Section 45 of Income tax Act, 1961—Capital gain—The primary issue in the appeal is: Whether the gain on sale of agricultural land by the assessee is taxable under the head ‘Capital Gains’ or ‘Business Income’? The assessee in revised return of income has declared the gain on sale of land as ‘Capital Gains’, whereas, the stand of Revenue is that the gain on sale of land is assessable under the head ‘Income from business’.

Held that—If the assessee in the original return of income has inadvertently mentioned the head of income as business income, it does not mean that it becomes sacrosanct and the assessee cannot change the head of income in the revised return. Taking into consideration the entirety of the facts, we are of the considered view that the transaction of sale of agricultural land by the assessee is not adventure in the nature of trade. The gain arising from sale of land is assessable under the head ‘Capital Gains’. Accordingly, the assessee succeeds on ground No.1 of the appeal.

In ground No.2 of the appeal, the assessee has assailed disallowance of cost of improvement over the land.

Held that— Since, there is ambiguity on facts on this issue, we deem it appropriate to restore this issue back to the file of AO for re-examination. The assessee is directed to furnish relevant details of expenditure before the AO and also clarify whether expenditure of Rs. 3.74 crores is part of the expenditure already allowed by the AO. The AO shall decide this issue de novo after affording reasonable opportunity of hearing to the assessee, in accordance with law.[SHRI RAVINDRA JOMA BHAGAT VERSUS INCOME TAX OFFICER, WARD 1, PANVEL] [2019] 20 ITCD Online (17) [ITAT PUNE]