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2015 (7) TMI 934 - AT - Income TaxSale of agricultural land - AO treating the income from sale of agricultural land as business income also upheld by CIT(A) - assessee claimed the same as exempt from income tax treating the same as agricultural land which is situated at a distance of more than 8 kms from the limit of any municipality - Held that - There is no dispute to the fact that the land sold in question are agricultural lands. We do not find logic behind the argument of the Revenue that the assessee is definitely a man of means and there was no compelling circumstance to sale the land and therefore, such income has to be taxed as business income. In our opinion, if any income is otherwise exempt from tax as per the statute, the same cannot be brought to tax merely because assessee is a man of means or that the money so obtained has been utilised for some business in an organised manner etc. It is for the assessee to decide his affairs in the way he likes and the Revenue has no business to direct or advise the assessee to manage his affairs. We find an identical issue had come up before the Tribunal in the case of the brother of the assessee wherein the Assessing Officer treated the surplus from sale of agricultural land as business income which was held by the CIT(A) as exempt being surplus from sale of agricultural land. Since in the instant case the assessee has sold the agricultural land in the year 2005 which were held by him for more than 7 years except in one case where the same was held for about 4 years, the details of which are extracted at para 11 of the impugned order and since there is also no dispute to the fact that the assessee was deriving regular agricultural income from the same land and further considering the fact that the Assessing Officer in the assessment order for A.Y. 2008-09 passed u/s.143(3) on 27-12-2010 has accepted the claim of the assessee that gain on sale of agricultural land at ₹ 96,61,250/- is not liable to tax and no addition has been made in orders passed u/s.143(3) for A.Yrs. 2001-02 and 2003-04, therefore, we are of the considered opinion that the CIT(A) was not justified in bringing to tax the surplus on sale of agricultural land as business income. - Decided in favour of assessee. Treating agriculture income as undisclosed income under section 69A - Held that - The agricultural income shown by the assessee during the impugned assessment year appears to be on the higher side. It is also an admitted fact that out of the total gross receipt of ₹ 7,69,115/- the assessee has received only an amount of ₹ 3 lakhs in cheque and the balance amount has been received in cash. The expenses claimed by the assessee are also unverifiable. Considering the totality of the facts of the case and the past records net agricultural income of ₹ 4,00,000/- for the impugned year, in our opinion, will meet the ends of justice - Decided partly in favour of assessee.
Issues Involved:
1. Assessment of income from the sale of agricultural land. 2. Treatment of agricultural income as undisclosed income. Issue-Wise Detailed Analysis: 1. Assessment of Income from the Sale of Agricultural Land: The primary issue revolves around whether the income from the sale of agricultural land should be treated as business income or exempt from tax. The assessee declared a total income of Rs. 17,24,730/- and agricultural income of Rs. 5,25,630/- for the Assessment Year 2005-06. The Assessing Officer (AO) noted that the assessee sold agricultural land for Rs. 78,90,000/- and claimed it as exempt from tax. The AO argued that the assessee was regularly engaged in selling agricultural lands, indicating a business activity rather than a mere sale of agricultural land. The assessee contended that the land was agricultural and situated outside municipal limits, thus exempt from tax. The AO, however, observed that the assessee's activities resembled an adventure in the nature of trade, given the frequency and manner of land transactions. The AO treated the surplus of Rs. 65,67,973/- from the land sale as business income. The CIT(A) upheld the AO's decision, emphasizing that the assessee belonged to a group involved in real estate and had not inherited the land but purchased it over time for substantial amounts. The CIT(A) noted that the assessee did not furnish complete details of land transactions and inferred that the sales were part of a business venture. The Tribunal, however, disagreed with the CIT(A) and AO, noting that the land was held for more than 7 years, and the assessee had been deriving regular agricultural income from it. The Tribunal emphasized that if the income is otherwise exempt, it cannot be taxed merely because the assessee is a man of means. The Tribunal also referred to a similar case involving the assessee's brother, where the income from the sale of agricultural land was treated as exempt. Consequently, the Tribunal set aside the CIT(A)'s order and allowed the assessee's claim that the profit on the sale of agricultural land is exempt from tax. 2. Treatment of Agricultural Income as Undisclosed Income: The second issue pertains to the AO treating Rs. 2,00,630/- of the declared agricultural income as undisclosed income under Section 69A of the Income Tax Act. The AO noted discrepancies in the agricultural income declared by the assessee and found certain expenses unverifiable. The AO considered a net agricultural income of Rs. 3,25,000/- as reasonable against the claimed Rs. 5,25,630/-, treating the difference as undisclosed income. The CIT(A) upheld the AO's decision, stating that the assessee failed to provide complete details to support the agricultural income claim. The Tribunal, upon review, noted that the agricultural income declared by the assessee in previous years was lower, and the current year's income appeared higher. Considering the totality of facts and past records, the Tribunal deemed a net agricultural income of Rs. 4,00,000/- as reasonable for the impugned year, partly allowing the assessee's claim. Additional Ground: The assessee raised an additional ground regarding the principles of natural justice and adequate opportunity of being heard. However, this ground was not pressed during the hearing and was dismissed as 'not pressed.' Conclusion: The appeal was partly allowed, with the Tribunal setting aside the CIT(A)'s order regarding the treatment of income from the sale of agricultural land and partly allowing the claim on agricultural income.
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