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

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.

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 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.

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.

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 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 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