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2025 Supreme(Mad) 4630
IN THE HIGH COURT OF JUDICATURE AT MADRAS
K.R. SHRIRAM, CJ., SUNDER MOHAN, J.
The Commissioner Of Income Tax (Appeals)-VIII, Chennai - Appellant
Versus
M/s Bharat Promoters, No.238 Manis Mansion Gandhi Road Vellore-4 - Respondent
T.C.A. Nos.368 and 369 of 2011
Decided On : 09-06-2025
For the Appellant : Mr. J. Narayanaswamy.
For Respondent: Mr. A.S. Sriraman.
A taxpayer's claim for expenditures must be substantiated by credible evidence, and the appellate authorities' factual determinations are upheld unless proved otherwise.
Headnote:(A) Income Tax Act, 1961 - Sections 143 and 260A - Appeals against the ITAT's decision on expenditure claims concerning development costs, broker commission, and repairs - Appellants argued the absence of sufficient evidence to support claims made by the respondent. Substantial issues included evaluation of expenses for land development and overall validity of the expenditure claims made. The court upheld ITAT's findings based on physical verification and established documentation supporting the claims made by the respondent. (Paras 2-12)
(B) Tax Assessments - The onus of proving the authenticity of claimed expenditures lies with the taxpayer. Both CIT(A) and ITAT evaluated evidence and found that the expenses were incurred as claimed, rejecting the appellant's assertion of factual errors. (Paras 4-9)
(C) Review of ITAT's Findings - A higher court will defer to the factual determinations made by the ITAT unless there are substantial grounds to question their findings. (Paras 10-12)
| Table of Content |
|---|
| 1. facts leading to the appeals - What were the substantial questions of law framed by the court? (Para 2) |
| 2. appellant's arguments against expenditures - What were the arguments presented by both parties regarding the expenses? (Para 3 , 4) |
| 3. court's analysis of expenses validity - How did the court evaluate the factual findings by the ITAT and CIT? (Para 5 , 6 , 7 , 8) |
| 4. court affirmed lower authorities' findings - How did the court evaluate the factual findings by the ITAT and CIT? (Para 9 , 10 , 11) |
| 5. conclusion and dismissal of appeals - What was the final decision of the court? (Para 12 , 13) |
JUDGMENT :
(SUNDER MOHAN, J.)
On 10.10.2011, while admitting the captioned Tax Case Appeals, this Court had framed the following five substantial questions of law.
“1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law deleting the addition made by the assessing officer in respect of development expenditure for levelling and filling to the tune of Rs.2,96,67,138/-, even though the assessee could not establish the expenditure at any stage not proved on the basis of facts and evidences is valid?
2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in deleting the addition made by the assessing officer in respect of Road Development Expenses to the tune of Rs.1,92,56,890/- even though the assessee could not establish the expenditure at any stage not proved on the basis of facts and evidences is valid?
3. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in deleting the addition made by the assessing officer in respect of Repairing of Compound Wall to the tune of Rs.40,17,590/-, even though the assessee could not establish the expenditure at any stage not proved on the basis of facts and evidences is valid?
4. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in deleting the addition made by the assessing officer in respect of repairing of old damaged well and over head tank to the tune of Rs.90,18,834/- even though the assessee could not establish the expenditure at any stage not proved on the basis of facts and evidences is valid?
5. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in deleting the addition made by the assessing officer in respect of Commission paid to Brokers to the tune of Rs.80,55,895/- even though the assessee could not establish the expenditure at any stage not proved on the basis of facts and evidence is valid?”
2. The facts leading to the filing of the above appeals are as follows:
(a) Respondent/assessee furnished the return of its income on 31.07.2007 declaring a taxable income of Rs.8,96,80,430/-, which included a declared short term capital gain of Rs.8,92,83,958/- and income from other sources of Rs.3,86,472/-. The assessing officer processed the return under Section 143 of the INCOME TAX ACT , 1961 [hereinafter referred to as 'the Act'] and passed an order on 29.12.2009, determining the taxable income at Rs.17,17,89,870/- and the tax payable at Rs.3,94,05,743/-.
(b) Aggrieved by the assessment order dated 29.12.2009, respondent filed an appeal before the Commissioner of Income Tax (Appeals)-IX, Chennai, [hereinafter referred to as 'CIT (A)'] on the ground that the assessing officer had disallowed the expenditures and deductions under the following heads.
(i) Expenses towards development of the land – Rs.6,97,78,544/-
(ii) Payment of commission to broker – Rs. 80,55,898/-
(iii) Interest on capital account – Rs.1,01,75,000/-
According to the respondent, they had incurred the expenses of Rs.6,97,78,544/- for the development of land in the following manner.
(i) Expenses for levelling/filling of land purchased by them : Rs.2,96,67,138/-
(ii) Road Development Expenditure : Rs.1,92,56,890/-
(iii) Repairing of compound wall : Rs. 40,17,590/-
(iv) Repairing of old da
