The order of the Bench was delivered by
N R S Ganesan-All the appeals relate to two independent assesseess for the assessment years 2007-08 and 2008-09. Since common issues arise for consideration in all the four appeals, for the sake of convenience, they were heard together and are disposed of by this common order.
2. Let us first take appeal in ITA No.230/Coch/2012 in the case of Right Hand Developers India (P) Ltd.
3. Shri CBM Warrier, the ld.representative for the assessees submitted that there was a search in the premises of the assessees u/s 132 of the Act on 26-03-2008 and incriminating documents marked as ‘MKG A(39) to A(45) was seized. According to the ld.rperesentative, the search was conducted in the case of the assessees, therefore, the assessment has to be framed u/s 153A. In this case, according to the ld.representative, the assessment was framed u/s 153C of the Act. Therefore, the assessment order is null and void. According to the ld.representative, during the year under consideration, the assessees company purchased land and incurred expenditure for filling up the land with soil. The expenses for filling up the land was claimed as deduction. According to the ld.representative, the claim of the assessees is supported by plan, voucher, estimate, etc. The seized document includes the vouchers for payment for filing up the land. According to the ld.representative, the total expenditure was Rs.3,46,60,990; however, the assessing officer disallowed Rs.3,13,56,840. The only reason for disallowing the claim is that the vendors of the land also claimed expenditure for filling up the land, therefore, the assessees could not have spent so much of money for filling up the land. According to the ld.representative, it is not the case of the revenue that no expenditure was incurred by the assessees for filling up the land. Referring to the reply given to the CIT(A), the copy of which is available at page 185 of the paper book, the ld.representative submitted that the lower authorities ignoring the material found during the course of search operation observed that the claim of land filling expenses is bogus. According to the ld.representative, the claim of the assessees to the extent of Rs.3,46,60,990 is in fact incurred by the assessees. Therefore, the assessing officer is not correct in disallowing the claim of the assessees to the extent of Rs.3,13,56,840.
3. According to the ld.representative, the expenditure to the extent of Rs. 2,21,91,340 was paid through bank. The assessees has also incurred expenditure to the extent of Rs.1,23,44,050 which was supported by vouchers found during the course of search operation. Referring to page 13 of the paper book, which is the copy of the report of the Digital Land Surveyors estimated the volume of earth required to be filled up was 141306.450 cubic metre and average depth of filling is 3.73 metre (approximately). Referring to MK-4-A-16, copy of which is available at page 63 of the paper book, the ld.representative submitted that this is the details for incurring the expenditure on day to day basis. Even though these documents were seized during the course of search operation, according to the ld.representative, the lower authorities conveniently omitted to consider these materials.
4. According to the ld.representative, the assessees purchased 943.47 cents of land for a total consideration of Rs.6,20,28,281. Since the land was low lying, the assessees incurred expenditure to the extent of Rs.3,46,60,990 for filing the low lying property. The ld.representative further submitted that during the course of search operation, vouchers for the expenditure upto 01-04-2008 was found disclosing the expenditure of Rs.1,23,44,050. Subsequent to 31-03-2008 a sum of Rs.1,25,600 was spent. Referring to Annexure A and the argument note, copy of which is available at page 139, the ld.representative submitted that the assessees has incurred another expenditure of Rs. 78,13,400. Referring to the agreement dated 25-09-2007, the copy of which is available at page 106 of the paper book, the ld.representative submitted that as per clause 3.1, the assessees has to carry out the work of filling up and leveling of the property and the work had to be completed within a period of six months. If the property was already filled up by the vendors before purchase, according to the ld.representative, there is no need for mentioning this clause for filling up the land by the assessees in the agreement to sell. The ld.representative further submitted that during the course of assessment proceedings, the assessees has also filed a detailed report of survey of the property estimating the filling requirements from LAN-DEC ENGINEERS the copy of which is available at page 13 of the paper book. According to the ld.representative, both the authorities below failed to make any reference to this document. The ld.representative further submitted that a photograph was taken before filling up the land and after filling up the land. The assessing officer as well as the CIT(A) has not considered these documents while rejecting the claim of the assessees.
5. In the post search enquiry, the persons, who were engaged for land filling were examined and statements were recorded from them. According to the ld.representative, the persons engaged for the land filling have produced their respective bank account showing the receipts from the assessees for land filling and confirmed that the expenditure was incurred by the assessees. Even though these evidence were available with the Investigation Wing of the department, the lower authorities have conveniently omitted to consider the same.
6. Shri CBM Warrier, the ld.representative for the assessees submitted that the assessing officer restricted the claim of the assessees for expenditure at Rs. 33,04,150 without any reason. The ld.representative submitted that if the vendor of the land filled up the land with soil, then there is no occasion for the assessees to fill up the same again. The very fact that the seized material discloses the expenditure incurred by the assessees for filling up the land shows that the vendor of the land has not done anything for filling up the land. According to the ld.representative, MKG-A-39 is part of the seized documents which discloses the expenditure incurred by the assessees. Even though these documents disclose the expenditure incurred by the assessees this was not taken into consideration by the lower authorities. Referring to the remand report said to be filed by the assessing officer, the ld.representative submitted that the assessing officer at paragraph 3 of the remand report disallowed part of the expenditure on the ground that supporting evidence was not available. According to the ld.representative, the Investigation Wing of the department verified the expenditure. When the evidence is available for incurring the expenditure to the extent of Rs.78,13,000, according to the ld.representative, merely because supporting vouchers are not available, there cannot be any reason for disallowance. According to the ld.representative, the department has no material to show that the assessees has not incurred any expenditure for land filling expenses. According to the ld.representative, the vouchers seized by the department during the course of search operation were available in the paper book. According to the ld.representative, nothing is unreliable about the payments made by the assessees. Purchase of red soil is evidenced by the seized record. Therefore, the presumption u/s 132(4A) of the Act is available to the assessees. Referring to the provisions of section 132(4A) of the Act, the ld.representative submitted that when the documents are found and seized during the course of search operation, the contents of such documents are presumed to be true unless it is established otherwise by any of the parties. In this case, according to the ld.representative, the expenditure incurred by the assessees for purchase of the red soil and the payments made to the contractor is available on the search material, therefore, there is a presumption that the assessees has incurred the expenditure. It is for the revenue to rebut the presumption if at all they have any material to suggest that the assessees has not incurred such expenditure. According to the ld.representative, when there is an agreement between the assessees and the vendor of the land which clearly shows that the assessees has to fill up the land within a specified period, the lower authorities are not justified in saying that the cost was incurred by the erstwhile owner before the assessees purchased the land. Referring to the copy of the remand report, more particularly paragraph 10, the ld.representative submitted that the assessing officer is not correct in saying that the search was conducted before purchase of the property by the assessees. According to the ld.represetnative, the very purpose of conducting the search is to find out the correctness of the claim of expenditure for land filling. According to the ld.representative, only after ascertaining the approximate expenditure for filling, the purchase price was decided by the parties. Therefore, according to the ld.representative, the assessing officer is not justified in saying that survey report has no relevance. According to the ld.representative, survey report clearly says that the expenditure for soil filling was required for making the land saleable condition. Therefore, the assessees purchased the land as it is subsequently incurred the expenditure to make it saleable. Therefore, the assessing officer and the CIT(A) are not justified in rejecting the claim of the assessees.
7. Referring to the appeal by M/s Damac Holdings (P) Ltd in ITA No.231/Coch/2012, the ld.representative submitted that this company was originally assessed at Bangalore. By an order u/s 127 of the Income-tax Act, the assessment was transferred to Ernakulam. According to the ld.representative, the procedure prescribed for transferring the jurisdiction from Bangalore to Ernakulam was not followed. Therefore, the assessment completed by the assessing officer at Ernakulam has no leg to stand.
8. According to the ld.represetnative, a search was said to be conducted u/s 132 of the Act in the case of Shri M.A. Mohiyuddin, the director of the assessee company on 26-03-2008. According to the ld.represetnative, Shri M.A. Mohiyuddin was not the managing director of the company. In fact, Shri. Mohiyuddin is the director of the company and the other director Shri Mathew Joseph. The ld.representative further submitted that no question was asked during the course of examination u/s 132(4) with regard to incriminating document found during the course of search operation. Referring to section 153C of the Act, the ld.representative submitted that when the search took place on 26-03- 2008, the jurisdiction to assess the assessees company was with the Income-tax Officer, Bangalore. Therefore, according to the ld.representative, all the documents found during the course of search operation relates to the present assessees has to be handed over to the assessing officer at Bangalore to initiate proceedings u/s 153C of the Act. According to the ld.representative, the assessing officer at Bangalore has to record his satisfaction with regard to material found during the course of search operation. In this case, according to the ld.representative, no satisfaction was recorded by the assessing officer.
9. Shri CBM Warrier, the ld.representative for the assessees submitted that as per the copy of the order served on the assessees, the assessment order was said to be made u/s 153C r.w.s. 153A of the Act. However, when the assessees contended that no order could be passed u/s 153A, the department has produced another copy of the order said to be passed u/s 153C of the Act. According to the ld.representative, inter-changing of section and issue of notice under wrong section are not curable defect u/s 292B of the Act.
10. Referring to the panchanama and the assessment order, the ld.representative submitted that panchanama clearly indicates that the warrant was in the case of Damac Holdings Pvt Ltd. However, as per the assessment order, the search warrant was in respect of Mohiyuddin and searched place is the assessee company. Therefore, according to the ld.representative, it is not clear in whose hand the search was initiated.
11. Coming to the land development expenditure, the ld.representative for the assessees submitted that the assessing officer rejected the claim of the assessees to the extent of Rs. 6,34,79,700 on the ground that the vendor of the land also claimed expenditure to the extent of Rs.18,000 per cent. According to the ld.representative, the vendor of the land claimed wrong indexation for the purpose of claiming capital gain. According to the ld.representative, one of the vendors, Shri A.K. Nizar claimed that he has spent Rs.6,30,000 @18,000 per cent in land filling. However, the lower authorities have not examined the source of Shri A.K. Nizar for incurring the expenditure of Rs.6,30,000 and the applicability of provisions of section 40A(3) for making cash payment. According to the ld.representative, merely because the land owners claimed expenditure for filling up the land, that alone, cannot be a reason for disallowing the claim of the assessees. According to the ld.representative, it is the duty of the assessing officer to find out who actually filled up the land on the basis of the material available on record. A mere claim without any source for making the payment and without any material for incurring the expenditure cannot be a reason to disallow the rightly claim of the assessees. Referring to paragraph 5 of the assessment order, the ld.representative submitted that the assessing officer has not made any enquiry to find out the correctness of the claim of the respective vendors with regard to their expenditure for filling up of the land. In the absence of any attempt on the part of the assessing officer to find out the correctness of the claim of the vendor, according to the ld.representative, the claim of the assessees cannot be disallowed.
12. The ld.representative further submitted that the vendor of the property claimed expenditure only in respect of Rajagiri property. In respect of other property, no such claim was made. Therefore, the finding of the assessing officer to disallow the total expenditure of Rs.6,34,79,700 is without any basis. Even with regard to Rajagiri Property, the material found during the course of search operation clearly shows that the expenditure was incurred by the assessees.
13. Referring to the agreement for purchase of property at Rajagiri, the ld.representative submitted that the agreement was entered into between Shri Mohiyuddin, Shri Mathew Joseph and others from the respective vendors on 10-09-2005 onwards. Therefore, the individual directors entered into agreement to purchase the property before incorporation of the company. The company in fact was incorporated on 18-12-2006. However, the respective directors have taken a decision to acquire the land before formation of the company. According to the ld.representative, the expenditure incurred by the assessees is only after the agreement entered into for purchase of the property by the respective directors. According to the ld.representative, the assessees company has also entered into agreement on 16-02-2007, 14-03-2007 and 25-09-2007 for purchase of property with M/s Neptune and Blue Lagoon Real Estates Pvt Ltd. According to the ld.representative, the company, after its formation incurred the expenditure to make the land saleable condition. The assessees has explained the details of payment and the expenditure incurred to the extent of Rs.6,81,57,390. Referring to the remand report said to be filed by the assessing officer, the ld.representative submitted that the assessing officer has not considered the material available on record. The vouchers for payment of the money, the details of expenditure on day to day basis are found during the course of search operation. According to the ld.representative, the lower authority failed to consider the same. Therefore, the disallowance made by the assessing officer is not justified.
14. On the contrary, Shri K.K. John, the ld.DR submitted that as per the agreement between the assessees and the seller of the land, there was a condition that the seller had to fill up the land and make it saleable within the specified time. However, the vendors of the respective land to the assessees has also claimed expenditure @Rs.18,000 per cent. If the vendors of the land incurred Rs.18,000 per cent to fill up the land, according to the ld.DR, there is no occasion for the assessees to incur such a huge expenditure for filling up the land. Referring to the remand report filed by the assessing officer in the case of Right Hand Developers, the ld.DR suibmitted that the assessing officer disallowed the expenditure to the extent of Rs.3,30,66,840. The assessees claims that voucher in support of land development to the extent of Rs.1,23,44,050 was seized. The assessing officer found that the expenditure for the period 01-04-2007 to 04-01-2008 to the extent of Rs.1,23,44,050 was correct. According to the ld.DR, the assessing officer found that the vouchers lagged credibility. These are self made vouchers prepared by the assessees. The particulars of payee were not mentioned. The payments are invariably made in cash below Rs.20,000. Therefore, the assessing officer rejected the claim of the assessees. The assessees claims to have paid huge expenses to the contractor for land filling. According to the ld.DR, when the individual payment exceeds Rs.20,000 the assessees is liable to deduct tax at the time of payment. According to the ld.DR, the assessing officer recognized the genuine payment to the extent of Rs.56 lakhs. In respect of other payment what was found during the course of search operation is only self made vouchers. According to the ld.DR, as per the agreement dated 25- 09-2007 the assessees had to fill up the land in respect of the land sold to Neptue Real Estate. However, the land was sold before the agreement, i.e. 25-08-2007. Therefore, when the land was sold one month before the agreement, no one would undertake the development in respect of the land sold. Referring to MKG-A-39, the seized document, the ld.DR submitted that the land filling charges are paid to various people as referred at paragraph 9 of the remand report. According to the ld.DR, the names appeared in the vouchers differ from the details of payment made to several persons which was found in other documents.
15. Referring to the objection of the assessees on the assessment order in the case of Damac Holdings (P) Ltd, the ld.DR submitted that originally, the assessees company was assessed at Bangalore and subsequently, by an order u/s 127 for consolidated enquiry the jurisdiction was transferred to Ernakulam. According to the ld.DR, the order passed u/s 127 is not subjected to appeal before this Tribunal. Therefore, the transfer of jurisdiction from Bangalore to Ernakulam cannot be challenged before this Tribunal. According to the ld.DR, the transfer of jurisdiction was made after giving necessary notice to the assessees. Therefore, it is not correct to say that the transfer was made without following the procedure.
16. According to the ld.DR, the search was conducted on 26-03-2008 in the case of Mohiyuddin, who was the director of the company on the date of search. Merely because the designation was referred as managing director instead of director, that will not vitiate the assessment proceedings. It is only a rectifiable error. After change of jurisdiction from Bangalore to Ernakulam, the assessment has to be made by one officer at Ernakulam, both in the case of searched person and person other than searched. In this case, according to the ld.DR, both the assessments were made i.e. on the searched person and the assessees by the very same assessing officer. When both the assessments were made by the very same officer, according to the ld.DR, there is no necessity for recording the satisfaction. Referring to provisions of section 153A and 153C, the ld.DR submitted that the assessments were made u/s 153C r.w.s. 153A of the Act. During the course of search operation in the case of Mohiyuddin, materials were found in the hands of the above two assesseess. Therefore, the assessing officer issued notice u/s 153C and the assessment was completed u/s 153A as per the statutory provisions. According to the ld.DR, the procedure for completion of assessment is provided in section 153A of the Act in respect of searched person and the person other than the searched person referred to in section 153C. Therefore, merely because wrong provision was quoted in the assessment order, that will not vitiate the entire proceedings. According to the ld.DR;, it is a rectifiable error u/s 292B of the Act.
17. Referring to the land development expenditure in the case of Damac Holdings (P) Ltd, the ld.DR submitted that the land owners from whom the assessees purchased the property claimed land development expenditure to the extent of Rs.18,000 per cent. If the land owners has incurred Rs.18,000 per cent, according to the ld.DR, there cannot be any occasion for the assessees to incur any such expenditure. According to the ld.DR, the assessees is not maintaining any book of account, not even a ledger folio for land development expenditure. According to the ld.DR, the only document available is the report of land surveyor. The land surveyor prepared the report on 10-08-2006. As per this report, the expected cost was Rs.8.90 crores. At the time of the report, the assessees has not even purchased the land. Therefore, the survey report has no relevance for deciding the expenditure incurred by the assessees for land development. According to the ld.DR, the assessees company purchased 734.64 cents of land from Nazir Abbas and his family members and friends. In computation of capital gain, the seller of the land claimed land development expenditure at Rs.18,000 per cent. The total expenditure claimed by the original owner is Rs.1,32,24,240. The assessees now claims expenditure of Rs.6,29,39,746. Referring to the agreement said to be entered into between Nazir Abbas and Shri Mathew Jopseph, the ld.DR submitted that the vendor Shri Nazir Abbas agreed to level the property filled in water with red soil and clean the land making it suitable for measuring. In this case, Shri Nazir Abbas, the vendor claimed Rs.18,000 per cent. Therefore, there is no justification for claiming any further expenditure. According to the ld.DR, the assessees has claimed Rs.6,12,21,269 in respect of Rajagiri property towards development charges. According to the ld.DR, at Rjagiri, the assessees acquired 12.29 acres of land. Out of this, 7.95 acres of land was sold to two companies. The ld.DR submitted that prior to acquisition of land at Rajagiri, the assessees has already claimed Rs.1,05,73,857 as development expenses. The assessees claims that the development charges were incurred after payment of advance for purchase of the property. According to the ld.DR, nobody will incur an expenditure before completing the registration formalities. The claim of the assessees that they incurred the expenditure after paying the advance amount for purchase of the property is not reliable one. According to the ld.DR, the cash payment made for filling up the amount does not exceed Rs.20,000. When the payment does not exceed Rs.20,000, according to the ld.DR, there cannot be any question of disallowance and deduction of tax. According to the ld.DR, the payments referred to at paragraph 12 of the remand report shows that the assessees has not deducted any tax with regard to the payment made to contractors. Therefore, the assessees cannot claim the same as an expenditure. According to the ld.DR, the assessing officer found that as per the seized record Rs.1,17,21,392 is the land expenditure for the assessment year 2007-08. However, out of this only Rs.1,16,738 is supported by material. Therefore, according to the ld.DR, the disallowance made by the assessing officer is rightly confirmed by the assessing officer.
18. We have considered the rival submissions on either side and also perused the material available on record. The first objection of the assessees is that the assessment framed u/s 153C has no leg to stand. Admittedly, the search was conducted in the premises of Mohiyuddin is none other than the director of both the companies. No doubt, Shri Mohiyuddin was described as managing director in the assessment order. A mere wrong description of the designation cannot be a reason to frustrate the order of assessment. This Tribunal is of the considered opinion that these are rectifiable u/s 292B of the Act. Therefore, the assessees cannot take advantage on this kind of mistakes.
19. The next contention of the assesseess is that the present assessing officer has no jurisdiction to complete the assessment in the case of Damac Holdings Pvt Ltd. Admittedly, there was a search in the premises of one Shri Mohiyuddin, who is the director in the company. During the course of search operation, material documents relating to the assessees was found and seized. Therefore, for consolidated enquiry / investigation, the assessments of the assesseess were transferred from Bangalore to Ernakulam. The assesseess have not challenged the order passed by the concerned authority transferring the case from Bangalore to Ernakulam. Only before the Tribunal at the second appellate level, the assesseess contend that the transfer is not made in accordance with law. The fact remains is that the transfer was made after giving due notice to the assesseess as required u/s 127 of the Income-tax Act for consolidating enquiry / investigation. Once the authorities followed the due process for transferring the case from one city to another for the purpose of effective investigation and completion of the assessments by one assessing officer, this Tribunal is of the considered opinion that the contention of the assesseess has no merit at all. Therefore, the present assessing officer, who completed the assessment order has jurisdiction in pursuance to the order passed by the concerned authority transferring the case u/s 127 of the Income-tax Act.
20. The next contention of the assesseess is that the original assessments were made u/s 153C r.w.s. 153A of the Act and no order was passed u/s 153A of the Act. According to the ld.representative, assessments should be made only u/s 153A of the Act. The assessees have produced another copy of the order said to be passed u/s 153C of the Act in the course of the proceedings before the Tribunal. The fact remains is that the search was in the case of Shri Mohiyuddin u/s 132A of the Act and material was found with regard to the present assessees. Therefore, the present assessees are persons other than searched person. Therefore, the proceedings had to be initiated u/s 153C of the Act. After initiating proceedings u/s 153C of the Act, the assessment proceedings have to be completed only as per the procedure laid down in section 153A of the Act. Therefore, merely because there was an omission to mention the relevant provision of law or wrong mentioning of the provisions of law that cannot be a reason to invalidate the assessment order passed by the assessing officer. Therefore, this Tribunal do not find any justification in the contention of the ld.representative for the assessees.
21. The next contention of the assessees is that the assessing officer has not recorded any satisfaction before transferring the file to the concerned assessing officer in initiating proceedings u/s 153C of the Act. The non recording of the satisfaction, according to the ld.representative, vitiate the assessment proceedings. Admittedly, the cases of the assessees were transferred to Ernakulam for consolidated enquiry by one officer. Therefore, the assessing officer for the person searched, viz. Shri Mohiyuddin and the assessees is one and the same. The Kerala High Court, after referring to the judgment of the Apex Court in Manish Maheshwari vs Assist.Commissioner of Income-tax & Anr (2007) 289 ITR 341 (SC) held that when the assessing officer is same for the person searched and person other than searched recording of satisfaction may not be necessary since there is no necessity for handing over the assessment records to the other officer. In view of the judgment of the Kerala High Court holding that recording of satisfaction may not be necessary in case the assessing officer is one and the same for the person searched and the person other than searched there is no necessity for handing over the assessment records to the other officer.. In this case, the same assessing officer has completed the assessment in the case of Shri Mohiyuddin and also in the case of the present assessees. Therefore, there is no necessity for the assessing officer to handover the document to another assessing officer. In such circumstances, as held by the Kerala High Court, recording of satisfaction may not be necessary. Therefore, this Tribunal do not find any merit in the contention of the ld.representative for the assessees.
22. Now coming to development expenditure incurred by both the assesseess for filling up the land, the assessing officer rejected the claim of the assesseess mainly on the ground that the vendor has already claimed a similar expenditure for filling up the land @18,000 per cent. The contention of the assessees is that seized material found in the course of search operation discloses the expenditure incurred by both the assessees and the assessing officer has ignored the seized document while rejecting the claim of the assessees. The assessing officer mainly placed his reliance on the agreement said to be executed by one Shri Naseer Abbas and the vendors.
23. We have carefully gone through the said agreement dated 07-02- 2006, the copy of which is available at page 17 of the paper book. Clause 6 of the said agreement reads as follows:
"6. The schedule properties shall be measured by the parties with competent authority before execution of the sale deed as per the Re-Survey records and a sketch of the properties shall be got prepared, which shall form part of the sale deed to be executed by the Vendors in favour of the Purchaser or its nominees. The First Party also agrees to level the properties which is filled with water, to be leveled with red earth and clean the land to make it suitable for measuring etc."
24. The above agreement clearly says that the vendor has to fill up the land with red earth and make it clean so as to suitable for measurement, etc. Therefore, the obligation of the vendor is to make the land suitable for measurement by the surveyor. It is nothing more than that. The vendor claimed Rs.18,000 per cent for filling up the land with red earth. The assessing officer has not examined the correctness of the claim made by the vendor. The assessees claim that the vendor has no source for making such investment in the land. This Tribunal is of the considered opinion that when the assessees claim that the land was filled up with red earth and made ready so as to make it saleable one, the claim of the assessee has to be examined on merit. The obligation of the vendor is to make the land suitable for measuring. Therefore, there is a lot of distinction between the obligation of the vendors and the present assessees. Merely because the vendors claimed much expenditure for filling up the land that cannot be a reason to disallow the claim of the assessees especially when documentary evidences are available which were found during the course of search operation.
25. We have also carefully gone through the copy of the agreement between Shri K.M Salim and Naseer Abbas, etc. and the present assessees, the copy of which is available at page 57 of the paper book. This agreement was executed on 25-11-2006. The terms and conditions of the agreement read as follows:
"First Party agreed and assures the Second Party that they will provide right of way to the Second Party for the purpose of filling the land with red earth and for the future entry to the property to the Second Party or their nominees. The Second party has agreed to purchase the necessary land for the approach road and the consideration paid to the first party shall be inclusive for the consideration for the essential land to be transferred for the purpose of road."
From this agreement it is obvious that the assessees have to only fill up the land and the vendor has to provide right of way on the basis of the agreement to purchase the land for the purpose of filing up with red earth. A similar agreement has also been entered into which discloses that the assessees have to fill up the land. Therefore, it is obvious from the agreement between the parties, the vendor has to fill up the land so as to make the land suitable for measurement by the surveyor. However, the assessees had to fill up the land and make it suitable for sale. In view of this, this Tribunal is of the considered opinion that merely because the vendors claimed Rs.18,000 per cent for filling up the land it cannot be a sufficient and reasonable cause to disallow any claim in the hands of the present assessees.
26. In the course of the assessment proceedings, the assesseess have filed estimate from the contractors for filling up the land. The contractors estimated the quantity of red earth required to fill up the land at 185604.025 cubic metre. The assessees have also plotted the land subsequently. The copies of the bank statement available on paper book and the ledger account clearly establishes the payment made by the assessees for filling up the land. The seized material discloses the payment on daily basis. The payment made was of less than Rs.20,000 to each person, therefore, the payment does not require any deduction of tax. Even though the payment was made by cash, the fact remains is that these documents were seized during the course of search operation, therefore, the presumption provided in section 132A(4) of the Act is very much applicable. Therefore, this Tribunal is of the considered opinion that it is for the revenue to rebut that the material found during the course of search operation does not relate to the expenditure incurred by the assessees. As rightly submitted by the ld.representative for the assessees, the claim of the vendors was accepted without any verification with regard to source for investment and genuineness of the expenditure. Therefore, as observed earlier, merely because the vendors claimed expenditure @18,000 per cent for filing up the land that alone cannot be a reason for disallowing the claim of the assessees. This Tribunal is of the considered opinion that the expenditure for filling up the land to make it saleable condition was incurred by the assessees, therefore, the expenditure has to be allowed in the hands of the present assessees. Therefore, this Tribunal do not find any justification on the part of the assessing officer in disallowing the claim of the assessees. In view of the material evidences which were found during the course of search operation, this Tribunal is of the considered opinion that both the assessees have incurred the expenditure for filling up the land with red earth so as to make it saleable. Therefore, the assessing officer is not justified in disallowing the claim of the assessees. This Tribunal is of the considered opinion that the CIT(A) ought to have allowed the entire expenditure instead of restricting the same. Accordingly, the orders of lower authorities are modified and the assessing officer is directed to delete the entire addition on account of development expenditure claimed in the hands of both the assessees.
27. In the result, departmental appeals in ITA No.224 & 225/Coch/2012 are dismissed and the assesseess’ appeals in ITA No.230 & 231/Coch/2012 are allowed.
The order pronounced in the open court on 06th June, 2014.