Failure of Assessee to Substantiate Enhanced Cost of Acquisition with Cogent Evidence: ITAT upholds Disallowance of Excess Cost [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, on the assessee’s failure to substantiate enhanced cost of acquisition with cogent evidence, upheld the disallowance of excess cost.

The aforesaid observation was made by the Pune ITAT, when an appeal was preferred before it by the assessee, being aggrieved by the first appellate order of the National Faceless Appeal Centre, Delhi [NFAC], passed under Section 250 of the Income Tax Act, 1961.

The sole and substantive ground of the assessee’s appeal, being directed against the determination of cost of acquisition of asset, where excess payment was made, over and above the agreed price consideration in acquiring it, the brief facts of the case pertaining to the issue were that,the appellant assessee was an individual who had filed his return of income originally under Section 139(1) of the Income Tax Act, declaring total income of ₹17,58,490/- which later was revised to ₹42,58,610/- under Section 139(5) .

In a scrutiny assessment under Section 143(3) of the Income Tax Act, the Dy. CIT, Pune [ AO] vide his order, assessed the total income at ₹99,28,610/- on account of three additions, including the impugned addition of ₹48,70,000/- arising on account of slicing down the cost of acquisition of assets charged to tax on its transfer.

In an appeal, the NFAC after considering detailed submission and analysing the facts in the light of juridical precedents, also upheld the action of the AO. And it is being further aggrieved by the same, that the assessee has preferred the instant appeal before the Pune ITAT.

Hearing the opposing contentions of both sides, as submitted by Shri Suhas P. Bora, on behalf of the assessee, and by Shri Ramnath P. Murkunde, on behalf of the Revenue, the Pune ITAT observed, “the excess payment (if any) made by the appellant to the parties from whom the pieces of and were acquired does not ispo-facto sufficient it to attribute towards the cost of acquisition of transferred assets. This is so because, there is a complete absence of lawful contractual obligation or a document creating any additional liability upon the appellant purchaser or acquirer for any payment in addition to or over & above the agreed consideration of ₹26,30,000/- in relation to execution of registered POA.”

Finally, the coram of S.S Godara, the Judicial Member, and G.D Padmahshali, the Accountant Member, thus concluded and held:

“Therefore, we do not find any infirmity with the orders of both the tax authorities below in disallowing the excess cost while computing the profits in the hands of appellant. For the reason we find the grounds of appeal meritless.”

To Read the full text of the Order CLICK HERE

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