In Brief
A company sold development rights in property for Rs. 15,94,06,500/- to Kirit City Homes in May 2008, later claiming the true consideration was Rs. 5,24,27,354/- through a rectification deed. The tax authority added the higher amount as capital gains; the company claimed it was stock-in-trade income already reported in the prior year. The ITAT allowed the company's appeal; the High Court upheld this. The Supreme Court held the ITAT failed to examine critical factors (frequency of sales, volume, transaction history) required to determine if this was sale of capital assets or stock-in-trade. Most importantly, the Court found the ITAT never verified whether the differential amount (Rs. 10,69,79,146/-) was actually refunded, noting that amounts received and recorded must be treated as income unless refunded. The matter was remitted to the ITAT for fresh consideration of all relevant factors.
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