Gains from sale of 25 plots held for over 6 years by an assessee not in real estate, with only levelling expenses, constitute capital gains, not adventure in the nature of trade. Burden of proof on revenue to show trading intent.

ORDER

PER PRASHANT MAHARISHI, VICE – PRESIDENT

1. ITA No. 1422/Bang/2025 is filed for Assessment Year 2012-13 by Shri Keshavareddy Krishnareddy (the Assessee/Appellant) against the Appellate Order passed by the National Faceless Appeal Centre (the NFAC), Delhi (the Ld. CIT(A)) on 07.04.2025 wherein the Appeal filed by the Assessee against the Assessment Order passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) on 27.02.2025 by the Assistant Commissioner of Income Tax, Circle – 2(2)(1), Bangalore (the Ld. Assessing Officer) was dismissed.

2. The Assessee is aggrieved with the same and has raised 6 grounds of appeal as under:-

1. The Learned Commissioner of Income Tax (Appeals) erred in law and on facts by confirming the recharacterization of the Long-Term Capital Gains of the surplus from sale of 25 plots as income from business or trade without giving credence to the nature and intent of the Appellant including the long-term holding and accounting treatment and by not accepting the valid Balance Sheets as sufficient proof and holding them as a self-serving document. As such, the addition has been made by ignoring the facts, evidence and cogent reasons and with a preconceived notion resting solely on the reasons that the Appellant invested money in the upkeep and maintenance of the plots and made a subsequent profit on the sale.This addition to income made on this account for income from business or trade may kindly be deleted and cancelled.

2. The Learned Commissioner of Income Tax (Appeals) erred in law and on facts by upholding the disallowance of the exemption under section 2(14)(iii) of the Income Tax Act on sale of agricultural lands at Survey Nos.- 145 and 146, Iggalur village and upholding the addition under income from business or trade in a sweeping and generalised manner and without independently verifying the rural and agricultural character of the lands. Thus, the addition being without due application of mind and without due consideration of the facts and evidence of the case, is in contravention of the provisions of the law. The disallowance of the exemption and the subsequent addition is illegal and may kindly be deleted and the exemption be allowed.

3. The Learned Commissioner of Income Tax (Appeals) erred in law and on facts by upholding the disallowance of the exemption on the KIADB compensation for the compulsory acquisition of agricultural land at Survey Nos.- 130 and 132, Mysore and upholding the addition under income from business or trade in a sweeping and generalised manner ignoring that the lands were rural and agricultural and were compulsorily acquired, and the transaction was involuntary, qualifying under sections 2(14)(b) and 10(37) of the Income Tax Act. Thus, the Addition being without due application of mind along with a preconceived and prejudiced notion and without due consideration of the facts and circumstances, documents and evidence produced, is in contravention to the provisions of the law. The disallowance of the exemption and the subsequent addition is illegal and may kindly be deleted and the exemption be allowed.

4. The Learned Commissioner of Income Tax (Appeals) erred because of misapplication of case laws and CBDT No. 4/2007 dated 15.06.2007 in the context of all the additions made to the returned income, without understanding and analysing the facts and arguments discussed in the case laws. Thus, the Additions made in the impugned Order are generalised and sweeping in nature and bad in law an