ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 6,, PUNE vs. PRAVIN MNAILAL SANGHVI,, PUNE

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.250/PUN/2018 िनधा�रण वष� / Assessment Year : 2011-12 ACIT, Circle-6, Pune. Vs. Pravin Mnailal Sanghvi, 53-B, New Timber Market, Pune-411042. PAN : AGNPS4798J Appellant Respondent Revenue by : Shri Ramnath P. Murkunde Assessee by : Shri Neelesh Khandelwal Date of hearing : 17.11.2022 Date of pronouncement : 01.12.2022 आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the Revenue directed against the order of ld. Commissioner of Income Tax (Appeals)-4, Pune [‘the CIT(A)’] dated 29.09.2017 for the assessment year 2011-12. 2. Briefly, the facts of the case are that the respondent-assessee is an individual deriving income under the head “Income from house property”. The Return of Income for the assessment year 2011-12 was filed on 30.09.2011 declaring total income of Rs.5,30,35,008/-. Against the said return of income, the assessment was completed by the Addl. Commissioner of Income Tax, Range-5, Pune (‘the

2 ITA No.250/PUN/2018 Assessing Officer’) vide order dated 28.03.2014 at a total income of Rs.10,31,85,008/-. While doing so, the Assessing Officer assessed the profit arising on sale of land situated at Gat No.746, 84R Gunta, Sanaswadei, Tal. Shirur, Dist. Pune sold for a consideration of Rs.5 crores under the head “Income from business”. The brief facts of the subject matter of appeal is set out by the Assessing Officer in para 5.1 of the assessment order. It was claimed that the said land was an agricultural land placing reliance earlier in 7/12 extracts, since the lands were situated beyond 8 kilo-meters from nearest municipal corporation as well as population was less than 10 thousands as per latest instruction, the claim of exemption of gains arising on sale of said property was made before Assessing Officer. However, the Assessing Officer was of the opinion that the respondent-assessee was a dealer in lands, therefore, the profit arising on sale of such land should be assessed under the head “Profits and gains of business”. The Assessing Officer also taken into consideration that the shed was constructed on the said land and it is let out earning the rental income as business venture rejecting the contention of the respondent-assessee that the said land is an agricultural land.

3 ITA No.250/PUN/2018 3. Being aggrieved by the above assessment order, an appeal was filed before the ld. CIT(A) who vide impugned order confirmed the findings of the Assessing Officer that the land is not an agricultural land, since no agricultural activity was carried on the said land. However, the ld. CIT(A) considering the fact that the land was purchased in the year 1997 and sold after a gap of 13 years and the gains arising on sale of such land should be assessed under the head “Income from capital gains”. The ld. CIT(A) also allowed the cost of construction of the shed at 900 per sq. ft. and also allowed indexed cost of acquisition, as a deduction from capital gains. 4. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 5. Before us, the Revenue challenges the findings of the ld. CIT(A) that the profit arising on sale of land should not be assessed under the head “Income from capital gains” as against the profit arising on sale of land under the head “Income from profits and gains of business” and also in allowing the cost of construction of the shed as cost of acquisition. It is further stated before us that the appeal filed by the assessee challenging the findings of the ld. CIT(A) that property sold is not agricultural land stands settled under the Vivad Se

4 ITA No.250/PUN/2018 Vishwas Scheme, 2020. Therefore, the issue what the asset sold was an agricultural land does not survive for consideration. As regards to the issue whether the profit arising on sale of such land should be assessed under the head “Income from capital gains”, the Revenue submits that the intention of the respondent- assessee is to earn the rental income and, therefore, the property sold should be treated as business asset not as a capital asset. It is further stated that the ld. CIT(A) had allowed the cost of construction of the shed at 900 per sq. ft. placing reliance on the valuer’s report, which was not placed before the Assessing Officer during the course of assessment proceedings. It is further stated the ld. CIT(A) had granted relief without giving opportunity of rebuttal to the Assessing Officer in violation of provisions of Rule 46 of the Income Tax Rules, 1962 (‘the Rules’). 6. On the other hand, ld. AR submits that since the lands were purchased way back 1997 and sold after a gap of 13 years, the intention of the respondent-assessee to hold the asset as capital asset is established. Further, the ld. AR submitted that for the year under consideration, as well as in the preceding assessment year, the income from the property was assessed under the head “Income

5 ITA No.250/PUN/2018 from house property”. Therefore, the question of treating the house property as “business asset” does not arise. 7. We heard the rival submissions and perused the material on record. The ground of appeal nos.1 and 2 challenges the findings of the ld. CIT(A) in holding that the asset sold was capital asset. From the findings of the ld. CIT(A), we find that the asset sold in question was bought in the year 1997 and the industrial shed was constructed for the purpose of giving the said property on rent and the rental income earned on the said property/shed was assessed under the head “Income from house property”. This fact clearly establishes that the intention of the respondent-assessee is to hold the asset as “capital asset”. Therefore, we do not find any fallacy in the findings of the ld. CIT(A) in holding that the asset sold was a capital asset. Accordingly, this ground of appeal nos.1, 2 stands dismissed. 8. Ground of appeal nos.3 and 4 challenges the findings of the ld. CIT(A) in allowing the cost of improvement, it is contended that the ld. CIT(A) had fell in serious error in allowing the cost of industrial shed on said land and also relying upon a new material which was not furnished before the Assessing Officer during the course of assessment proceeding and without complying with Rule 46A of the Rules.

6 ITA No.250/PUN/2018 9. On the other hand, ld. AR submits that the ld. CIT(A) allowed the cost of acquisition at 900 per sq. ft. is based on the valuer’s report. 10. We heard the rival submissions and perused the material on record. On perusal of the assessment order, it would reveal that though the respondent-assessee made a claim for deduction towards cost of construction of the shed while computing the gains arising on sale of such land. The respondent-assessee had not produced any evidence in support of the cost of construction/improvement carried out on the property. It is only during the course of appellate proceedings before the ld. CIT(A), the respondent-assessee had filed a valuer’s report. Based on the said valuer’s report, the ld. CIT(A) allowed the cost of construction of the shed at 900 per sq. ft. On perusal of the assessment order, it would be evident that this valuer’s report was not furnished before the Assessing Officer during the course of assessment proceedings and, therefore, the ld. CIT(A) ought not to have allowed the cost of construction at 900 per sq. ft. without complying with the provisions of Rule 46A of the Rules. In these circumstances, we remit this ground of appeal nos.3 and 4 to the file of the ld. CIT(A) to decide the cost of acquisition based on the valuer’s report after giving an opportunity of hearing

7 ITA No.250/PUN/2018 to the Assessing Officer. Thus, the ground of appeal nos.3 and 4 stands partly allowed. 11. In the result, the appeal filed by the Revenue stands partly allowed. Order pronounced on this 01st day of December, 2022. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 01st December, 2022. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A)-4, Pune. 4. The Pr. CIT-3, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.