INCOME TAX ACT, 1961

Section ?????

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Only issue raised in the first round of proceedings was, whether repairs and renovation expenses incurred was capital or revenue in nature and none of the authorities had ever doubted genuineness of the expenses. Entire details in respect of repairs and renovation were duly filed before the copies of lease deeds were filed as additional evidences before CIT(A) which was duly forwarded to AO for comments. Once the lease deeds were not admitted by CIT(A), Tribunal restored the issue only to examine, whether repairs and renovation expenses were capital or revenue in nature and to consider the lease deeds filed. However, in second round of proceeding, AO undertook ex parte inquiries behind the back of assessee to doubt even genuineness of expenses. On the basis of the remand report submitted by AO, CIT(A) confirmed disallowance of expenses holding it to be non-genuine. Held: Scope of proceedings was circumscribed to direction of the Tribunal, which was limited to, whether repair and renovation expenses incurred on a lease property was revenue expenditure or was capital in nature. Nowhere genuineness of expenses incurred was doubted nor bills and vouchers for the purchase of material and for renovation work filed were ever disputed or found to be non-genuine. The direction of the Tribunal was very categorical, firstly, to admit the lease deed; and secondly, to decide whether the expenditure incurred is revenue in nature or not. However, entire context of addition not changed when in the course of appellate proceedings, CIT(A) in the remand proceedings got conducted certain inquiry through AO, wherein AO sought information from the parties. First of all, such an inquiry was not called for, as it was beyond the scope of second round of proceedings and any inquiry conducted behind the back of assessee that too after a gap of seven years, could not be used to draw any adverse inference, especially when assessee had produced the entire bills and invoices raised by the same contractors and after a gap of substantial time of seven years an ex parte statement given behind the back of the assessee had no credibility. The same could not be used as an evidence against assessee.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2007-08

INCOME TAX ACT, 1961

Section 37(1)

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