2012 (9) TMI 125 - AT - Income Tax

Income from sale of plots - business income OR capital gains - Held that - The assessee had purchased nine plots at Coimbatore which were sold the same at higher price within a short span of six months thereby generating profit. The reason given by the assessee in the written submissions for treating the income as capital gains are not convincing - the sequence of events show that the assessee had purchased plots to earn profit in the course of business. The frequency of purchase and sale belies the stand of the assessee - against assessee. Addition on unexplained investment - Held that - As the assessee has not been able to explain source of investment the CIT(A) has rightly upheld the addition as unexplained investment after deducting the amount already included in the income returned by the assessee - against assessee. Disallowance of expenses towards improvement and development of the plots - Held that - Except for the bald statement of the assessee there is nothing on record to show that any expenditure was incurred by the assessee for the development of plots. Even assessee was not able to show any document to substantiate the claim - against assessee.

Issues:
Appeal against CIT(A) orders for assessment years 2007-08 and 2008-09 - Delay in filing appeals - Addition of unexplained investment in plots - Addition of business income - Treatment of income as business income instead of capital gains - Allowability of expenditure on land development.

Analysis:
1. Delay in Filing Appeals:
The appellant filed two appeals challenging the CIT(A) orders for the assessment years 2007-08 and 2008-09 with a delay of three days. An application for condonation of delay was filed, citing reasons for the delay. The Tribunal allowed the condonation of the delay after perusing the affidavit and reasons provided, admitting the appeals for hearing on merits.

2. Assessment Year 2007-08:
a. The appellant was intercepted at the airport, leading to a search under section 132 of the Income Tax Act, resulting in the recovery of Rs. 26.48 lakhs. The Assessing Officer assessed the total taxable income at Rs. 78,73,023, which the CIT(A) partly allowed after deleting certain additions.
b. The appellant contested the CIT(A) order, arguing against the sustained unexplained investment in plots and the treatment of income as business income instead of capital gains. The Tribunal upheld the Assessing Officer's decision, considering the frequency of purchase and sale as indicative of a business activity.

3. Assessment Year 2008-09:
a. The Assessing Officer added Rs. 19,06,975 as business income, which the CIT(A) partly upheld after deleting double additions. The appellant challenged this decision, claiming the amount as capital gains. The Tribunal supported the Assessing Officer's stance, sustaining the addition of Rs. 13,34,223 as business income.

4. Treatment of Income as Business Income:
The appellant argued that the income from the sale of plots should be assessed as capital gains, emphasizing the investment nature of the plots. However, the Tribunal observed that the purchase and sale pattern indicated a profit-seeking motive, leading to the classification of the income as business income rather than capital gains.

5. Allowability of Expenditure on Land Development:
The appellant contended that expenses on land development were not considered by the authorities, but failed to provide evidence to support the claim. The Tribunal found no substantiation for the expenditure, upholding the CIT(A)'s decision to disallow the expenses.

6. Conclusion:
The Tribunal dismissed both appeals, finding them lacking merit. The orders of the CIT(A) were upheld, emphasizing the business nature of the appellant's activities and the lack of evidence supporting expenditure claims. The judgment was pronounced on June 21, 2012, in Chennai.

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