Disallowance of excess claim of development expenses by AO

The Revenue appealed the deletion of disallowances made by the Assessing Officer (AO) concerning development expenses and other expenditures. The AO had disallowed a significant portion of development expenses claimed by the assessee, arguing that the revenue from flat sales spanned multiple years. Additionally, the AO made ad-hoc disallowances of 20% on certain contract expenses due to cash payments lacking proper documentation. However, the appeal by the Revenue was ultimately dismissed.

BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER
AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER

I .T.A.No.1922/Chny/2018

Assessment Year : 2008-09)

The Income Tax Officer,
Non-Corporate Ward-13(4)
Chennai

vs

M/s. Guru Homes,
5, PeriyarSalai,
Thiru Nagar, Ashok Nagar
Chennai-600 083.

PAN: AAHFG 0077A

Appellant by : Ms. Anita, Addl.CIT

Respondent by : Mr.N.R.Krishnamoorthy, FCA

Date of hearing : 25.08.2021

Date of Pronouncement : 01.09.2021

O R D E R

This appeal filed by the Revenue is directed against the order passed by the learned CIT(A)-14, Chennai dated 26.03.2018 and pertains to assessment year 2008-09.

2. Brief facts of the case are that the assessee, a partnership firm, is engaged in the business of construction of flats filed its return of income for assessment year 2008-09 on 30.06.2009 declaring total income of Rs.65,847/-. The assessment has been subsequently reopened u/s.147 of the Income Tax Act, 1961.

3. The first issue that came up for our consideration from ground no. 1 to 2.5 of revenue appeal is deletion of disallowance of excess claim of development expense of Rs.2,78,20,552/-. The learned DR for the Revenue submitted that the learned CIT(A) has erred in deleting disallowance of excess claim of development expenses, without appreciating fact that assessee has claimed entire development expenses in the impugned assessment years, even though it has recognized revenue from sale of flats for three assessment years including impugned assessment year.

4. The next issue that came up for our consideration from ground no.3 of revenue appeal is ad-hoc disallowance of various expenses on the ground that said expenses incurred in cash and not further, supported by necessary bills and vouchers. The Assessing Officer has disallowed 20% of contract expenses like site expenses, earth filling charges and sand purchases on the ground that the assessee has incurred expenditure in cash.

5. In the result, appeal filed by the revenue is dismissed.
Order pronounced in the open court on 1st September , 2021

Please find attached the enclosed file for the full judgement