TaxTMI 
TaxTMI 
2023 (5) TMI 284
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....e 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 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 2008-09 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. 15,94,06,500/-to Rs. 5,24,27,354/-. As the transact....
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....saction definitely belongs to this year and market value u/s. 50C should be considered as the sale consideration. In 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 AY 2009-10. The CIT (A) also discarded the submissions made by the assessee that transfer of development rights were made in FY 2008-09 pursuant to the MOU dated 27.12.2007. ....
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....hat 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 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 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....
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....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 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 2008-09. 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 order of the ITAT and that the claim was allowed by the Tr....
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.... 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 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 2008-09), 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 2007-08, 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/-. 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....
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....d it covered cost of land and various expenses including land development, stamp charges etc. d) For financial year 2002-03, work in progress was shown at Rs. 8.51 crores. e) For financial years 2003-04 and 2004-05 (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 2005-06 (financial year 2004-05) 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 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 2006-07 and 2007-08 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/- The facts relating to MOU dated 27/12/2007, ne....
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.... d) Perusal of balance sheets of the assessee since 1999-2000 clearly 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 2008-09. 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. 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....
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....shwar 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 2008-09 (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 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 r....