Why can't we place the Extended ACL close to the destination not the source ? What will happen if we do so ?
You can place an extended ACL where you want (as long as it is in the path of the packet you want to filter of course). However, depending on the filtering parameters, it is usually better to put it close to the source. This way, undesirable traffic is denied close to the source network without crossing the network infrastructure, which limit bandwidth usage.