ITO Vs Goral Infrastructure Private Limited (Supreme Court of India)
Summary: In ITO Vs Goral Infrastructure Private Limited, the Supreme Court condoned the delay and declined to interfere with the impugned order in exercise of its jurisdiction under Article 136 of the Constitution of India. It consequently dismissed the Special Leave Petition and disposed of the accompanying interlocutory applications, if any. The Supreme Court’s brief order gives no separate substantive reasoning on the reassessment or valuation issues. The detailed reasoning in the supplied material belongs to the underlying High Court judgment, which quashed the order under Section 148A(3) and the consequential Section 148 notice dated 26 June 2025 for Assessment Year 2021–22.
The company, incorporated on 16 January 2015 and engaged in real estate development and infrastructure activities, filed its return for AY 2021–22 on 11 March 2022 declaring a loss of ₹13,032; the return was processed under Section 143(1). It had acquired land at Goraj, Sanand, Ahmedabad under a registered purchase deed dated 4 November 2020. The proceedings also referred to land purchases in AY 2020–21 involving memoranda of understanding entered into by Sandeep Agarwal with the original owners and subsequent tripartite agreements. Under that structure, the owners were entitled to the amounts specified in the memoranda, while the balance consideration was payable to Agarwal. The original assessment for AY 2020–21, completed under Section 143(3) on 28 September 2022, accepted the returned income. Following revision under Section 263 on 26 March 2025 concerning examination of the difference between stamp duty value and sale deed value, a fresh assessment under Section 143(3) read with Section 263 dated 17 September 2025 again accepted the return without additions.
For AY 2021–22, the Assessing Officer issued a show-cause notice under Section 148A(1) on 31 March 2025, followed by the impugned order and notice after considering the company’s reply. The company submitted that, against sale deed consideration of ₹39.64 lakh, actual consideration of ₹4.63 crore exceeded aggregate stamp duty valuation of ₹4.62 crore. It stated that the land was shown as stock-in-trade under inventories, the amount payable to Agarwal was disclosed in the audited financial statements, and the outstanding liability was subsequently settled through banking channels in AY 2025–26. It also relied on documentary evidence and Agarwal’s video-conference confirmation in the earlier assessment, and argued that Section 56(2)(x) did not apply to land purchased in the ordinary course of business. The Revenue sought examination of the differential value under that provision and argued that Agarwal had not paid the original landowners despite the tripartite arrangement.
The High Court found that the two assessment years rested on identical facts and material and that the Revenue had not shown a substantial distinguishing feature. It expressly acknowledged that the favourable assessment dated 17 September 2025 post-dated the impugned reopening order and notice. Although paragraph 10 records that the Section 56(2)(x) aspect had not been considered in the earlier proceedings, paragraph 10.1 records that the Assessing Officer had examined the stamp duty, consideration and stock-in-trade aspects. The Court held that the provision did not apply to the company’s land held as stock-in-trade and referred to the disclosed agreements, ledger entries and explanations of the landowners and Agarwal. It rejected the objection concerning payment to the original owners and declined the Revenue’s request for remand.
Relying on Commissioner of Income Tax-IV Vs SBJ VON Compounders (P.) Ltd., [2013] 37 taxmann.com 353 (Gujarat), the High Court applied the principle of consistency where unchanged circumstances and satisfactory explanations had previously been accepted. It held that compelling the company to continue facing the proceedings would amount to abuse of the statutory provisions. The order under Section 148A(3) and the Section 148 notice, both dated 26 June 2025, were quashed, and the rule was made absolute without costs. The subsequent Supreme Court order dismissed the Revenue’s SLP by declining interference under Article 136.
Reason for the Decision: The Supreme Court condoned the delay but declined to interfere with the Gujarat High Court’s judgment in exercise of its discretionary jurisdiction under Article 136 of the Constitution. Accordingly, the Revenue’s Special Leave Petition was dismissed.
The underlying High Court had quashed the reassessment proceedings because the Revenue relied on materially identical facts and documents examined in the earlier assessment year, failed to demonstrate substantial distinguishing circumstances and could not justify departing from the principle of consistency.
Legal Accuracy Note: The Supreme Court’s brief order contains no independent findings on Section 56(2)(x), land held as stock-in-trade or the validity of reassessment. Dismissal of the SLP without a reasoned merits judgment should not be described as the Supreme Court affirming every legal proposition in the High Court judgment or declaring a binding precedent on those substantive issues.
Cases Discussed
- Commissioner of Income Tax-IV Vs SBJ VON Compounders (P.) Ltd. — [2013] 37 taxmann.com 353 (Gujarat High Court). Cited by the company and relied upon by the High Court for consistency in accepting an unchanged stock-valuation position where the explanations had been accepted in the preceding year.
Read HC Judgment in this case: Goral Infrastructure Private Limited Vs ITO (Gujarat High Court)
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. We are not inclined to interfere with the impugned order in exercise of our jurisdiction under Article 136 of the Constitution of India.
3. The Special Leave Petition is, accordingly, dismissed and the accompanying interlocutory application(s), if any, stands disposed.
