2015 (9) TMI 73 - HC - Income Tax

Purchase value for the purpose of computation of capital gains - whether has to be reckoned as per Annexure C Agreement and on the basis of Statement recorded under Sec.132 (4) of the Act? - Held that - Appellate Tribunal has discussed the entire issues put forth by the appellants and has arrived at a reasonable conclusion that the basis for adoption of sales price of ₹ 25,000/- per cent was the sale agreement seized during search and also confirmation of the same by the appellant and the purchaser of property, Sri.A.A. Davis in their sworn statements. It is therefore clear that the sale price of ₹ 25,000/- per cent was arrived at basically relying on the sale agreement and not the sworn statement alone. Further the Tribunal has found that the claim that the appellants have purchased the property for ₹ 10,250/- and ₹ 10,500/-respectively per cent made in the sworn statement of the appellant was not corroborated by any proof or materials and therefore the Assessing Authority was left with no other alternative than to decline the claims so raised by the appellants. Further the Tribunal has found that the responsibility to substantiate the purchase consideration was on the appellants and appellants have not adduced any evidence or put forth any material to substantiate the case advanced by them and therefore, the claim of the appellants that they were entitled to seek reckoning of the amount allegedly paid by them when they effected purchase of the property cannot be considered to be real at all. The Appellate Tribunal has thereupon declined to interfere with the orders passed by the First Appellate Authority. The circumstances which led to the addition of amounts in the assessment order was based fully upon the facts unearthed during the search operations at the residence of one Pavunni. Further the authorities below have found that there was no evidence at all to prove that while the property was conveyed by executing sale deed, the same was an agricultural land. But on the other hand, the assessing officer has clearly found that the property in question was barren land and further it was revealed that after purchase of the property, no agricultural operations were carried on by the appellants and further that the property was sold within a short period which discloses nothing but an adventure in the nature of trade liable to be taxed under the Act. These are all circumstances based on facts and the authorities below have appreciated the contentions put forth by the appellants and arrived at a fair and reasonable conclusion that the agreement relating to the sale deed was a crucial document showing the exact price of the property, which was also not denied by the appellants. - Decided against assessee.

Issues:
1. Dispute over additions made by the Assessing Authority in the order of assessment.
2. Claim for exemption from capital gains tax.
3. Nature of property sold by the appellants - agricultural or barren land.
4. Validity of the sale agreement and purchase value for computation of capital gains.
5. Application of Section 53A of the Transfer of Property Act.
6. Whether the property sale transaction qualifies as an adventure in the nature of trade.

Analysis:
1. The High Court of Kerala heard appeals against the Income Tax Appellate Tribunal's order confirming additions made by the Assessing Authority. The Tribunal upheld the order, stating that the additions were justified due to discrepancies in the sale price of a rubber plantation sold by the appellants.

2. The appellants claimed exemption from capital gains tax, arguing that the property sold was agricultural with a rubber plantation. They contended that buyers were allowed to conduct agricultural activities on the land, making it eligible for tax exemption under the Income Tax Act.

3. The Court examined the nature of the property sold and found that it was barren land at the time of sale, not agricultural as claimed by the appellants. The Assessing Authority determined that the transaction resembled an adventure in the nature of trade, leading to tax liability.

4. The appellants disputed the purchase value used for computing capital gains, citing a sale agreement unearthed during a search operation. However, the Court found that the agreement required registration under Section 53A of the Transfer of Property Act, which was not done, making it ineffective for tax exemption purposes.

5. Section 53A of the Transfer of Property Act was invoked to determine the validity of the sale agreement. The Court ruled that since the agreement was not registered, the appellants could not claim tax exemption based on possession transfer as agricultural property.

6. The Court considered the appellants' contentions regarding the sale transaction but found insufficient evidence to support their claims. The Tribunal's decision to rely on the sale agreement and the lack of corroborating proof for the purchase price claimed by the appellants led to the dismissal of their appeals.

In conclusion, the High Court dismissed the appeals, upholding the Tribunal's decision based on factual findings and lack of substantial legal questions warranting further consideration under Section 260A of the Income Tax Act.

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