Sanjay Baburao Parab Vs ITO (ITAT Pune)
The assessee appealed against the order of the Commissioner of Income Tax (Appeals)/NFAC confirming the addition of long-term capital gains of ₹2,31,79,498 and the denial of exemption under Section 54F of the Income Tax Act arising from a development agreement executed on 17.09.2016. The assessee contended that the Commissioner (Appeals) failed to determine the foundational issue of whether any “transfer” had taken place within the meaning of Section 2(47), particularly Section 2(47)(v), read with Section 53A of the Transfer of Property Act, 1882. The assessee further argued that no monetary consideration, built-up area, or enforceable right to receive consideration had accrued, that the development agreement was cancelled on 09.07.2020 after the developer failed to perform, and that the cancellation deed and stay order under Section 220(6) were not considered. The assessee also challenged the denial of exemption under Section 54F and the addition of capital gains, relying upon judicial authorities referred to in the grounds of appeal.
For Assessment Year 2017-18, the assessee filed the return declaring total income of ₹4,32,740 after claiming exemption under Section 54F. The case was selected for limited scrutiny relating to large deductions/exemptions and large investment in property. During assessment proceedings, the Assessing Officer examined the development agreement entered into with M/s Gokhale Construction under which the developer was to construct six residential flats together with terraces and six covered car parking spaces in exchange for development rights. The assessee had adopted the stamp duty valuation as the sale consideration while computing capital gains and claimed exemption under Section 54F. Upon issuing a show-cause notice, the Assessing Officer considered the assessee’s explanation that the project had been delayed due to legal issues and that no flats had been received because development had not commenced.
