2023 (5) TMI 736 - AT - Income Tax

Addition of undisclosed income arising out of sale of land - amount received by the assessee towards sale of agricultural land - whether as declared sale consideration or on-money ? - assessee has not disclosed the sale proceeds of the land sold in the original return of income - HELD THAT:- As in the revised return of income filed in pursuance to the notice issued u/s. 153A assessee has offered the amount received from sale of land. This, in our view, cannot be a finding which is sustainable either on facts or in law. Firstly, AO has not controverted the nature and character of land sold.

Once, nature and character of land sold is established as agricultural land not to be treated as capital asset u/s. 2(14)(iii) of the Act, any income arising out of sale of such land – whether by way of declared sale consideration or on account of on-money, would partake the character of exempt income, as the source of both the declared sale consideration and the on-money received is the same, viz., sale of agricultural land.

Income derived from sale of agricultural land, which is not a capital asset, cannot be made taxable. The decisions relied upon by ld. Counsel for the assessee fully supports this view. No infirmity in the decision of ld. Commissioner (Appeals) in deleting the additions made. Decided against revenue.