COMMISSIONER OF INCOME TAX 8 MUMBAIversusGLOWSHINE BUILDERS & DEVELOPERS PVT. LTD

1004                      [2023]REPORTS
                SUPREME COURT   7 S.C.R. 1004                 [2023] 7 S.C.R.


 A             COMMISSIONER OF INCOME TAX 8 MUMBAI
                                          v.
            GLOWSHINE BUILDERS & DEVELOPERS PVT. LTD.
                          (Civil Appeal No. 2565 of 2022)
 B                                 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
 C
       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
 D     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
 E
       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
 F     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
 G
       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
 H     in the hands of the recipient – ITAT failed to consider relevant aspects
                                         1004
  COMMISSIONER OF INCOME TAX 8 MUMBAI v. GLOWSHINE                      1005
           BUILDERS & DEVELOPERS PVT. LTD.

while considering transaction in question – Hence, the matter is        A
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                B
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       C
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,              D
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          E
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      F
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      G
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
in the earlier AY i.e., 2008-09, the differential amount of

                                                                        H
1006            SUPREME COURT REPORTS                       [2023] 7 S.C.R.


 A     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
 B
       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 questioned the factum of refund of differential
       amount of Rs. 10,69,79,146/- to the purchaser on account of
 C     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. [Para 7.1][1019-G-H]
 D
             3. 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
 E     such were required to be considered by the ITAT, the 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. [Para 7.2][1020-D]
 F
             4. 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
 G     and on its own merits. [Para 8][1020-E-F]
             Mantri Techzone Private Limited v. Forward Foundation
             and Ors. (2019) 18 SCC 494; Raja J.Rameshwar Rao
             v. Commissioner of Income Tax, Hyderabad (1961) 42
             ITR 179 – referred to.
 H
  COMMISSIONER OF INCOME TAX 8 MUMBAI v. GLOWSHINE                           1007
           BUILDERS & DEVELOPERS PVT. LTD.

      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2565                    A
of 2022.

      From the Judgment and Order dated 04.09.2017 of the High Court
of Judicature at Bombay in ITA No. 1756 of 2014.

     Balbir Singh, ASG, Rupesh Kumar, Ms. Swarupama Chaturvedi,              B
Devashish Bharukha, Raj Bahadur Yadav, Advs. for the Appellant.

     S. K. Bagaria, Sr. Adv., Ujjwal A. Rana, Himanshu Mehta for
M/s Gagrat and Co., Advs. for the Respondent.

      The Judgment of the Court was delivered by                             C

      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         D
Bombay in Income Tax Appeal No. 1756 of 2014, by which, the High
Court has dismissed the said appeal preferred by 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.                                E

        2. The dispute pertains to the Assessment Year (AY) 2009-10
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
                                                                             F
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    G
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
                                                                             H
1008                SUPREME COURT REPORTS                         [2023] 7 S.C.R.


 A     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 transaction was pertaining to AY 2009-10,
       the assessee was served a further notice dated 10.10.2011 under Section
 B
       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
 C                    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. 2009-10 whereas you
 D
                      had offered this transaction in the A.Y. 2008-09. 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
 E
                      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 narrations
                      thereof alongwith copy of the bank account statement
 F                    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
 G                    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
 H                    with supporting documentary evidences.
  COMMISSIONER OF INCOME TAX 8 MUMBAI v. GLOWSHINE                            1009
    BUILDERS & DEVELOPERS PVT. LTD. [M. R. SHAH, J.]

      (vi)    Considering the above, I am of the view that for the above      A
              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
                                                                              B
              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 this         C
              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,      D
              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         E
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         F
FY 2008-09 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,            G
after examining the chart submitted by the assessee pertaining to opening
balance and closing balance for the assessment years 1996-97 to 2007-
08 held that the assessee in all these years showed inventory and
expenses. Consequently, ITAT held that the assessee is engaged in the
business of building and development. The ITAT further noted that the         H
1010            SUPREME COURT REPORTS                           [2023] 7 S.C.R.


 A     assessee showed the cost of land along with related expenditure as work
       in progress/inventory since 1999-2000 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
 B
       the sale consideration from Rs. 15,94,06,500/- to Rs. 5,24,27,354/- during
       FY 2007-08 on the basis of MOU dated 27.12.2007 and the said amount
       of the income has already been declared in the AY 2008-09 i.e., FY
       2007-08 and therefore, such income cannot be declared in AY 2009-10
       i.e., FY 2008-09. The ITAT also confirmed and/or agreed with the
 C     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/-.
              2.3 The Revenue preferred an income tax appeal before the High
 D     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.
             2.4 Feeling aggrieved and dissatisfied with the impugned judgment
 E     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.
 F            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
 G     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
 H
  COMMISSIONER OF INCOME TAX 8 MUMBAI v. GLOWSHINE                           1011
    BUILDERS & DEVELOPERS PVT. LTD. [M. R. SHAH, J.]

passing a rectification entry on 31.03.2008 itself. Therefore, it was        A
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
                                                                             B
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      C
accounts of the assessee simpliciter confirmed that the transactions
pertained to earlier years i.e., Assessment Year 2008-09 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.
       4.1 It is further submitted by Shri Balbir Singh, learned ASG, that   D
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            E
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.
       4.2 Secondly, balance sheets for the Assessment Years 2006-07         F
to 2009-10 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       G
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 1996-97 upto 2007-08 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
                                                                             H
1012             SUPREME COURT REPORTS                           [2023] 7 S.C.R.


 A     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
 B
       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
 C     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
 D     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.
 E            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 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.
 F
              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., 2008-09, the differential
       amount of Rs. 10,69,79,146/- on account of reduction in the sale
 G     consideration of development rights is to be assessed in the current year
       as either as capital gain or business income. This is without prejudice to
       the submission that the Assessing Officer has correctly assessed the
       income in his Assessment Order dated 29.11.2011.

 H
  COMMISSIONER OF INCOME TAX 8 MUMBAI v. GLOWSHINE                            1013
    BUILDERS & DEVELOPERS PVT. LTD. [M. R. SHAH, J.]

      4.6 Making the above submissions, it is prayed that the present         A
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      B
business of building and development of properties since the year 1999-
2000. That the assessee’s balance sheets show that it had work-in-
progress/inventories year after year, since 1999-2000. 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.
                                                                              C
       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       D
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 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   E
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       F
             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                                    G
      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
                                                                              H
1014                SUPREME COURT REPORTS                       [2023] 7 S.C.R.


 A                    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: -
 B           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
 C                    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
 D                    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.
 E
             vi.      The aforesaid events took place during the financial year
                      2007- 08 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”.
 F
             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.
 G
              5.4 Shri Bagaria, learned Senior Advocate has also taken us to
       the following further facts recorded and findings given by the ITAT: -
             a) The aforesaid 50.16 acres of land was acquired by the
                assessee in the financial year 1996-97. The tribunal gave year
 H
COMMISSIONER OF INCOME TAX 8 MUMBAI v. GLOWSHINE                        1015
  BUILDERS & DEVELOPERS PVT. LTD. [M. R. SHAH, J.]

       wise details from 1996-97 which clearly showed that the          A
       acquisition of land was in financial years 1996-97 and 2004-
       05. 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
                                                                        B
       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 the balance sheets
      filed with the Department and in the Income Tax Returns.
      The tribunal considered the year-wise position and gave the
      following findings for different years.                           C

   c) For assessment year 2001-02 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           D
      developer, erectors, construction of building, houses,
      apartments, ownership flats. Work in progress of Rs 7.66
      crores was also mentioned in the assessment order and it
      covered cost of land and various expenses including land
      development, stamp charges etc.                                   E
   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        F
      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,       G
      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.

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1016              SUPREME COURT REPORTS                          [2023] 7 S.C.R.


 A           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,
 B
                  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.
 C           g) It was found that since 1999-2000 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 143 (3) wherein the nature of the
 D              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,
 E     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 Section 143(3). It is submitted that ultimately the Tribunal
       concluded the issues as under: -
 F
             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).
 G
             b) The said transaction had taken place during the financial year
                2007-08 pertaining to assessment year 2008-09. 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 said assessment year 2008-09. Even
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  COMMISSIONER OF INCOME TAX 8 MUMBAI v. GLOWSHINE                              1017
    BUILDERS & DEVELOPERS PVT. LTD. [M. R. SHAH, J.]

           in the abstract from AST, the assessing officer had referred         A
           the said sale as part of the return for assessment year 2008-
           09.
      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                    B
         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 1999-2000              C
         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.
                                                                                D
      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.
                                                                                E
         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.                F
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 was duly offered        G
to tax in assessment year 2008-09 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,
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1018             SUPREME COURT REPORTS                            [2023] 7 S.C.R.


 A     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 same consideration and
 B
       the said Deed of Rectification was duly registered with the Sub-Registrar,
       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
 C     development agreement as well as the deed of rectification were both
       registered with the same Sub-Registrar, Vasai but the income tax officer
       did not make any enquiry from the said Sub-Registrar.
              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
 D     regular transactions of purchase and sale 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
 E     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. Rameshwar Rao Vs.
 F     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
 G     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.
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  COMMISSIONER OF INCOME TAX 8 MUMBAI v. GLOWSHINE                            1019
    BUILDERS & DEVELOPERS PVT. LTD. [M. R. SHAH, J.]

       5.9 Making the above submissions that the High Court is correct        A
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         B
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 on examining the balance sheets for the AY 2006-07 to 2009-10        C
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-         D
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        E
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          F
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 made by the assessee, including the assertion    G
that Rs. 15,94,06,500/- was shown in the tax return in the earlier AY i.e.,
2008-09, 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   H
1020              SUPREME COURT REPORTS                           [2023] 7 S.C.R.


 A     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 questioned
       the factum of refund of differential amount of Rs. 10,69,79,146/- to the
 B
       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
 C     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
 D     by the ITAT, the 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.
 E            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
 F     appropriate decision on whether the transaction in 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
 G     merits as above.

       Ankit Gyan                                                Appeal partly allowed.
       (Assisted by : Abhishek Pratap Singh and Tamana, LCRAs)



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