Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2565 OF 2022
Commissioner of Income ...Appellant(s)
Tax 8 Mumbai
Versus
Glowshine Builders & …Respondent(s)
Developers Pvt. Ltd.
J U D G M E N T
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the
impugned judgment and order dated
04.09.2017 passed by the High Court of
Judicature at Bombay in Income Tax Appeal
No. 1756 of 2014, by which, the High Court
Signature Not Verified
Digitally signed by R
Natarajan
Date: 2023.05.04
16:38:34 IST
Reason:
has dismissed the said appeal preferred by
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the Revenue, thereby confirming the order
passed by the Income Tax Appellate Tribunal,
“G” Bench, Mumbai (hereinafter referred to as
the ITAT) by which the addition made by the
Assessing Officer (AO) of Rs. 15,94,06,500/
was deleted, the Revenue has preferred the
present appeal.
2. The dispute pertains to the Assessment Year
(AY) 200910 i.e., Financial Year (FY) 2008
09. The assessee entered into an agreement
dated 06.05.2008 with one M/s Kirit City
Homes Pvt. Ltd. The development rights in a
property at Vasai were sold for a total
consideration of Rs. 15,94,06,500/. It
appears that as per paragraph 6 of the
development agreement and as per the receipt
of the deed, consideration of Rs.
15,94,06,500/ was agreed and received by
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the assessee. During assessment, it was
noticed by the AO that the aforesaid was not
disclosed while filing the return of income.
The assessee did not enter the aforesaid
income into his profit and loss account. The
assessee was asked to explain the transaction
as it was not appearing in its profit and loss
account. The agreement dated 06.05.2008
was also furnished to the assessee along with
the notice. In response, the assessee vide
letter dated 04.10.2011 stated that the
transaction was duly offered to tax in AY
200809 reflecting a consideration of Rs.
5,24,27,354/. The assessee also stated that
it had entered into a “rectification deed” with
the said party on 30.05.2008. By the said
ratification, it was claimed that the value of
the development rights was reduced from Rs.
Page 3 of 44
15,94,06,500/ to Rs. 5,24,27,354/. As the
transaction was pertaining to AY 200910,
the assessee was served a further notice
dated 10.10.2011 under Section 142(1). The
assessee was requested to explain as under:
(i) “You are aware that perusal of AIR
information, copy of 'Development
Agreement' dt. 06.05.2008 revealed
that you had entered into
"Development Agreement" with M/s.
Kirit City Homes Mau, Pvt. Ltd in
respect of various properties as detailed
in the said agreement. It is also seen
that you had received Rs.
13,94,06,500/ on account of
granting/allowing development rights
assigned.
(ii) As per the agreement, the transaction
is dt. 06.05.2008, so this transaction
falls under the A.Y. 200910 whereas
you had offered this transaction in the
A.Y. 200809. Please explain the logic
and basis thereof
(iii) Perusal of the 'Development Agreement'
dt. 06.05.2008, you had claimed to had
received the entire sale proceeds of Rs.
15,94,06,500/ . In this regard, you are
requested to furnish the details of sale
proceeds received mode there details of
proceeds realized, etc in respect of sale
proceeds of Rs. 15,94,06,500/. Please
also furnish the copy of 'Bank Book' /
'Cash Book' reflecting the receipts and
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narrations thereof alongwith copy of
the bank account statement reflecting
credits thereof.
(iv) Vide 'Deed of rectification' dt.
30.05.2008, you had claimed to have
revised the value from Rs.
15,94,06,500/ to Rs. 5,24,27,354/.
In this regard, please explain whether
you had refunded the differential
amount. If yes, please furnish the mode
and details thereof with supporting
documentary evidences.
(v) Vide 'Deed of rectification' dt.
30.05.2008, you had claimed to have
revised the value from Rs.
15,94,06,500/ to Rs. 5,24,27,354/.
In this regard please furnish the basis
thereof with supporting documentary
evidences.
(vi) Considering the above, I am of the view
that for the above transaction,
provisions of section 50C of the I.T. Act
1961 are clearly applicable despite the
reduction in your agreement value. In
this regard, you are requested to
explain as to why the provisions of
section 50C of the I.T. Act should not
be initiated as well as please explain as
to why the sale proceeds should not be
treated at Rs. 15,94,06,500/.
(vii) Perusal of all the documents furnished
by you in respect of above transactions,
I am of the view that the transaction
definitely belongs to this year and
market value u/s. 50C should be
considered as the sale consideration. In
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this regard, please explain as to why
the treatment as mentioned above does
not be made applicable in your case. In
view of the above, it is proposed to treat
the transaction for this year and to add
the sale proceeds of Rs. 15,94,06,500/
in your hands. You are requested to
furnish your explanation, if any, with
supporting documentary evidences.”
2.1 The assessee replied to the same and with
regard to the applicability of provision of
Section 50C, the assessee stated that the
assessee had sold its stock in trade and not
the assets. The AO made the addition of Rs.
15,94,06,500/ by treating the same as short
term capital gains and consequently, added
the same to the income for the year under
consideration. The Commissioner, IT
(Appeals), Mumbai dismissed the appeal and
confirmed the addition made by the AO and
upheld the view of the AO to treat the
transaction as income for capital gains for the
Page 6 of 44
AY 200910. The CIT (A) also discarded the
submissions made by the assessee that
transfer of development rights were made in
FY 200809 pursuant to the MOU dated
27.12.2007. In the absence of proof to
buttress such claim, the CIT (A) also
discarded the claim of the assessee that value
of the transfer of development rights was
reduced from Rs. 15,94,06,500/ to Rs.
5,24,27,354/
2.2 The assessee filed an appeal before the ITAT.
The ITAT, after examining the chart
submitted by the assessee pertaining to
opening balance and closing balance for the
assessment years 199697 to 200708 held
that the assessee in all these years showed
inventory and expenses. Consequently, ITAT
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held that the assessee is engaged in the
business of building and development. The
ITAT further noted that the assessee showed
the cost of land along with related
expenditure as work in progress/inventory
since 19992000 and the assessment orders
were subsequently made under Section
143(3) of the IT Act, wherein the AO accepted
the nature of business of the assessee.
Therefore, ITAT concluded that what was sold
by the assessee was part of its inventory and
not a capital asset. The ITAT also held that
the assessee has reduced the sale
consideration from Rs. 15,94,06,500/ to Rs.
5,24,27,354/ during FY 200708 on the
basis of MOU dated 27.12.2007 and the said
amount of the income has already been
declared in the AY 200809 i.e., FY 200708
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and therefore, such income cannot be
declared in AY 200910 i.e., FY 200809. The
ITAT also confirmed and/or agreed with the
assessee that the sale consideration was Rs.
5,24,27,354/ only. Based on these findings,
the ITAT reversed the findings of the AO as
well as the CIT (A) and allowed the appeal by
deleting the addition made by the AO of Rs.
15,94,06,500/.
The Revenue preferred an income tax appeal
2.3
before the High Court by way of ITA No.
1756/2014. By the impugned judgment and
order, the High Court has dismissed the said
appeal filed by the Revenue by holding that
none of the questions proposed by the
Revenue are substantial questions of law.
Page 9 of 44
Feeling aggrieved and dissatisfied with the
2.4
impugned judgment and order passed by the
High Court dismissing the appeal, the
Revenue has preferred the present appeal.
3. Shri Balbir Singh, learned ASG has appeared
on behalf of the Revenue and Shri S.K.
Bagaria, learned Senior Advocate has
appeared on behalf of the assessee.
4. Shri Balbir Singh, learned ASG appearing on
behalf of the Revenue has vehemently
submitted that the High Court has failed to
appreciate that the order of the ITAT was
perverse and contrary to facts on record. It is
submitted that the ITAT failed to appreciate
that the assessee has taken contrary stands
before the assessing authority and the
Tribunal, on account of sale of development
Page 10 of 44
rights. It is submitted that firstly, the
assessee vide its letter dated 25.11.2011
submitted the Ledger Account in respect of
development agreement. The perusal of the
said Ledger Account revealed that the
assessee claimed to have received income of
Rs. 15,94,06,500/ from a development
agreement on 31.03.2008 and the said entry
was reversed on the same day by passing a
rectification entry on 31.03.2008 itself.
Therefore, it was reflected that the aforesaid
payment was paid by the purchasing party on
31.03.2008 to an entity SICCL and all these
entries were reflected on the same date.
Based on the Ledger furnished by the
assessee, pertinent questions were raised by
the Assessing Officer which included reason
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of rectification and confirmation of the fact
that the differential amount of Rs
10,69,79,146/ was refunded to the
purchaser. However, perusal of the order
passed by the ITAT reflects that the fact of
receipt of money on 31.03.2008 was not even
discussed. On the contrary, a reference was
made to the MOU dated 27.12.2007 for a
total consideration of Rs. 5,24,27,354/. It is
submitted that the ITAT without examining
the true nature of transaction and entry
made in the books of accounts of the assessee
simpliciter confirmed that the transactions
pertained to earlier years i.e., Assessment
Year 200809 and the reduction of amount
arising out of the Development Agreement
dated 06.05.2008 and Rectification dated
30.05.2008 was due to mistake.
Page 12 of 44
4.1 It is further submitted by Shri Balbir Singh,
learned ASG, that the ITAT failed to take into
account the fact that the entry made and
reflected in the Ledger Account of the
assessee as on 31.03.2008 was on account of
a third party i.e., SICCL and that too for a
total of Rs. 15,94,06,500/. Further, the ITAT
did not even question the factum of refund of
differential amount of Rs. 10,69,79,146/ to
the purchaser on account of Rectification
Deed dated 30.05.2008. That the ITAT has
failed to appreciate that the moment the
receipt of amount is received and recorded in
the books of accounts of the assessee, unless
shown to be refunded/returned, is to be
treated as income in the hands of the
recipient.
Page 13 of 44
4.2 Secondly, balance sheets for the Assessment
Years 200607 to 200910 were examined by
the Assessing Officer and it was recorded that
there was not even a single sale during all
these years and there were negligible
expenses and the transaction in question was
the only transaction i.e., transfer of
development rights in respect of land and
consequently, it was held that the transaction
was that of transfer of capital asset and not
that of transfer of stock in trade. However,
the ITAT in its order, after examining the
opening and closing balance for the year
199697 upto 200708 held that in multiple
years there was inventory shown in the
Balance Sheet and since subsequent
assessment orders were made under Section
143(3) of the Income Tax Act, without
Page 14 of 44
disputing the claim of assessee, held that the
transaction in question is sale of stock in
trade. It is contended that the ITAT neither
dealt with the findings given by the Assessing
Officer nor verified/examined the total sales
made by the assessee during the relevant
year and during the previous years.
Therefore, the ITAT as well as the High Court
have materially erred in holding that, merely
because the entry made in the books of
accounts involved recording of inventory, the
transaction in question becomes sale of stock
in trade. That, it is well settled that in order
to examine whether a particular transaction
is sale of capital asset or business
transaction, multiple factors like frequency of
trade, volume of trade, nature of transaction
over the years etc. are required to be
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examined. However, in the present case, the
ITAT without examining any of the relevant
factors confirmed that the transaction was
transfer of stock in trade.
4.3 It is further submitted that the ITAT without
any basis and solely on the basis of claim
made by the assessee, contrary to the
accounts produced before the Assessing
Officer, agreed that the transaction was
reflected as sale in the tax return for the
Assessment Year 200809. That,
interestingly, the ITAT did not even question
as to what happened to the differential
amount of Rs. 10,69,79,146/ on account of
reduction of sale value of development rights.
4.4 It is further submitted by Shri Balbir Singh,
learned ASG, that the High Court has failed
to examine the inherent contradiction in the
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order of the ITAT and that the claim was
allowed by the Tribunal, contrary to the
records produced before the Assessing
Officer. Therefore, the order of the High Court
holding that there was no substantial
question of law involves is illegal and
perverse.
4.5 It is further submitted that the High Court
has failed to appreciate that, even in the
event of acceptance of claim made by the
assessee, including the assertion that Rs.
5,24,27,354/ was shown in the tax return
for the earlier Assessment Year i.e., 200809,
the differential amount of Rs. 10,69,79,146/
on account of reduction in the sale
consideration of development rights is to be
assessed in the current year as either as
capital gain or business income. This is
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without prejudice to the submission that the
Assessing Officer has correctly assessed the
income in his Assessment Order dated
29.11.2011.
4.6 Making the above submissions, it is prayed
that the present appeal be allowed and the
order passed by the ITAT as well as the High
Court be set aside and the order of the
Assessing Officer be restored.
5. Shri S.K. Bagaria, learned Senior Advocate
appearing on behalf of the assessee has taken
us to the findings recorded by the High Court
as well as the ITAT. It is submitted that the
assessee is engaged in the business of
building and development of properties since
the year 19992000. That the assessee's
balance sheets show that it had workin
progress/inventories year after year, since
Page 18 of 44
19992000. The same has been accepted by
the department all these years; even after
scrutiny assessments under Section 143(3) of
the Income Tax Act, 1961.
5.1 It is submitted that the assessee had entered
into an MOU dated 27.12.2007 with M/s Kirit
City Homes Private Limited, whereby,
Development Rights in a property at Vasai
were sold for a total consideration of Rs.
5,24,27,354/. That the said MOU was on
record before the lower authorities and has
been referred in the Assessment Order as well
as in the order passed by the CIT (A). In
connection with the said transaction, detailed
findings were given by the Income Tax
Appellate Tribunal (Tribunal/ITAT) and these
were also duly considered by the High Court.
The findings given by the Tribunal were pure
Page 19 of 44
findings of facts and therefore, the High Court
has rightly dismissed the appeal after
considering the facts and the tribunal’s order
and by holding that no substantial question
of law arises in the matter.
5.2 Shri S.K. Bagaria, learned Senior Advocate
has taken us to the following facts recorded
by the High Court in the impugned judgment
and order:
a) It is a common ground that the
assessee is in the business of
building and development of
properties. There was no change in
the activities of the assessee during
the year under consideration.
b) For the year ending 31/03/2006 the
assessee disclosed inventories at Rs
8.66 crores
Page 20 of 44
c) For the year ending 31/03/2007
there was no change and the same
figure of Rs 8.66 crores was
disclosed.
d) For the year ending 31/03/2008
(assessment year 200809), the
assessee showed sale of land
development rights at Rs
5,24,27,354/ and the cost of land
was shown at Rs 5,21,37,454/.
5.3 It is submitted that in connection with the
aforesaid transaction during financial year
200708, the High Court has further
considered the following facts in the
impugned judgment and order:
i. In MOU dated 27/12/2007 with
KCH transfer of development rights
was for the said total consideration
of Rs 5,24,27,354/.
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ii. The assessee was holding 50.16
acres of land, out of which 27.44
acres of land was the subject matter
of the aforesaid MOU dated
27/12/2007. Total cost of the land
was determined proportionately.
iii. On 02/01/2008 necessary entries
were passed debiting the account of
KCH but crediting the account of
one M/s SICCL. The assessee owed
SICCL a sum of Rs 8.10 crores and
it therefore directed KCH to pay the
consideration directly to SICCL.
iv. Corresponding entries relating to the
aforesaid transaction were also
made in the accounts of SICCL.
v. On 02/01/2008 possession of the
land was also handed over.
vi. The aforesaid events took place
during the financial year 2007 08
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relating to assessment year 2008
09. In that assessment year, the
assessee offered to tax the income
arising out of the aforesaid
transaction under the head
"business income".
vii. In the development agreement dated
06/05/2008 the sale consideration
was incorrectly mentioned as Rs
15,94,06,500/ and on realising the
mistake, a Deed of Rectification of
executed on 30/05/2008. This deed
of rectification was registered with
the office of the Sub Registrar,
Vasai.
5.4 Shri Bagaria, learned Senior Advocate has
also taken us to the following further facts
recorded and findings given by the ITAT:
Page 23 of 44
a) The aforesaid 50.16 acres of land
was acquired by the assessee in the
financial year 199697. The tribunal
gave year wise details from 199697
which clearly showed that the
acquisition of land was in financial
years 199697 and 200405. During
the financial year 2007 08, cost of
the inventory was Rs. 9,53,06,475/
and the tribunal gave a definite
finding that "the above inventory
represents the cost of 50.16 acres of
land out of which 27.44 acres has
been sold vide Memorandum of
Understanding dated 27/12/2007".
b) The assessee was showing work in
progress under the head current
assets and loans and advances in
Page 24 of 44
the balance sheets filed with the
Department and in the Income Tax
Returns. The tribunal considered
the yearwise position and gave the
following findings for different years.
c) For assessment year 200102 the
assessee's Return was selected for
scrutiny assessment and the
assessment was completed under
section 143 (3) vide order dated
11/09/2003, wherein, the assessing
officer gave a categorical finding that
the assessee was engaged in the
business of builder and developer,
erectors, construction of building,
houses, apartments, ownership
flats. Work in progress of Rs 7.66
crores was also mentioned in the
Page 25 of 44
assessment order and it covered cost
of land and various expenses
including land development, stamp
charges etc.
d) For financial year 200203, work in
progress was shown at Rs. 8.51
crores.
e) For financial years 200304 and
200405 (year ending 31/03/2004
and 31/03/2005), inventories were
shown at Rs 8.58 crores and Rs 8.66
crores respectively. For the
assessment year 200506 (financial
year 200405) the assessee was
again subjected to scrutiny
assessment and its assessment was
completed under Section 143 (3) by
order dated 30/11/2007 and the
assessing officer again
Page 26 of 44
acknowledged the business of the
assessee as that of builder and
developer, erectors, construction of
building, houses, apartments,
ownership flats. The assessing
officer specifically found that there
was no change in the activities of
the assessee during the year under
consideration.
f) For the financial years 200607 and
200708 the inventories were shown
at Rs 8.66 crores and there was no
change. For the financial year 2007
08 (year ending 31/03/2008) the
assessee had shown sale of land
development right at Rs.
5,24,27,354/ and cost of the said
land was shown at Rs 5,21,37,454/
Page 27 of 44
The facts relating to MOU dated
27/12/2007, necessary entries
being made in the books of accounts
on 02/01/2008, debiting the
account of KCH and crediting the
account of SICCL, mistake in the
development agreement dated
06/05/2008 and its being corrected
by the said registered deed of
rectification were also mentioned.
g) It was found that since 19992000
the assessee was showing cost of
land along with other related
expenditures as work in
progress/inventory in the balance
sheets and its Income Tax Returns
for several intervening years as the
above were assessed under Section
Page 28 of 44
143 (3) wherein the nature of the
assessee's business was accepted by
the assessing officer. It was held
that what was sold by the assessee
was part of its inventory and not a
capital asset and the tribunal
decided the matter by taking into
consideration these undisputed
facts.
5.5 It is submitted that based on the aforesaid
facts and findings, the ITAT has rightly held
that the impugned transaction related to
transfer of stock in trade and that the
assessee had shown “stock in
trade/inventories” year after year in its
balance sheets and its contention was
accepted by the Assessing Officer and twice
the assessments were completed under
Page 29 of 44
Section 143(3). It is submitted that ultimately
the Tribunal concluded the issues as under:
a) The impugned transaction related to
transfer of stock in trade and that
the assessee had been showing
"stock in trade/inventories" year
after year in its balance sheets and
its contention was accepted by the
assessing officer and twice the
assessments were completed under
Section 143(3).
b) The said transaction had taken
place during the financial year
200708 pertaining to assessment
year 200809. The assessee had
shown the sale consideration as also
the cost of land in its balance sheet
and profit and loss account filed
with the Return of Income for the
Page 30 of 44
said assessment year 200809. Even
in the abstract from AST, the
assessing officer had referred the
said sale as part of the return for
assessment year 200809.
c) Considering the MOU and the Deed
of Rectification, the consideration
was Rs 5.24 crores. The assessing
officer completed assessments
simply by relying on AIR data
received from the office of the Sub
Registrar, Vasai but failed to
consider the Deed of Rectification
registered by the same Sub
Registrar and did not even care to
verify the figure from the said Sub
Registrar, Vasai.
d) Perusal of balance sheets of the
assessee since 19992000 clearly
Page 31 of 44
showed that the assessee had been
showing work in
progress/inventories year after year
and apportioned the cost in
proportion to the part of the land
transferred and the cost of the land
was as per the cost shown in the
Return of Income for assessment
year 200809.
e) Since the impugned transaction
related to the business of the
assessee and was to be assessed as
such under the head "profit and
gains of business or profession" the
provisions of section 50C of the
Income Tax Act, 1961 were not
applicable to the facts of the case.
Page 32 of 44
5.6 It is submitted that the above findings
recorded by the ITAT which were upheld by
the High Court are pure findings of facts and
therefore, no substantial question of law
arises in the matter. Therefore, it is prayed
that no interference of this Court against the
findings recorded on material and evidence is
called for. Reliance is placed on the decision
of this Court in the case of
Mantri Techzone
Private Limited Vs. Forward Foundation
and Ors.; (2019) 18 SCC 494 .
5.7 It is further submitted by Shri Bagaria,
learned Senior Advocate appearing on behalf
of the assessee that the assessment order
simply referred to AIR data. As recorded in
the assessment order itself the assessee had
submitted that the transaction in question
Page 33 of 44
was duly offered to tax in assessment year
200809 reflecting its consideration at Rs.
5,24,27,354/. The MOU relating to the said
transaction was already before the assessing
officer and the consideration of Rs.
5,24,27,354/ was duly mentioned in the
MOU. In the Development Agreement, there
was a mistake in mentioning the
consideration and on realizing the error,
within a short period of 24 days, the aforesaid
Deed of Rectification was entered into and
was duly registered. The said consideration of
Rs. 5,24,27,354/ was correctly mentioned in
the MOU which was before the Assessing
Officer as well as before the CIT (Appeals).
The amount mentioned in the Deed of
Rectification, rectifying the mistake in the
Development Agreement also mentioned the
Page 34 of 44
same consideration and the said Deed of
Rectification was duly registered with the
SubRegistrar, Vasai with whom the
Development Agreement was also registered.
It is important to mention that if the
Department intended to dispute the
valuation, it could have easily referred the
matter to the valuation officer but it did not
do so. Not only this, as recorded by the
tribunal, the development agreement as well
as the deed of rectification were both
registered with the same SubRegistrar, Vasai
but the income tax officer did not make any
enquiry from the said SubRegistrar.
5.8 It is further submitted that with regard to the
nature of business of the assessee, the
income tax officer proceeded as if there must
be regular transactions of purchase and sale
Page 35 of 44
every year. Firstly, the income tax
Department itself had accepted that the
assessee's business was of builder and
developer, erectors, construction of buildings,
houses etc and the assessments on that basis
were completed year after year including the
assessments under Section 143 (3) for
different years as mentioned above. Secondly,
the regularity and frequency itself depends on
the nature of business and nothing prevents
the assessee from buying plots of land,
holding them as stock in trade, developing or
continuing to hold as it is and then entering
into the transactions of sale or disposal or
transfer at an appropriate time. Reliance in
this regard is placed on the judgement
reported in (1961) 42 ITR 179 (Raja J.
Page 36 of 44
Rameshwar Rao Vs. Commissioner of
Income Tax, Hyderabad) wherein it was held
inter alia that, "no doubt, this was only a
single venture; but even a single venture may
be regarded as in the nature of trade or
business." As regards the applicability of
Section 50C of Income Tax Act, it is
submitted that when the land in question was
held by and transferred by the assessee as
stock in trade and not as capital asset,
Section 50C could have no application at all.
In the income tax return for assessment year
200809 (during which the relevant events as
mentioned above took place) the transaction
in question was duly offered to tax under the
head "profit and gains of business and
profession". All these facts were considered by
Page 37 of 44
the tribunal and findings of fact as mentioned
above were given.
5.9 Making the above submissions that the High
Court is correct in holding that the Tribunal’s
findings were findings of fact supported by
written documents and corroborating
materials and that there was nothing
perverse in the tribunal’s findings and the
case did not involve any substantial question
of law, it is prayed to dismiss the present
appeal.
6. Heard learned counsel appearing on behalf of
the respective parties at length.
7. In the present case, the AO treated the
transaction as capital assets. ITAT has
reversed the said findings and held that the
transaction was stock in trade. It appears
that the AO specifically recorded the findings
Page 38 of 44
on examining the balance sheets for the AY
200607 to 200910 that there was not even a
single sale during all these years and that
there were negligible expenses and the
transaction in question was the only
transaction i.e., transfer of development
rights in respect of land and consequently, it
was held that the transaction was one of
transfer of capital assets and not one of
transfer of stock in trade. However, the ITAT
after examining the opening and closing
balance for the AY 199697 to 200708
observed that in multiple years, inventory
was shown in the balance sheet, without
discussing the claim of the assessee and held
that the transaction in question is sale of
stock in trade. It appears that ITAT has
neither dealt with the findings given by the
Page 39 of 44
AO nor verified/examined the total sales
made by the assessee during the relevant
time and during the previous years. Merely on
the basis of recording of the inventory in the
books of accounts, the transaction in
question would not become stock in trade. As
per the settled position of law in order to
examine whether a particular transaction is
sale of capital assets or business expense,
multiple factors like frequency of trade and
volume of trade, nature of transaction over
the years etc., are required to be examined.
From the order passed by the ITAT, it appears
that the ITAT has without examining any of
the relevant factors confirmed that the
transaction was transfer of stock in trade.
7.1 The High Court has also failed to appreciate
that even in the event of acceptance of claim
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made by the assessee, including the assertion
that Rs. 15,94,06,500/ was shown in the tax
return in the earlier AY i.e., 200809, the
differential amount of Rs. 10,69,79,146/ on
account of reduction in sale consideration of
development rights was to be assessed in the
current year as either capital gain or business
income. At this stage, it is required to be
noted that as per the claim of the assessee
and the entry made and reflected in the
ledger account of the assessee as on
31.03.2008, an amount of Rs. 15,94,06,500/
was paid to a third party i.e., SICCL.
However, thereafter, according to the
assessee there was a rectification deed dated
30.05.2008 and the amount was reduced
from Rs. 15,94,06,500/ to Rs.
5,24,27,354/. The ITAT has not even
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questioned the factum of refund of differential
amount of Rs. 10,69,79,146/ to the
purchaser on account of rectification deed
dated 30.05.2008. The ITAT ought to have
appreciated that the moment the receipt of
amount is received and recorded in the books
of accounts of the assessee unless shown to
be refunded/returned, it is to be treated as
income in the hands of the recipient.
However, the ITAT has also not considered
the aforesaid aspect.
7.2 In view of the above and as observed
hereinabove, the ITAT has not considered the
relevant aspects/relevant factors while
considering the transaction in question as
stock in trade and has not considered the
relevant aspects as above which as such were
required to be considered by the ITAT, the
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matter is required to be remanded to the ITAT
to consider the appeal afresh in light of the
observations made hereinabove and to take
into consideration the relevant factors while
considering the transaction as stock in trade
or as sale of capital assets or business
transaction.
8. In view of the above and for the reasons
stated above, the present appeal succeeds in
part. The impugned judgment and order
passed by the High Court and that of the
ITAT are hereby quashed and set aside and
the matter is remitted back to the ITAT to
consider the appeal afresh in accordance with
law and on its own merits, while taking into
consideration the observations made
hereinabove and to take an appropriate
decision on whether the transaction in
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question is the sale of capital assets or sale of
stock in trade and other aspects referred
hereinabove. It is observed that we have not
expressed anything on merits in favour of
either of the parties. It is ultimately for the
ITAT to take an appropriate decision in
accordance with law and on its own merits as
above.
………………………………….J.
[M.R. SHAH]
………………………………….J.
[B.V. NAGARATHNA]
NEW DELHI;
MAY 04, 2023
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