IMPORTANT POINT
Reopening of assessment under Section 148 requires fresh tangible information and cannot be based on audit objections alone.

JUDGMENT :

Bhargav D. Karia, J.

1. Heard learned Senior Advocate Mr. Tushar Hemani with learned advocate Ms. Vaibhavi Parikh for the petitioner and learned Senior Standing Counsel Mr. Nikunt Raval for learned advocate Ms. Kalpana Raval for the respondents.

2. Rule returnable forthwith. Learned advocate Mr. Nikunt Raval waives service of notice of Rule on behalf of the respondents.

3. Since the issue involved is in narrow compass, with consent of learned advocates appearing for the respective parties, the matter is taken up for final hearing.

4. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 28.3.2021 issued under Section 148 of the Income-Tax Act, 1961 (for short ‘the Act’) for Assessment Year 2016-17.

5. The reasons recorded for issuance of the notice read as under :

“1. Brief Details of the Assessee :

The assessee filed his return of income for A.Y.2016-17 declaring total income of Rs.3.08.58.620. The return of income was processed u/s 143(1) of the I.T.Act. Subsequently, this case was selected for scrutiny and assessment u/s 143(3) of the I.T.Act finalized on 28.11.2018 at assessed income of Rs.3,08,58,620/- as returned.

2. Brief Details of Information collected/received by the AO:

On verification of case records (Computation of income, purchase deed and sale deed) revealed that assessee has purchased 10421 sq.mts. old tenure agricultural land at Block No.191, R.S.No.162 Village Puna, Taluka-Choryasi, Dist. Surat at consideration of 4,95,000 along with two other co-partners vide sale deed number 9562/23.04.2008. As per his share the cost of land purchased was 2,48,900. The said land was converted in to non-agricultural use for residential and commercial purposes vide Collectors Surat order dated 21/12/2013. The assessee has also availed development permission for the said land from the competent officers vide order No.TDO/DP/No.385 dated 19.2.2015 and after converting the agricultural land into residential and commercial purpose the assessee has sold the said land to Kantilal Jethabhai Patel and two others for consideration of 4,50,14,40. Further it is revealed that Shri Nanubhai Vashrambhai Ramolia (PAN:ABAPR5115L) is one of the co-owners of above sale deed has treated the said transactions of sale and purchase as a trade and business and disallowed the exemption claimed under section 54B. It was also mentioned in the assessment order that the land sold was not a capital asset rather stock in trade for which the Long Term Capital Gain is disallowed and the sale proceed would be treated as business income.

3. Analysis of information collected /received:

As per data available in ITD/ITBA, the profile of the assessee is as under:

Status of the assessee is Individual and filed in form ITR-3/4 and his source of income was Business, Long term capital gains and no agricultural income. For the last 3 years the assessee has shown his nature of business and source of income as tabulated below:

In the present case it is observed that the assessee has shown its nature of business as Trading and Property Developer and is involved in the practice of sale purchase of land. Hence, the present transaction is in the nature of trade and should have been treated as business income instead of long term / short term capital gains.

4. Enquiries made by the AO as sequel to information collected/received:

The main source of income of the assessee is not sale of land. Assessee has converted the land into non-agriculture land and then he sold and ofiered the income under the head LTCG. However, the assessee's main intention is to trade and he is a developer and practice of sale and purchase of lands. Thus transaction are in nature of