2014 (1) TMI 29 - AT - Income Tax

Undisclosed investment - date of sale / transfer - Held that - no document is available on record to suggest that the physical possession of the property was handed over to the purchaser on 14-12- 2007 at the time of agreement. In the absence of any material evidence, this Tribunal is of the considered opinion that the contention of the ld.counsel for the assessee cannot be accepted. - Decided against the assessee. Determination of cost of purchase - Held that - The selling rate adopted by the AO was on the basis of the sale agreement, which was also confirmed by assessee, the co-owner of the land and also by one of the purchasers of the land - The basis for adoption of sales rate at Rs.25,000/- per cent is the sale agreement only and not the sworn statement - As per the sworn statement of assessee the selling rate was Rs. 10250/- which was not supported by any corroborative material - The responsibility to prove the purchase consideration lies upon the assessee - The Ld CIT(A) was justified in rejecting the claim of the assessee for enhancing the purchase consideration - Decided against assessee.

Issues Involved:
1. Classification of income from the sale of agricultural property as business income.
2. Determination of the sale consideration of the land.
3. Validity of the claim that the land was agricultural and exempt from capital gains tax.
4. Consideration of the purchase price of the land.

Detailed Analysis:

1. Classification of Income from Sale of Agricultural Property as Business Income:
The primary issue in the appeal was whether the income arising from the sale of agricultural property should be classified as business income. The assessee argued that the land was agricultural, and thus, the profit from its sale should be exempt under section 2(14)(iii) of the Income Tax Act. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] observed that no agricultural activity was carried on the land, and it was sold within a short period after purchase. The land had been converted into barren land due to the removal of earth. These factors led the authorities to view the transaction as an adventure in the nature of trade, thereby classifying the profit as business income. The Tribunal upheld this view, noting that the intention at the time of purchase was to engage in real estate transactions rather than agricultural activities.

2. Determination of the Sale Consideration of the Land:
The sale consideration was another contentious issue. During a search at the residence of a broker involved in the transaction, a sale agreement was seized, indicating a selling price of Rs. 25,000 per cent, which was higher than the documented value. The AO adopted this rate to determine the sale consideration. The assessee contested this, but the Tribunal noted that both the assessee and the buyer confirmed the transaction rate of Rs. 25,000 per cent. The Tribunal found no reason to deviate from the AO's determination of the sale consideration based on the sale agreement and corroborating statements.

3. Validity of the Claim that the Land was Agricultural and Exempt from Capital Gains Tax:
The assessee claimed that the land was agricultural and, therefore, the profit from its sale should be exempt from capital gains tax. However, the AO and CIT(A) found that no agricultural activities were conducted on the land, and it was sold shortly after purchase. The Tribunal agreed with this assessment, noting that the land was not used for agricultural purposes and was sold in multiple transactions, indicating a real estate business intent rather than an agricultural investment.

4. Consideration of the Purchase Price of the Land:
The assessee claimed that the purchase price of the land was Rs. 10,250 per cent, higher than the documented rate. The AO rejected this claim due to a lack of corroborating evidence and relied on the documented purchase price. The Tribunal upheld this decision, emphasizing that the onus was on the assessee to prove the higher purchase price. The Tribunal noted that the AO's reliance on the documented price was justified in the absence of any material evidence to support the assessee's claim of a higher purchase price.

Conclusion:
The Tribunal confirmed the orders of the lower authorities on all issues. The income from the sale of the land was rightly classified as business income, the sale consideration was correctly determined based on the seized sale agreement, the claim of the land being agricultural and exempt from capital gains tax was invalidated due to lack of agricultural activity, and the documented purchase price was correctly adopted in the absence of corroborative evidence for a higher price. Consequently, the appeal of the assessee was dismissed.

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