The Income Tax Appellate Tribunal (ITAT), Pune Bench has held that deduction of compensation paid for breach of contract cannot be allowed based on bank statement alone.
The assessee, M/s.Home Developersis a partnership firm engaged in the business of builder, promoter, and developer. During the assessment proceedings, the Assessing Officer observed that the assessee entered into the Development Agreement in respect of its project “Parijat” and claimed a deduction of Rs.36,09,000/- being compensation paid to land-owners, for allotting less than agreed constructed area, as per development agreement.
The AO without being satisfied with the details furnished by the assesseeand observing that the assessee furnished self-made vouchers and also tampered with some of the documents, invoked section 37 of the Act and made the addition of Rs.36,09,000/-. The aggrieved assessee filed an appeal before CIT(A) which confirmed the addition. Hence, filed an appeal before ITAT.
The Coram of Mr. S.S. Godara, Judicial Member,and Dr. Dipak P. Ripote, Accountant Member has observed that the development agreement does not indicate any consideration. A mere statement that the transactions routed through a banking channel do not absolve the assessee to claim the deduction.
The Tribunal has held that “we do not find any reason to deviate from the order of theCIT(A). Accordingly, we uphold the order of theCIT(A). Therefore, the grounds of appeal raised by the Assessee are rejected”.
Mr.S P Walimeappeared on behalf of the revenue.
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