2014 (1) TMI 20 - ITAT DELHI

Whether 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.