COMMISSIONER OF INCOME TAX 8 MUMBAI versus GLOWSHINE BUILDERS & DEVELOPERS PVT. LTD

Citation: [2023] 7 S.C.R. 1004 · Decided: 04-05-2023 · Supreme Court of India · Bench: M.R. SHAH

Judgment (excerpt)

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SUPREME COURT REPORTS
[2023] 7 S.C.R.
COMMISSIONER OF INCOME TAX 8 MUMBAI
v.
GLOWSHINE BUILDERS & DEVELOPERS PVT. LTD.
(Civil Appeal No. 2565 of 2022)
MAY 04, 2023
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Income Tax Act, 1961 – s.142, 143 – Non-disclosure of amount
– Dispute related to the Assessment year (AY) 2009-10 i.e. Financial
Year (FY) 2008-09 – Assessee entered into an agreement whereby
development rights in a property were sold at a Rs. 15,94,06,500/-
– However, AO noticed that the aforesaid amount was not disclosed
by assessee while filing the return of income – Explanation sought
from assessee – In response, the assessee stated that the aforesaid
transaction was duly offered to tax in AY 2008--09 reflecting a
consideration of Rs. 5,24,27,354/- – It was claimed that a rectification
deed was entered into whereby the value of development rights was
reduced from Rs. 15,94,06,500/- to Rs. 5,24,27,354/- – However,
the addition of Rs. 15,94,06,500/- was made by the AO by treating
the same as short term capital gains – The Commissioner confirmed
the order made by the AO – ITAT reversed the said finding and held
that the transaction was stock in trade – Also, confirmed that the
sale consideration was Rs.5,24,27,354/- only – Appeals were
dismissed by the High Court – On appeal, held: ITAT has neither
dealt with the findings given by the AO nor verified/examined the
total sales made by the assessee during the relevant time and during
the previous years ITAT after examining opening and closing balance
for the AY 1996-97 to 2007-08 held that the transaction was sale in
stock in trade – 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 assessee claimed that rectification deed was
entered into entered into and the amount was reduced from
Rs.15,94,06,500/- to Rs.5,24,27,354/- – ITAT did not question the
factum of refund of differential amount of Rs.10,69,79,146/- – 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 – ITAT failed to consider relevant aspects
[2023] 7 S.C.R. 1004
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while considering transaction in question – Hence, the matter is
required to be remanded to the ITAT to consider the appeal afresh –
Impugned judgment and order passed by the High Court and that
of the ITAT are hereby quashed and set aside.
Partly allowing the appeal, the Court
HELD : 1. 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 on examining the balance
sheets for the AY 2006-07 to 2009-10 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 1996-97 to 2007-08 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 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. [Para 7][1019-C-F]
2. The High Court has also failed to appreciate that even in
the event of acceptance of claim made by the assessee, including
the assertion that Rs. 15,94,06,500/- was shown in the tax return

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