9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (1) TMI 20 - AT - Income TaxWhether in the absence of any incriminating material found during the course of search addition can be made by assessing officer as undisclosed income u/s 153A - Held that - The purchases of agricultural land has been accepted by department as part of fixed asset/ investment of the assessee by assessment u/s 143(3) - Both the lower authorities have rather relied only on the original return of income, returns on record and explanations filed by the assessee and not on any incriminating material found as a result of search - Following Jai Steel India v. ACIT 2013 (6) TMI 161 - RAJASTHAN HIGH COURT - The assessing officer could not have made these additions in the impugned assessee u/s 153A, there being no incriminating material indicating any undisclosed income found as a result of search - Merely because a search is conducted and even though no incriminating material is found as a result thereof the original assessment of the assessee cannot be reviewed or substituted by a change of opinion about any claim of deduction, allowance or claim of exempt income. Rejection of books of accounts - Held that - No inconsistencies or defects have been pointed out in the books of accounts maintained by the assessee - The assessee has claimed to have carried out agriculture operations and earned agriculture income which is offered in the return of income, which is accepted - Conveyance of sale of land also demonstrates that the land in question was agriculture land - It has not been disputed that the assessee on its own as an independent entity has not carried out any development activity or moved any application for commercial exploitation of the land to any local, state or Central agency - These glaring facts and circumstance do not raise any occasion for rejection of books - In the absence of any worthwhile defect in the books of accounts, rejection of books was unjustified. Whether gain arising from purchase and sale of agricultural land be treated as business income - Held that - In a big group launching of several corporate entities each company is an independent assessee in the eyes of law - Their activities are to be analyzed on the basis of actual activities and cannot be ignored merely because the associate concern is engaged in some other activities - This inference by lower authorities amounts to a pure guess work and conjecture - Group companie s business activities, which are distinct and separate entities, cannot be held as a factor to discard the assessee s actual activity. The land in question was situated outside the specified municipal limits and as per the prescription of sec. 2(14) it does not amount to an asset - The income arising from the sale of agriculture land falls u/s 2(14)(iii) read with sec. 10(1) and is to be treated as agriculture income - Following Delhi Apartments Pvt. Ltd. and DLF United Ltd 2013 (3) TMI 330 - DELHI HIGH COURT - Real estate companies can also hold separate port folio of land as stock in trade and as investment port folio; the sale of investment portfolio is always taxed as capital gains - The assessee s gains were profits from sale of specified agriculture land which does not come within the definition of asset as prescribed u/s 2(14) and by virtue of sec. 2(1A)(a) read with sec. 2(14)(iii) r.w.s. 10(1) the assessee s gains from sale of such agriculture land are exempt income - Decided in favour of assessee.
Issues Involved:
1. Legality of additions made under Section 153A of the Income Tax Act. 2. Rejection of books of accounts under Section 145(3) of the Income Tax Act. 3. Treatment of gains from the sale of agricultural land as business income rather than exempt agricultural income. 4. Determination of whether the land in question is situated outside the specified municipal limits. Detailed Analysis: 1. Legality of Additions Made Under Section 153A: The assessee contended that the additions made under Section 153A were invalid as they were not based on any incriminating material found during the search. The search was conducted on 17-09-2008, and no undisclosed income was surrendered. The original assessments were completed under Section 143(3), and the returns filed by the assessee were accepted. The Tribunal held that no addition could be made under Section 153A unless some incriminating material was found as a result of the search. The Tribunal cited several case laws, including the Delhi High Court decision in the case of Anil Kumar Bhatia vs. CIT, which supported the view that additions under Section 153A should be based on incriminating material found during the search. Consequently, the Tribunal allowed the assessee's appeal on this ground. 2. Rejection of Books of Accounts Under Section 145(3): The assessing officer rejected the books of accounts maintained by the assessee, alleging that the books did not present a true and fair picture of the business affairs. The Tribunal found that the books of accounts were duly audited, and no inconsistencies or defects were pointed out. The land was purchased as agricultural land and was shown as fixed assets in the books, which was accepted in the original assessment. The Tribunal held that there was no justification for rejecting the books of accounts merely to change the head of income. Therefore, the rejection of books under Section 145(3) was deemed unjustified, and this ground of the assessee was allowed. 3. Treatment of Gains from the Sale of Agricultural Land: The assessee argued that the gains from the sale of agricultural land should be treated as exempt agricultural income under Section 2(1A) read with Section 2(14)(ii) or (iii) of the Income Tax Act. The assessing officer treated the gains as business income, considering the transactions as an adventure in the nature of trade. The Tribunal, however, noted that the land was purchased and sold as agricultural land, and no development or commercial exploitation was undertaken by the assessee. The Tribunal referred to several judicial precedents, including the Delhi High Court decision in Hindustan Industries Resources Ltd. vs. ACIT, which held that the nature of the land and its use should be considered. The Tribunal concluded that the land in question was agricultural land and the gains from its sale were exempt from tax. 4. Determination of Whether the Land is Outside Specified Municipal Limits: The assessee provided evidence, including certificates from the Tehsildar and sale deeds, showing that the land was situated beyond 8 km from the nearest municipal limits. The Tribunal noted that the assessing officer did not dispute the geographical location of the land. The Tribunal held that the land was indeed situated outside the specified municipal limits and, therefore, did not qualify as a capital asset under Section 2(14). Consequently, the gains from the sale of such land were not taxable as capital gains or business income. Conclusion: The Tribunal allowed the assessee's appeals for both assessment years, holding that: - Additions under Section 153A were invalid as they were not based on incriminating material found during the search. - Rejection of books of accounts under Section 145(3) was unjustified. - Gains from the sale of agricultural land were exempt from tax as agricultural income. - The land in question was situated outside the specified municipal limits and did not qualify as a capital asset.
|
