9911796707
TMI Blog2019 (10) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... In response to the notice under section 153A the assessee contended that return filed originally under section 139(1) be treated as filed in response to this notice. M/s.Sahara India Commercial Corporation Ltd. ("SICCI" for short) was exploring to develop a housing project in Jamnagar. Therefore, it required negotiator/mediator who could arrange land for it. It emerges out from the record that a memorandum of understanding was executed by the assessee and "SICCI" on 24.5.2005. Copy of which has been placed on page no. 31 to 36 of the paper book. Through this MOU, it was agreed that the assessee would make arrangement of 43.92 acres of land at the agreed price of Rs. 13.00 lakhs per acre. According to the assessee, as per clause-4 of the MOU, this Rs. 13 lakhs will include all cost of land and development expenses. Thus, the assessee is required to develop such land i.e. leveling, boundary cleaning, cutting of trees etc. The assessee has debited a sum of Rs. 1,95,35,000/- at the rate of Rs. 4,44,786/- per acre towards such development expenditure. The AO conducted an inquiry and recorded statement of four persons who have carried out this development on behalf of the assessee. He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily cash book to which the assessee replied that he had not maintained any account of this cash." 4. On the basis of the above discovery of facts coupled with reply of the assessee given to question no.8 during the course of search, the ld.AO held that the assessee was not supposed to incur the expenditure towards development expenditure etc. and he made addition of Rs. 1,95,35,000/- apart from other expenditure. 5. Dissatisfied with this disallowance, the assessee carried the matter in appeal before the ld.CIT(A). The ld.first Appellate Authority has appreciated the facts and arrived at conclusion that as per MOU the assessee was under obligation to carry out the development of the land, and therefore, he must have incurred some expenditure. The ld.CIT(A) on an estimate basis considered a sum of Rs. 3 lakhs per acre as incurred by the assessee and allowed a deduction of Rs. 1,31,76,000/- out of the alleged disallowance of Rs. 1,95,35,000/-. 6. Revenue in its appeal is impugning deletion of disallowance of Rs. 1,31,76,000/-. Certain administrative expenditure of Rs. 2,52,031/- were claimed out of which Rs. 2,16,574/- has been deleted by the ld.CIT(A). This deletion has been cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to him, this is the main reason why huge additions/disallowances have been made in the "hands of the appellant. He stated that he is neither related nor associate of that person. Only similarity is that appellant has also sold land to M/S Sahara India to whom that person has sold the land. He stated that there is no similarity between the facts of the two cases. (ii) Appellant has entered in to a Memorandum of Understanding with M/s Sahara India on 24.05.2005 for sale of land admeasuring 43.92 Acres of land at the agreed price of Rs. 13,00,000/- per acre. As per preamble of the MOU, purchaser, M/s Sahara India has acquired land admeasuring 102.55 acres and by this MOU, they wanted to make total land acquisition of 150 acres i.e. further approximately 48 acres. Main purpose for acquisition of this land is that M/s Sahara India intends to develop a residential township in Jamnagar in 150-acre area. According to the clause no 4 of the agreement, M/s Sahara India has agreed to purchase land at average rate of Rs. 13,00,000/- per acre, which shall include the cost of land and development expenses etc. Before Assessing officer, appellant-has produced copy of this MOU, which is up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t fit four use for development of a residential township. Main reasons for disallowance of this expense by assessing officer have been discussed in Para no 7 of the instant appellate order. Appellant has shown the details of payments made to those persons, all the payments are made thorough cheque and all the persons to whom the work is allotted have confirmed that they have carried on the work, they have also shown receipt in their books of accounts and they have filed their return of income. Appellant has also produced contractors who have been chosen by assessing officer for examination and in examination; they have confirmed that they have carried on the work. During the course of examination before Assessing Officer, they . have also produced .the workbook. During the course of examination, the contractors have further stated that number of hours they have worked, how they have worked, how the labour payments have been made, they have employed supervisors and chowkindars. They have also entered in to contract with the appellant for carrying out this work which includes land filling, water sprinkling, grass and babool cutting, jungle cutting, rolling of land after all these wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wners, appellant stated that after that agreement is entered, possession is handed over to the appellant for carrying out development work. He further submitted that for the purposes of carrying out this type of works as it is not construction activity, it is not necessary that appellant should get the possession of the property as land owners have already stopped carrying on agricultural activity. Further, such types of covenants are mentioned for the reason that if the possession is handed over at the time of entering into agreement to sale, full stamp duty is chargeable, therefore, it is also the standard wording of agreements. Regarding statement of one contractor where he has stated that he made withdrawal of Rs. 3,00,000/- on 10.10.2005 and handed over the sum to the appellant, appellant in turn clarified that as he is always on the site, that amount is given, to the appellant to hand it over to his supervisor for onward payments to be made. However, only because of isolated sum of Rs. 3,00,000/- where the explanation of contractor as well as appellant was not found satisfactory By assessing officer, whole amount of Rs. 1.95,35,000- cannot be disallowed. Further, some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay anything in particular but it is true that I have not spent anything on land development, but it is also true that in today's time there are many other expenses in any land transaction. In totality I have to state that I have earned a profit of Rs. 1 crore and I accept that." 12. The explanation of the ld.counsel for the assessee qua this reply is that this statement has been misconstrued by the Revenue authorities. The land development expenditure was to be borne by the SICCL. The obligation at the end of the assessee was to cut trees, leveling of plots, laying boundaries etc. While giving this reply, the assessee construed the question as if Revenue was talking of construction expenditure and other activities which are to be performed by Sahara. On analysis of this material, particularly, in the light of detailed reasoning/finding of the CIT(A) one fact is clear that the assessee has incurred certain expenditure towards development of this land i.e. cutting of trees, leveling, filling, demarcation of boundaries etc. The question now is, how to quantify it. As per the assessee, he has maintained details of all the persons who have performed this activity. He has made paym ..... X X X X Extracts X X X X X X X X Extracts X X X X
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