentic and genuine and not merely a piece of paper.

The genuineness of any claim is not proven merely on the production of some paper but only when the same is to be substantiated. The creditworthiness of the claim having not been established rather the ungenuineness nature of the claim having been proved by the Assessing Officer, he was justified in disallowing Rs. 1,70,000 as cost of improvement of the property.

One more revealing fact was that when the expenditure was incurred for the whole of the property, the assessee had claimed the entire expenses as its own expenses, whereas the assessee was only having one-fourth share of the same. This also proved in the approach of the assessee in claiming bogus expenses and, consequently, reduced his tax liability.

Conclusion


Merely because the signature in an invoice is not matching does not amount to the expenditure to be bogus. Whether expenses claim are genuine or is a matter of fact and entire transaction cycle (need of expenses, quotation, billing, receiving, payment and benefits from the expenses), justification of claim and approach of the assessee in making such claim shall be looked after before disallowing the expenses.

Sensys

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