2023 (5) TMI 284 - SC - Income Tax

Characterization of gain on sale of property - nature of transaction - transfer of capital assets or transfer of stock in trade - as argued 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 u/s 143(3) - ITAT concluded that what was sold by the assessee was part of its inventory and not a capital asset also confirmed by HC - HELD THAT:- 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. 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 matter is required to be remanded to the ITAT to consider the appeal afresh in light of the observations made here-in-above 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.

The High Court has also failed to appreciate that even in the event of acceptance of claim made by the assessee, including the assertion was shown in the tax return in the earlier AY i.e., 2008-09, the differential amount 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.

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 here-in-above and to take an appropriate decision on whether the transaction in question is the sale of capital assets or sale of stock in trade and other aspects referred here-in-above. 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.