TMI Blog2013 (11) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessees herein is about 30% and no business man would ordinarily spend such amount voluntarily unless they are compelled to do so and such compulsion should be reflected in the sale deed. Similarly, even if the land had to be developed/filled in, nobody would be willing to incur generously 30% of the sale price that too without any agreement, either with the purchaser or with the developers. It is also necessary to notice that the developers, being business men, would not ordinarily take up such contracts without anything in writing and without any prior payment. The entire surrounding circumstances plainly go to prove that the assessing officer has correctly noticed the facts and arrived at a conclusion that development expenditure cannot be allowed as deduction u/s 48 of the Act. Merely because he has drifted from his main observations to estimate expenditure on adhoc basis and to generously allow the same as deduction the Ld. CIT(A), whose powers are co-terminus with that of the assessing officer, should not remain as a mute spectator of the game - Therefore, matter is restored back to CIT - Decided in favour of Revenue. - IT Appeal Nos. 367 & 368 (Vizag.) of 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted filling/leveling of the land even without receiving any amounts from the assessee; If one were to go by the assumption that the land was sold on 11.06.2007 and simultaneously leveling of land had commenced. Taking judicial notice of the fact that ordinarily no developer would carry on the land development work without taking any advance amount from the assessees more particularly when there is no agreement on record to substantiate that they were directed to fill/level the land the same was pointed out to the assessee. The counsel appearing on behalf of the assessee submitted that the development was a pre-condition for sale of the property. In other words land was to be handed over only after filling the same to the extent required. It was also submitted that the land was used for agricultural purpose for long time i.e. for growing paddy and in respect of such lands, huge amount has to be spent for filling the land. It was also contended that Sri Surya Prakash is engaged in a small time business i.e. selling of ropes and scrap iron and Sri Sama Naresh is also engaged in small time business (nature of business not mentioned). Therefore, they could not get any loans from banks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal circumstances no prudent person would enter into an agreement for either land filling or development without deciding upon the rate per acre or rate per unit of land. Even after alleged completion of land filling, the assessee is not in a position to tell as to how much expenditure was incurred per acre. No doubt it is true that the developers have declared the receipts in their income-tax returns but the fact remains that they have admitted meager profits and mere declaration in their returns is not sufficient enough to prove that the land development activity was done as a pre-condition for sale of land. 4. Having analysed the peculiar factual matrix of the case at length, the A.O., for the reasons best known to him, did not want to rest upon the strong foundation made by him but rather diverted his attention on the alternative grounds. In this regard, he observed that even if it is assumed that the expenditure was incurred by the assessees and had to be treated as cost of development, reasonability of such expenditure has to be proved by the assessees. In this regard, he has referred to a comparable case of Sri K. Srinivas, Tallarevu who in turn sold land situated in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of development nor made any further probe regarding the nature and extent of development. The A.O. having accepted the factum of development and factum of payment, he ought not to have reduced the development expenditure in an adhoc manner since there is no basis for arriving at expenditure @ Rs.3 lakhs per acre. He again reiterated the fact that the assessing officer having satisfied himself regarding the genuineness of development activity, identity of the payee and the genuineness of the payment he cannot proceed to disallow certain expenditure on adhoc basis. Thus the expenditure, as claimed by the assessee, was allowed by the Ld. CIT(A). 8. Aggrieved, revenue preferred appeals before the Appellate Tribunal. The case of the assessing officer is that the powers of the Ld. CIT(A) are co-terminus with that of the assessing officer and he ought to have called for a remand report when he noticed that further enquiry ought to have been conducted by the assessing officer. It was further contended that the CIT(A) should have given opportunity to the assessing officer to furnish additional information in this regard since his powers are co-terminus with that of the assessing offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessing officer by not discharging his duty as a first appellate authority in verifying about the need to incur such expenditure and whether such expenditure is allowed u/s 48 of the Act. The Ld. D.R. strenuously contended that except placing on record that payments were made by cheques, there was no other evidence to show that there was necessity to develop the land. It is nowhere stated by the assessee as to when the development had commenced. But even going by the facts placed on record, it has to be assumed that the so called development activity i.e. filling the land, had commenced only after the date of sale. If such be the case, whether the assessee or the developer is entitled to trespass the land purchased by M/s. GSPCL and fill the land without prior written agreement? M/s. GSPCL is a corporate entity and it would not be difficult to cross verify as to whether there is any such prior agreement or whether there is any activity on the land by the seller after the date of sale, as a pre-condition of sale. In fact without the consent of purchaser, neither the assessees nor the developer could have carried on any activity on the land and in the peculiar factual matrix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not contain any clause, whereby development of land was required to be carried out by the assessees as part of the package of sale. Section 48(i) (ii) provides for mode of computation of capital gains whereby, an assessee is entitled to compute the capital gains taxable under the Act by deducting, from the full value of the consideration received, the following amounts i.e. (a) expenditure incurred wholly and exclusively in connection with such transfer and (b) the cost of acquisition of the asset and the cost of any improvement thereto. From a plain reading of the section 48 of the Act, it becomes clear that only expenditure incurred prior to agreement of sale or expenditure which was wholly and exclusively incurred in connection with such transfer is allowable as deduction. In respect of any claim of expenditure, the initial onus is upon the assessees to prove that such expenditure was incurred wholly and exclusively in connection with such transfer. In the instant case, the assessing officer repeatedly asserted that development is not a pre-condition for sale. In other words, sale price was based upon the quality of the land as it existed prior to the so called development. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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