Converted land loses agricultural character; unsubstantiated bank deposits and credits remain taxable as unexplained income.

Land converted into non-agricultural land before transfer ceases to qualify for exclusion as agricultural land under section 2(14)(iii), so capital gains may be computed on that basis and stamp duty value can be adopted under section 50C. Cash deposits remain assessable as unexplained money under section 69A when the assessee fails to produce documentary evidence for the alleged source, including supporting material for the claimed agricultural income of another person. Other bank credits are likewise taxable as unexplained credits under section 69A when no confirmations or reconciliation are furnished to show loans, gifts, or repayments from identifiable sources.

---

---

Issues: (i) whether the gain arising from sale of land could be excluded from capital gains on the plea that the land remained agricultural land and therefore fell outside the definition of capital asset; (ii) whether cash deposits in the assessee's bank accounts were rightly treated as unexplained money under section 69A of the Income-tax Act, 1961; (iii) whether other bank credits were rightly treated as unexplained credits under section 69A of the Income-tax Act, 1961.

Issue (i): whether the gain arising from sale of land could be excluded from capital gains on the plea that the land remained agricultural land and therefore fell outside the definition of capital asset

Analysis: The land had been converted into non-agricultural land before transfer. Once such conversion took place, the land lost its character as agricultural land. The fact that some agricultural activity was asserted to have continued did not alter the legal character of the land for the purposes of section 2(14)(iii) of the Income-tax Act, 1961. Accordingly, the case did not fall within the exclusion for agricultural land, and the stamp duty value could validly be adopted for computing capital gains under section 50C of the Income-tax Act, 1961.

Conclusion: The addition on account of long-term capital gains was upheld and the issue was decided against the assessee.

Issue (ii): whether cash deposits in the assessee's bank accounts were rightly treated as unexplained money under section 69A of the Income-tax Act, 1961

Analysis: The assessee claimed that the deposits represented agricultural income of the wife, but no bank statements, income-tax return particulars, or other supporting material of the wife were produced to substantiate the source. The explanation remained uncorroborated despite opportunity. In the absence of documentary evidence establishing the source of the cash deposits, the burden of proof was not discharged.

Conclusion: The addition of cash deposits as unexplained money was upheld and the issue was decided against the assessee.

Issue (iii): whether other bank credits were rightly treated as unexplained credits under section 69A of the Income-tax Act, 1961

Analysis: The assessee did not reconcile the credits or produce confirmations or material showing that they were received from friends or relatives by way of loans or repayments. The credits thus remained unexplained on the record, and there was no basis to interfere with the assessment addition.

Conclusion: The addition in respect of other bank credits was upheld and the issue was decided against the assessee.

Final Conclusion: The appeal failed on all substantive grounds, and the assessment additions relating to capital gains and unexplained bank transactions were sustained.

Ratio Decidendi: Where land is converted into non-agricultural land before transfer, it ceases to qualify for exclusion as agricultural land under section 2(14)(iii) of the Income-tax Act, 1961, and bank deposits or credits remain taxable as unexplained money under section 69A unless the assessee substantiates the source with cogent evidence.

---