ACIT, CHENNAI vs. KUGEK DEVELOPERS PVT. LTD., CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

:-2-: ITA No. 1371/Mds/2017 claimed Rs.4,55,27,000/- towards Land development expenses. The AO required the assessee to furnish , inter alia, details about the land which was developed, how it was developed, agreement between the owner of the land and the assessee, payment register for the daily wages claimed to have been made , to produce and proof for the payments made etc,. Since the assessee could not furnish them, he disallowed it. Aggrieved , the assessee filed an appeal before the CIT (A) . The CIT (A) on the basis of the orders of the CIT (A) and the ITAT furnished by the assessee in respect of the appeals filed by its sister concerns viz Suprasnath Promoters Pvt. Ltd. etc, directed the Assessing Officer to restrict the income of the assessee to 2.24% and partly allowed the assessee’s appeal . Aggrieved against the CIT(A) order, the Revenue filed this appeal with the following grounds .

“1. The order of the CIT(A) is contrary to law and facts of the case.

2. The CIT(A) erred in restricting the disallowance of expenditure incurred on land development of Rs4,55,27,000/- to 2.24% of the income of the assessee. 2.1. The CIT(A) erred in not appreciating the contention of the AO that the assessee had claimed huge expenditure of Rs 4,55,27,000/- on land development without any documentary evidence like vouchers/bills/receipts etc. 2.2. The CIT(A) erred in not appreciating the contention of the AO that the extract of the ledger account of land development expenses furnished by the assessee did not contain any details such as to whom the payments have been made, number of labourers to whom payments were made etc. 2.3. The CIT (A) failed to appreciate that no proof or evidence in connection with expenditure incurred on improvements and agreement between the owner of the land and the assessee company were produced before the AO.

:-3-: ITA No. 1371/Mds/2017 2.4. The CIT(A) erred in not appreciating that the burden was on the assessee to produce all the evidence in support of the claims made in the return of income and the assessee failed to discharge its burden of substantiating its huge claim on the land development expenses. Hence the CIT(A) ought to have upheld the action of the AO in disallowing the land development expenses of Rs 4,55,27,000/-.

3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.”

:-4-: ITA No. 1371/Mds/2017 whether TDS was deducted etc. The assessee's representative replied that the land development was done with manual labour only and no machinery was utilized for land development. Subsequently, a question was put to the assessee, if land development to an extent of 651 acres was done manually as claimed, whether the assessee hired/owned any development cum agricultural equipment’s like hand axe, spade, crow bar, sickle, pan etc. The assessee couldn't give proper explanation . The AO required the assessee , inter alia, to furnish details about the land which was developed, how it was developed, agreement between the owner of the land and the assessee, production of payment registers for the daily wages claimed to have made and produce proof for the payments made etc,. Since the assessee could not furnish them, the AO held that the assessee could not prove its claim of developing the land to an extent of 651 acres within a span of 4 months by using labour only (ie without using any earth moving machinery /land development equipments) that too continuously during even the festive and harvest season and hence disallowed the claim. Even before the CIT (A), as is seen from the order of the CIT (A), the assessee has not furnished any material with respect to the issues under consideration. The CIT (A) without appreciating the facts of this case properly , without examining whether the assessee had similar business in the earlier year’s or in subsequent years and whether the operational results are similar or not etc decided the issue . Further, the CIT (A) has without examining whether the facts and circumstances of the cases on which he relied on has any :-5-: ITA No. 1371/Mds/2017 commonality with the facts and circumstances the assessee’s business has decided this case . Thereafter, the D R took us to each of the grounds of appeal and submitted that the order of the CIT (A) be set aside and the order of the Assessing Officer be restored.

4. We heard him, gone through the orders and find merit in the submissions. Even before the CIT (A), as seen from his order , the assessee has not furnished any material with respect to the issues under consideration. On the facts and circumstances pointed out by the AO, as is summed up by the D R , supra, it is clear that the CIT (A) has not appreciated the case in proper perspective. The A O has disallowed the expenditure claimed by the assessee as it has not discharged its onus. The CIT (A) has not examined as to what prevented the assessee in furnishing even the rudimentary records in respect of its claim. Further, it is seen from the assessment order, the A O has not recorded anything about the books of account. When the AO has not estimated the income by rejecting the books of account, the CIT (A) can not reject the books account and estimate the income unless otherwise he records the reasons based on relevant material and when fresh materials is/ are relied on, the AO should have been due given opportunity of being heard . In this case, as pointed out supra, the CIT (A) has not recorded any reason based on the material connected with the assessee’s business as to whether of the current year’s or earlier years or of the subsequent years data . results etc.

:-6-: Further, the CIT (A) has also not recorded as to whether the facts and circumstances of this case is on par with the cases on which he relied on, both on the business environments , locational as well as the period (time), and on the financial aspects with specific reference to the findings recorded by the A O on the issues under consideration. The CIT (A) has not even recorded as to how and for what reasons the cases on which he relied on, could be considered as sister concerns of this assessee . Hence, we deem it fit to set aside the order of the CIT (A) and restore the matter to file of the CIT (A). The CIT (A) would decide the issue, afresh, in accordance with law, after affording a reasonable opportunity of being heard to the assessee / the A O as the facts and circumstances warrant .