2022 (9) TMI 305 - AT - Income Tax

Deduction u/s 57 - assessment was selected for limited scrutiny - assessee had declared as sales proceeds of land under the head income from other sources - HELD THAT - The land which was purchased was an agricultural land extending to 2 acres (87,120 sq.ft.). It is claimed by the assessee that it had developed the said land and received only 41,947.19 sq.ft. as saleable area as per the approved plan of BIAAPA. The cost per square feet, according to the assessee, comes to Rs.172.21 per sq.ft. (i.e. 72,23,725 /41,947.19 sq.ft.). AO however, adopted the cost to be at Rs.82.91 per sq.ft.(i.e. 72,23,725 / 81,120). A.O. also has not granted expenses of Rs.3,41,133, which according to the assessee, is attributable to sale of developed sites. To the proposal issued by the A.O., the assessee did not respond, consequently, the claim of deduction u/s 57 of the I.T.Act was reduced by the A.O. to Rs.22,33,252 instead of Rs.49,79,511 claimed by the assessee. Even before the first appellate authority, the assessee has not been able to prove that it was in respect of only saleable area of 41,947.19 sq.ft. Consequently, the CIT(A) confirmed the views taken by the A.O. Assessee had produced approval plan issued by BIAAPA, wherein it is mentioned that the total saleable area is only 50.68%. It is not clear whether this approved plan issued by the BIAAPA was before the lower authorities. The assessee has to necessarily prove that she was only in receipt of total saleable area of 41,947 sq.ft. in exchange of undeveloped land of 87,120 sq.ft. This exercise needs to be done by the assessee before the A.O. Accordingly, the entire issue is restored to the files of the A.O. The assessee shall also produce the necessary evidence to prove that a sum are expenses attributable to the sale of developed sites. Claim of deduction u/s 57 was reduced by the A.O. to Rs.22,33,252 instead of Rs.49,79,511 claimed by the assessee. Even before the first appellate authority, the assessee has not been able to prove that it was in respect of only saleable area of 41,947.19 sq.ft. CIT(A) confirmed the views taken by the A.O. Before us, the assessee had produced approval plan issued by BIAAPA, wherein it is mentioned that the total saleable area is only 50.68%. It is not clear whether this approved plan issued by the BIAAPA was before the lower authorities. The assessee has to necessarily prove that she was only in receipt of total saleable area of 41,947 sq.ft. in exchange of undeveloped land of 87,120 sq.ft. This exercise needs to be done by the assessee before the A.O. Accordingly, the entire issue is restored to the files of the A.O. The assessee shall also produce the necessary evidence to prove that a sum of Rs.3,41,133 are expenses attributable to the sale of developed sites. The assessee shall cooperate with the Revenue and shall not seek unnecessary adjournment in the matter. A.O. shall afford a reasonable opportunity of hearing to the assessee before a decision is taken in the matter - Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Discrepancy in the cost of site sold as claimed under income from other sources.
2. Failure to substantiate the claim with required documents and agreements.

Issue 1: Discrepancy in the cost of site sold:
The appellant contested the Assessment order, objecting to the AO's restriction of the cost of the site sold to Rs.22,33,252 from the claimed Rs.49,79,511 under income from other sources. The appellant argued that the developed sites were sold, and the claimed development cost was spent by the developer, justifying the cost claimed under section 57. The appellant received developed site areas in exchange for undeveloped land, emphasizing that the developed cost of the site should be considered under section 57. The AO and CIT(A) were criticized for not acknowledging the agreement with the purchaser, where the cost per sq.ft. was specified. The appellant sought to add, alter, amend, or delete grounds at the hearing. The Tribunal analyzed the purchase cost, development, and sale proceeds, ultimately directing the issue back to the AO for further evidence and consideration, allowing the appeal for statistical purposes.

Issue 2: Failure to substantiate the claim:
The CIT(A) dismissed the appeal, stating that the appellant failed to provide necessary documents or agreements to support the claim. The appellant's submissions lacked essential evidence, and despite multiple opportunities, relevant documents were not produced to validate the cost of developed land. The CIT(A) emphasized the appellant's failure to substantiate the claim, leading to the dismissal of the appeal. The Tribunal noted the lack of documentary proof and developer agreements, reiterating the importance of substantiating claims with evidence. The Tribunal instructed the appellant to cooperate with the Revenue, produce required evidence, and engage with the AO for a fair assessment. The issue was remanded to the AO for further examination, emphasizing the need for supporting documentation to validate the claim.

In conclusion, the judgment addressed the discrepancy in the cost of the site sold and the failure to substantiate the claim with essential documents. The Tribunal directed the issue back to the AO for further evaluation, emphasizing the importance of providing necessary evidence to support claims. The appellant was instructed to cooperate with the Revenue and produce essential documentation to validate the cost of developed land, ensuring a fair assessment process.