INCOME TAX ACT, 1961

Section 40A(3)

Business disallowance under section 40A(3) - Disallowance of development charges - Applicability of provisions of section 40A(3) -

AO noticed that assessee was carrying on real estate activity. AO noticed that the assessee had claimed deduction as development expenses. AO further noticed that assessee had shown development charges in the year relevant to the assessment year 2010-11. In the absence of details relating to development expenses, AO had disallowed the said amount in assessment year 2010-11. AO noticed that the amount claimed as deduction during the year formed part of expenditure disallowed in assessment year 2010-11. Since assessee did not furnish any documentary evidence in support of the claim to prove genuineness, AO disallowed the same holding that provision of section 40A(3) was also applicable, since the assessee has made the payment exceeding Rs. 20,000 by way of cash. Held: Applicability of provisions of section 40A(3) could well be appreciated only if the documentary evidences were also examined, besides sledger extracts. Assessee had not furnished documentary evidences before AO and hence, the applicability of provisions of section 40A(3) was also not actually examined. Expenditure claimed by assessee formed part which was incurred by the assessee during the year relevant to the assessment year 2010-11. Assessee had claimed proportionate expenditure relating to the whole of sites affected by it. Since assessee had claimed the expenditure during the year, it was the duty of assessee to prove expenditure before AO by furnishing relevant documentary evidences. Therefore, matter was remanded back to AO for fresh examination.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2011-12

INCOME TAX ACT, 1961

Section 40A(3)

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