Kasimali Mahaboobsab Sayyed Vs ITO (ITAT Bangalore)
Section 50C Not Applicable to Stock-in-Trade? ITAT Remands for Fresh Verification
In this case, the Bangalore ITAT dealt with a key issue—whether Section 50C can be applied when the assessee is engaged in real estate business and the properties sold are stock-in-trade.
The AO had reopened the case based on insight portal data and made an addition of ₹44.81 lakh under Section 50C, being the difference between stamp duty value and actual sale consideration of 18 sites. The assessment was completed ex-parte due to non-compliance by the assessee.
Before the Tribunal, the assessee contended that he was a real estate dealer, and the plots sold were business inventory, not capital assets. Therefore, income should be taxed under business head, making Section 50C (which applies only to capital assets) inapplicable.
The ITAT accepted the legal position that Section 50C applies only to capital gains and not to stock-in-trade. However, since the assessee had failed to substantiate this claim before lower authorities with proper evidence (books, agreements, etc.), the Tribunal remitted the matter back to the AO for verification.
The AO was directed to examine whether the assessee was genuinely in the business of real estate and whether the properties constituted stock-in-trade. If so, Section 50C addition must be deleted.
Consequentially, penalty proceedings (271D & 271(1)(c)) were also remanded to be decided afresh based on the outcome of the quantum proceedings.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
