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Issues Involved: Cross appeals filed by Assessee and Revenue in ITA Nos. 925/Ahd/12 & 1086/Ahd/12 regarding addition of land restoration expenses for assessment year 2007-2008.
Assessee's Appeal (ITA No. 925/Ahd/2012): The Assessee challenged the addition of Rs.6,67,849 out of total addition of Rs.79,41,759 made by the AO on account of disallowance of land restoration expenses. The Assessee argued that the expenses should be allowed as revenue expenses since the corresponding projects were completed in earlier years and income was already booked. The CIT(A) confirmed the addition, stating that expenses can only be allowed if corresponding income is disclosed during the year. The Assessee failed to co-relate the expenses with income generated, leading to partial confirmation of disallowances. Revenue's Appeal: The Revenue contested the deletion of Rs.72,73,910 out of the total addition of Rs.79,41,759, treating land restoration expenses as capital expenditure. The Co-ordinate 'A' Bench set aside the issue to the CIT(A) for reconsideration. The A.O. did not provide a clear finding in the remand report, and the CIT(A) did not address the nature of expenditure in the second round. Despite the Assessee's failure to clarify the nature of expenses initially, the CIT(A) had treated the expenses as revenue expenditure in the first round. The Revenue's appeal was dismissed based on the nature of the expenses being deemed revenue in previous findings. Conclusion: Both the Assessee's and Revenue's appeals were dismissed, with the Tribunal upholding the disallowance of Rs.6,67,849 of land restoration expenses and confirming the treatment of expenses as revenue rather than capital expenditure. The Orders were pronounced on 20.12.2013 by the ITAT Ahmadabad.
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