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2018 (10) TMI 451 - AT - Income TaxAssessment u/s 153A - head of income for the purposes of assessment of gain arising on sale of plot of lands has been changed from ‘capital gains’ offered by the assessee to ‘business income’ assessed by the AO - whether the Revenue is entitled to interfere with the assessment concluded either under s. 143(1) or under s. 143(3) of the Act and not pending at the time of search in the absence of any incriminating material unearthed as a result of search? - Held that:- Referring to decision of the Hon’ble Delhi High Court rendered in the case Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] we are of the view that various additions/disallowances made by the AO are clearly beyond the scope of the authority vested under s. 153A of the Act owing to absence of any incriminating material or evidence deduced as a result of search. No reference of such incriminating material, if any, is found in the assessment year. We hold that routine adjustments in the nature of change of head of income of reported income without any nexus to incriminating material found, if any, as a result of search operations are not sustainable in the eyes of law in Section 153A proceedings. Hence, the re-alignment of head of income towards gain on sale of land for the purposes of taxability requires to be quashed. Thus, we find merit in the legal ground raised by the assessee. In this view of the matter, we do not intend to adjudicate the merits of the adjustments / re-alignment . Assessing capital gains arising from the sale of Sanavad land under the head of ‘business income’- Held that:- The question is essentially factual in nature and depends on the facts prevalent in a given case. The assessee has advanced justification for taxability under the head ‘capital gains’ on the ground that the assessee being a farmer has acquired agricultural land. However, due to change in the Government policy, the land fell into residential zone where the assessee found it difficult to carry on agricultural activity due to ongoing construction and development. Due to the large size of the land, it was divided and sub-divided and sold to the interested customers. These facts do not exclusively suggest that the entire exercise was to exploit the land commercially in the nature of adventure which is akin to the business. We find merit in the plea of the assessee for treating the same to be gain arising for capital nature and thus, assessable under the head of ‘capital gains’ - Decided in favour of assessee
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