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2023 (11) TMI 934 - AT - Income TaxReopening of assessment - Correct head of income - LTCG or business income - disallowing indexation on cost of acquisition and treating LTCG as business income - assessee contributed in the form of land in the Joint Development Agreement - as argued assessee itself has converted its investment into stock in trade, therefore, the income generated from transfer of such investment should be considered as business receipt and not the income chargeable under the head capital gains - HELD THAT:- In the present case since the assessee company as the owner has agreed to sell and transfer its rights, title, and interest in the land in favour of the developer as per the requirement of Developer, thus has contributed in the form of land in the Joint Development Agreement, in turn the assessee as consideration towards the extinguishment of rights in the land has received 29% of the properties constructed apart from cash consideration. In such a case taxability of the income which the assessee has credited on accrual basis and offered for taxation in the relevant assessment years requires to be worked out under the provisions of section 45(2) r.w.s. 48, i.e. long-term capital gain for the sale of the land as well as profit from the sale of the developed property would be computed in accordance with the provisions of s. 45(2) r.w.s. 48 of the Act and under the head "Income from business" respectively. Thus, the reasons recorded by the Ld AO u/s 148(2) treating the income to chargeable under the head Business and Profession are found to be under wrong appreciation of facts and erroneous application of law, which is not permissible. This aspect is covered by the judgment relied upon by the assessee, in the case of Prakriya Pharmacem [2016 (1) TMI 946 - GUJARAT HIGH COURT] wherein as categorically held that, under the circumstances, the reasons recorded by the Assessing Officer to form belief that the income chargeable to tax had escaped assessment lack validity for the simple reason that an attempt was as made by the AO to apply certain provisions of the Act, which were not apply in the case on hand.Thus, the notice u/s 147 for reopening is set aside. Thus the belief formed by the Ld. AO was misconceived, which lead to recording of reasons without considering the provision of sections 45(2) r.w.s. 2(47) and section 48 of the Act, therefore, such proceedings for initiating the reopening assessment under the provisions of section 147/148 to charge the income escaped assessment was bad in law, thus, can not be held as valid. Decided in favour of assessee.
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