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What is the case about ?

  • The revenue, appellant had preferred the present appeals against the impugned judgement and order passed by the Bombay High Court.
  • In the said judgement, HC upheld the decision of the Income Tax Tribunal, allowing the the decision of deleting the addition made by the Assessing Officer (AO) of Rs. 15,94,06,500.
  • The brief of the relevant facts of the case are that in the assesse entered into an agreement with M/s   Kirit   City Homes Pvt. Ltd on 06.08.2008 under which the developmental rights of the concerned property was sold at a Rs. 15,94,06,500.
  • During assessment for the year 2009-10, it was noticed by the AO that the aforesaid amount was not mentioned by the assesse while filing income tax return. The assesse was asked about it and in response assesse vide letter described that the aforementioned transaction was duly mentioned reflecting  the consideration of Rs. 5,24,27,354. This reduced amount is the result if rectification deed made between the assesse and the party.
  • The assesse was served with an notice and the AO made the addition of Rs.15,94,06,500 by treating as short term capital gains and added the same to the income year.
  • Assesse filed an appeal before ITAT, where it was confirmed the sale transaction of Rs. 5,24,27,354 only. It was observed that the assesse is engaged in the business of building and development. 

Contentions of the Parties

  • The learned counsel appearing on behalf of the revenue submitted that High Court has  failed to reverse the order of the ITAT. It was submitted that the ITAT failed to examine whether the money amounting to 10,69,79,146 after the rectification deed, was returned to the purchaser or not.
  • It was submitted by the counsel that the ITAT did not examine the cause or factually of the rectification deed and failed to assert the fact that of any amount is entered in the books of accounts, it will be treated as income in the hands of the recipient unless shown refunded or returned.
  • It was also contended that High Court and ITAT had materially erred in holding that merely because there was inventory shown in the balance sheet as per section 14(3) of Income Tax Act, 1961 the transaction becomes sale of stock in trade.
  • The learned counsel appearing on behalf of the assesse submitted that the High Court and ITAT had rightly observed that assesse was involved in business of building and development after the scrutiny made under Section 14(3).
  • It was submitted that the rectification deed and MOU between assesse and the purchaser was duly examined by the lower authorities and the transfer of development rights for consideration of Rs. 5,24,27,354 was upheld by the High Court.

Judgement of the Court

  • The impugned order and judgement passed by High Court and ITAT were set aside and quashed. Court remitted back the matter to ITAT to examine whether the transaction will be treated as capital assets or sale of stock in trade as fresh appeals.
  • Apex court observed that the ITAT has not examined the factum of the refund to the purchaser and has also not considered the relevant factors while considering the transaction in question.
  • It was observed that although ITAT has examined the   opening   and closing for the balance for the AY 1996-97 to 2007-08 , it had failed to examine the findings of the AO regarding the total sales which was made by the assesse in the relevant period i.e AY 2009-10.
  • Court directed that the matter should be dealt as fresh appeals by ITAT as there are relevant factors and findings needed to be examined.
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