SANJAY AMRUTRAO SATAV HUF,PUNE vs. INCOME TAX OFFICER, WARD-12(4), PUNE, PUNE

This is an appeal filed by the assessee directed against the order of the National Faceless Appeal Centre, Delhi [‘NFAC’] dated 14.03.2023 for the assessment year 2016-17.

Briefly, the facts of the case are that the appellant is a HUF deriving income under the head “agricultural and capital gains”. It is engaged in the business of developers and builders. The Return of Income for the assessment year 2016-17 was filed on 17.10.2016 declaring total income of Rs.6,45,270/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-12(4), Pune (‘the Assessing Officer’) vide order dated 28.12.2018 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.1,92,17,320/-. While doing so, the Assessing Officer brought to tax the gains arising on sale of agricultural land of Rs.1,85,72,046/-. The factual background of the case is as under : The appellant sold ancestral agricultural land situated at Gat No.564 in Village- Wagholi, Tal- Haveli, Dist- Pune. It is stated that out of the said land, an area admeasuring 2 Hectares and 80 R were converted into stock-in-trade on 16.11.2011. Subsequently, the appellant had entered into a development agreement with one Mr. Manish Dwarkadas Maheshwari for the purpose of development of the said property in consideration of sharing 50-50 in gross sale proceeds. The said development agreement was registered on 17.11.2011. In terms of the said development agreement, the appellant also received interest free security deposits Rs.1,67,00,000/-. It is stated that during the course of assessment proceedings, a query was raised by the Assessing Officer as to why the capital gains arising on sale of the said property cannot be brought to tax. The appellant filed detailed submissions before the Assessing Officer stating that the capital gains arising on sale of property were not liable to tax as on the date of Notification dated 06.01.1994 of CBDT, the agricultural lands were situated beyond 8 kilometres from the municipal limit of Pune, as on the date of conversion of the said property from capital assets to stock-in-trade, the said land was an agricultural. Without prejudice to the above, it is contended that the capital gains, if any, can be brought to tax only in the year of sale in terms of the provisions of section 45(2) of the Act. Without prejudice to the above contention, during the course of assessment proceedings, the appellant also computed the capital gains of Rs.1,85,72,046/-, which is extracted by the Assessing Officer at page no.3, vide para 8(i) of the assessment order. Based on this information, the Assessing Officer proceeded with framing assessment by bringing to tax the capital gains of Rs.1,85,72,046/-. 3. Being aggrieved by the above order of assessment, an appeal was filed before the NFAC contending that as on the date of