Onus is on Assessee to establish that Expenditure was incurred for Business: ITAT [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ), held that onus is on assessee to establish that expenditure was incurred for business.

The assessee company, Green Twig Estate Management Pvt Ltd, was incorporated with two shareholders Ashwin L. Shah and Kalpana Shah, with the main purpose of Property namely Kirti Chambers located. The assessee failed to file his regular return of income for theassessment year under consideration i.e Assessing Year (AY) 2011-12, therefore the Assessing Officer issued a notice under section 148 of the Income Tax Act.

The assessee failed to file his regular return of incomefor theassessmentyear underconsiderationi.eAY 2011-12,therefore the Assessing Officer issued a notice under section 148 ofthe Income-tax Act, 1961, whichwas duly served upon the assessee. In response, the assessee filedreturnofincomedeclaringNilincome.

Subsequently, statutory notices under the Income Tax Act were issued andcomplied with. In the assessment completed undersection 147 read with section 143(3) of Income Tax Act, the Assessing Officerthough assessed the total income at NIL, however disallowed work-in-progress in respect of “Kirti Chambers Property” amounting to Rupees two crores anddeniedcarryforwardofthesameforsubsequent years. On appeal the CIT(A) also upheld the disallowance. Hence the present appeal has been preferred.

In the case, the Assessing Officer was required to verify two things. Firstly, whether the payments have been made by the assessee or on behalf of the assessee to the seller parties. Secondly, the payment has been made for the purpose of the business of the assessee.

A Bench consisting of Om Prakash Kant, Accountant Member and Sandeep Singh Karhail, Judicial Member observed that “The lower authorities hasmainly rejected the genuineness of the expenditure incurred againstpayment to tenanted authorized/unauthorized dwellers mainly on the ground thatin the registered deed of transfer, purchase value was recorded atnil as compared to the value recorded in unregistered agreementsand declaration of seller parties.”

“The onus was on the assessee to establish that expenditure was incurred wholly and exclusively for the purpose of the business of the assessee” the Tribunal said.

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