Capital gains treatment, not business income, applies to long-held property and inherited land absent proof of trading intent.

Long-held residential and let-out property retained for investment, rather than trading, is assessable as capital gains, even where the owner engages in other property dealings. Additions based on benami allegations and a section 132(4) statement cannot stand without independent corroboration; the Revenue must prove real ownership with evidence of source, title, possession and conduct. A marriage-expense addition may be apportioned where the record shows contribution from another family member with independent income. Land inherited under a will, later converted into stock-in-trade, remains governed by the capital gains framework for the pre-conversion stage, and the appellate treatment was sustained.

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Issues: (i) whether the surplus arising from sale of the residential house and shops was taxable as business income or as capital gains; (ii) whether additions made on account of income standing in the names of the assessee's minor sons and other family members could be sustained on the basis of benami allegations and the statement recorded under section 132(4); (iii) whether the addition relating to marriage expenses was liable to be sustained in full; and (iv) whether the surplus arising from sale of plots out of land inherited under a will was assessable as business profit or under the head capital gains.

Issue (i): whether the surplus arising from sale of the residential house and shops was taxable as business income or as capital gains.

Analysis: The properties had been held for about ten years, the house was purchased for residence, and the shops had been let out and the rental income had been offered under the head income from house property. The material on record did not show any further commercial exploitation of the house after purchase. Long holding, the purpose of acquisition, and enjoyment of rental income supported the conclusion that the assets were retained as investments and not as trading assets. A mere property-dealing activity in other transactions did not require every holding to be treated as stock-in-trade.

Conclusion: The surplus was rightly treated as capital gain and not as business profit, and the assessee succeeded on this issue.

Issue (ii): whether additions made on account of income standing in the names of the assessee's minor sons and other family members could be sustained on the basis of benami allegations and the statement recorded under section 132(4).

Analysis: The additions based on the names of the minor sons were not supported by independent material showing actual earning of the disclosed income. The statement under section 132(4) was treated as an important piece of evidence, but it was not conclusive and could be displaced when unsupported by corroboration. In relation to the family properties and booth, the Revenue failed to establish benami ownership with evidence showing source of consideration, title, possession, or conduct inconsistent with the ostensible ownership. The materials showed that the relevant investments and transactions stood in the names of the mother, father-in-law, or sons, and the Revenue did not discharge the burden of proving that the assessee was the real owner.

Conclusion: The deletions and restrictions made by the appellate authority were upheld, and the assessee succeeded on these additions.

Issue (iii): whether the addition relating to marriage expenses was liable to be sustained in full.

Analysis: The appellate authority accepted the estimate of the marriage expenditure but found that the assessee's mother had independent income and had also contributed to the ceremony. On the available material, a shared contribution basis was reasonable and the entire estimate could not be fastened on the assessee alone.

Conclusion: The reduction of the addition to 50 per cent was upheld, and the assessee succeeded in part on this issue.

Issue (iv): whether the surplus arising from sale of plots out of land inherited under a will was assessable as business profit or under the head capital gains.

Analysis: The will was held to be genuine, there was no evidence that the land had originally been acquired by the assessee as a business asset, and the assessee acquired title only by inheritance before later converting the land into stock-in-trade. The applicable tax treatment was therefore governed by the capital gains framework, including the rule applicable where conversion into stock-in-trade occurs after ownership is acquired otherwise than as stock-in-trade.

Conclusion: The appellate authority was justified in treating the matter under the head capital gains and in restoring the computation issue for fresh determination, and the assessee succeeded on this issue.

Final Conclusion: The common approach adopted by the appellate authority on the substantive issues was sustained, and all revenue appeals failed.

Ratio Decidendi: A long-held property acquired for residence or rental use is not converted into a trading asset merely because the holder is otherwise engaged in property dealings; a statement under section 132(4) cannot by itself justify an addition without corroborative material; and benami ownership must be proved by evidence, not presumed from relationship alone.

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