Facts of the Case

1. The assesse filed its return for the A.Y 2015-16, which consisted of business income, short term capital gain and long term capital gain. Consequently, the act issued notice stating that they had reasons to believe that assesse’s income chargeable to tax for said A.Y had escaped assessment and asked them to deliver a return in the prescribed form before the expiry of 30 days from the service. The assesse submitted their objections to the notice, which was however dismissed while praying for setting aside the impugned notice and objections.

2. Further, their main objective was to carry on agricultural, horticultural etc. and other objects of the MOA were secondary in nature. The agricultural land purchased by assesse could not be said to be its stock in trade. The land in question was classified as agriculture land in revenue record. And after its purchase, actual cultivation was carried out by assesse for raising grass for grazing cattle’s free of cost and there was no intention on the part of assesse to put the land for non-agricultural purpose. The assesse’s counsel further observed that merely because the land in question was sold for profit, it could not be held. On writ, the HC held that it was seen that the assesse had requested the ACIT to provide reasons for issuing the notice, who immediately gave reasons for issuing the notice u/s 148.  

3. Certain documents were impounded for further investigation. From the perusal of the said documents & post survey investigations, it was noticed that the assesse company had sold land in the financial year 2009-10 to various entities. The assesse company’s return of income for the relevant year had shown agricultural income of Rs. 3,38,250/- in lieu of sale of the agricultural land which has been claimed as exempt income by it. It was noted from the available records, and material impounded during the survey, that the assesse company was involved in the business of sale and purchase of land.

4. Moreover, it is not disputed that as per the MoA, one of the objects to be pursued by the company on its incorporation was also to purchase, sell, acquire, convert, develop, improve, hold with absolute or limited rights or on lease, sub lease or otherwise and to erect, construct, build, demolish, re-erect, alter, repair, furnish, maintain land, including agricultural land, building, farm houses, residential flats, commercial complexes.

5. The AO observed that the entity sells and purchases land, including agricultural land, as one of the main objects of the assesse company for which it was formed, which is a business activity of the assesse company; even in the averment with regard to whether any incriminating material was found during the course of surveys or not, it was submitted that evidence related to huge amount of tax evasion, stamp duty evasion, violation of Land Ceiling Acts and other laws, falsification of facts in registered sale deeds, and evidences related to vast quantum of benami properties was found during the course of surveys.