NEELESH SHYAMSUNDER SABLE,MUMBAI V. ACIT, CIRCLE 51(2), MUMBAI

ITA 8304/MUM/2025

AI Insights

The case involves Neelesh Shyamsunder Sable, the appellant, who is engaged in the business of purchasing land. The dispute arose when the Assessing Officer (AO) made an addition of INR 5,36,81,000 to the appellant's income under Section 56(2)(vii)(b)(ii) of the Income-tax Act, 1961, alleging that the properties were acquired at a value significantly lower than the Stamp Duty Value (SDV). The appellant contested that these properties were stock-in-trade and not capital assets, thus not subject to the provisions of Section 56(2)(vii). The Income Tax Appellate Tribunal found procedural lapses in the initial assessment and granted the appellant a final opportunity to substantiate his claims.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840223 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 02-12-2025
• Other Referred Cases: Utility Supply Pvt. Ltd. v. DCIT (ITAT Mumbai)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARI
• Assessee Lawyers: SUMIT SINHA; VIRTUALLY
• Keywords: Set aside; Capital asset; Opportunity of being heard; Sale consideration of property below Jantri Value; Principle of natural justice
• Section: 56; 56(2); 2(14)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 8304/MUM/2025 Assessment Year: 2016-17 Neelesh Shyamsunder Sable, Office No. 305, Plot No. 83, Devavrata Building Sector-17, Vashi, Navi Mumbai-400703. Vs. Asst. CIT-51(2), Navi Mumbai. PAN NO. BVLPS 3488K Appellant Respondent Assessee by : Mr. Sumit Sinha, Adv. (Virtually appeared) Revenue by : Mr. Swapnil Choudhari, Sr. DR Date of Hearing : 16/02/2026 Date of pronouncement : 25/02/2026 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 27.05.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – 51, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2016-17, raising following grounds: Printed from counselvise.com 1. It is admitted position that the Appellant is in the business of the purchase of land and the property in question was stock in Trade, which was also reflected the balance sheet o and it was not a capital asset as decided by the AO and as such Section 56(2) (vii) does not apply 2. That the Appellant had produced various documents on record to show that the properties in question were agricultural lands situated at hil lesser value than the normal properties 3. That the Hon'ble ITAT in the case titled as Utility Supply Pvt. Ltd. v. DCIT (ITAT Mumbai) (ITA No. 03.04.2025 has held that Shares held company cannot be subject matter of Act as they are outside the meaning of the word 'property' provided in clause (vii) 4. On the basis of similar principle the agricultural land is excluded and c Explanation (b) to Section 56(2)(x) of the Act, specifically provides that \"expression of property shall have the same meaning as assigned to in clause Act\". 5. The Explanation (d) to means the following capital asset of the assessee, namely: (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; drawings; (vi) paintings; (vii) (ix) bullion; 6. Hence the agricultural land does not appear in this list of assets. It lists only specific capital assets and excludes others. This is an exhaustive definition, not interpretation, it means that the revenue cannot levy tax under Section 56, Income agriculture land\", by invoking provisions of Section 56(2)(x) of the Act, as this was never t 7. CBDT Circular No. 1/2011 dated distinguishes between capital assets and stock applicability of Section 56. 8. The that several other properties were purchased during the year at or above the market value, thereby negating any allegation of undervaluation or tax evasion. Neelesh Shyamsunder Sable ITA No. 8304/MUM/2025 1. It is admitted position that the Appellant is in the business of the purchase of land and the property in question was stock in Trade, which was also reflected the balance sheet of the assessee and it was not a capital asset as decided by the AO and as such Section 56(2) (vii) does not apply 2. That the Appellant had produced various documents on record to show that the properties in question were agricultural lands situated at hills and as such the valuation of these properties was lesser value than the normal properties 3. That the Hon'ble ITAT in the case titled as Utility Supply Pvt. Ltd. v. DCIT (ITAT Mumbai) (ITA No. 3585/Mum/2024) 03.04.2025 has held that Shares held as 'stock in trade' by a company cannot be subject matter of addition u/s 56(2)(viia) of the Act as they are outside the meaning of the word 'property' provided in clause (vii) 4. On the basis of similar principle the agricultural land is excluded and cannot be taxed under Section 56 of the Act. Explanation (b) to Section 56(2)(x) of the Act, specifically provides \"expression of property shall have the same meaning as assigned to in clause (d) of explanation of Section 56(2)(vii) of the 5. The Explanation (d) to Section 56(2)(vii)6 states \"property\" means the following capital asset of the assessee, namely: (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; drawings; (vi) paintings; (vii) sculptures; (viii) any work of art; or 6. Hence the agricultural land does not appear in this list of assets. It lists only specific capital assets and excludes others. This is an exhaustive definition, not an inclusive one. By the literal interpretation, it means that the revenue cannot levy tax under Section 56, Income-tax Act, 1961, on \"stock in trade\" and \"rural agriculture land\", by invoking provisions of Section 56(2)(x) of the Act, as this was never the intent of the legislature. 7. CBDT Circular No. 1/2011 dated 06.04.2011, which clearly distinguishes between capital assets and stock-in-trade for the applicability of Section 56. 8. The that several other properties were purchased during the above the market value, thereby negating any allegation of undervaluation or tax evasion. Neelesh Shyamsunder Sable 2 ITA No. 8304/MUM/2025 1. It is admitted position that the Appellant is in the business of the purchase of land and the property in question was stock in f the assessee and it was not a capital asset as decided by the AO and as such 2. That the Appellant had produced various documents on record to show that the properties in question were agricultural lands ls and as such the valuation of these properties was 3. That the Hon'ble ITAT in the case titled as Utility Supply Pvt. 3585/Mum/2024) dated as 'stock in trade' by a 56(2)(viia) of the Act as they are outside the meaning of the word 'property' as 4. On the basis of similar principle the agricultural land is Section 56 of the Act. The Explanation (b) to Section 56(2)(x) of the Act, specifically provides \"expression of property shall have the same meaning as (d) of explanation of Section 56(2)(vii) of the Section 56(2)(vii)6 states \"property\" means the following capital asset of the assessee, namely: (i) immovable property being land or building or both; (ii) shares and securities; (iii) jewellery; (iv) archaeological collections; (v) sculptures; (viii) any work of art; or 6. Hence the agricultural land does not appear in this list of assets. It lists only specific capital assets and excludes others. an inclusive one. By the literal interpretation, it means that the revenue cannot levy tax under tax Act, 1961, on \"stock in trade\" and \"rural agriculture land\", by invoking provisions of Section 56(2)(x) of the 06.04.2011, which clearly trade for the 8. The that several other properties were purchased during the above the market value, thereby negating any allegation Printed from counselvise.com 9. That the show cause notice dated merely two days prior to the passing of the 25.12.2018 being a public holiday, there of hearing was not given and as such the order passed by AO is bad in law. 2. At the threshold, we note a delay of 100 days in the filing of this appeal. The Assessee has moved an application for condonation, supported by an and legal exigencies. It is submitted that during the relevant period, the Assessee was embroiled in responding to summons issued by the Directorate of Enforcement (ED), Bangalore, necessitating frequent travel between Assessee’s father was suffering from prolonged ill 2.1 Upon considering the submissions, we are of the view that the Assessee was prevented by \"sufficient cause\" from filing the appeal within the statutory pe acceptable and following the principle that substantial justice must take precedence over technical conduits, the delay is hereby condoned, and the appeal is admitted for adjudication on merits. 3. The core controversy involves an addition of made by the Assessing Officer (AO) under the Income-tax Act, 1961 ('the Act'). The AO observed that the Assessee acquired two parcels of land at Bhisengaon, Karjat, at a consideration significantly lower than the Stamp Duty Value (SDV). Neelesh Shyamsunder Sable ITA No. 8304/MUM/2025 9. That the show cause notice dated 24.12.2018 was issued merely two days prior to the passing of the assessment order, with 25.12.2018 being a public holiday, thereby reasonable of hearing was not given and as such the order passed by AO is At the threshold, we note a delay of 100 days in the filing of this appeal. The Assessee has moved an application for condonation, supported by an affidavit, citing compelling personal and legal exigencies. It is submitted that during the relevant period, the Assessee was embroiled in responding to summons issued by the Directorate of Enforcement (ED), Bangalore, necessitating frequent travel between Mumbai and Bangalore. Furthermore, the Assessee’s father was suffering from prolonged ill-health. Upon considering the submissions, we are of the view that the Assessee was prevented by \"sufficient cause\" from filing the appeal within the statutory period. The Explanation filed by the assessee is ollowing the principle that substantial justice must take precedence over technical conduits, the delay is hereby condoned, and the appeal is admitted for adjudication on merits. ontroversy involves an addition of made by the Assessing Officer (AO) under Section 56(2)(vii)(b)(ii) tax Act, 1961 ('the Act'). The AO observed that the Assessee acquired two parcels of land at Bhisengaon, Karjat, at a ration significantly lower than the Stamp Duty Value (SDV). Neelesh Shyamsunder Sable 3 ITA No. 8304/MUM/2025 24.12.2018 was issued assessment order, with by reasonable opportunity of hearing was not given and as such the order passed by AO is At the threshold, we note a delay of 100 days in the filing of this appeal. The Assessee has moved an application for affidavit, citing compelling personal and legal exigencies. It is submitted that during the relevant period, the Assessee was embroiled in responding to summons issued by the Directorate of Enforcement (ED), Bangalore, necessitating Mumbai and Bangalore. Furthermore, the health. Upon considering the submissions, we are of the view that the Assessee was prevented by \"sufficient cause\" from filing the appeal The Explanation filed by the assessee is ollowing the principle that substantial justice must take precedence over technical conduits, the delay is hereby condoned, and the appeal is admitted for adjudication on merits. ontroversy involves an addition of ₹5,36,81,000/- Section 56(2)(vii)(b)(ii) of tax Act, 1961 ('the Act'). The AO observed that the Assessee acquired two parcels of land at Bhisengaon, Karjat, at a ration significantly lower than the Stamp Duty Value (SDV). Printed from counselvise.com 3.1 Before us, the Ld. Counsel for the Assessee raised the contentions, firstly, (i) held as 'Stock-in-Trade' and reflected as such in the Balance Sheet. Consequently, they do not constitute a \"Capital Asset\" as defined under Section 2(14) for the purposes of Section 56; Legal Precedent: Reliance was placed on DCIT (ITA No. 3585/Mum/2024) as stock-in-trade fall outside the ambit of \"property\" under the Explanation to Section 56(2)(vii); It was argued that the definition of \"property\" in Explanation (d) to Section 56(2)(vii) is exhaustive literal interpretation, rural agricultural land and stock excluded from the levy; and contended that the Show Cause Notice dated 24.12.2018 provid an illusory window for response, as the assessment order was passed just two days later, with an intervening public holiday. 4. We have heard the rival submissions and perused the material on record. In the case, assessee had purchased two parcels of th land situated at Bhisengaon, Karjat. The Assessing Officer found that those properties were registered at a value lower than the stamp duty valuation and accordingly he made addition for the difference aggregating to Rs.5,36,81,000/ Act. No details were filed before the Assessing Officer CIT(A) dismissed the appeal of the assessee mainly for the reason Neelesh Shyamsunder Sable ITA No. 8304/MUM/2025 Before us, the Ld. Counsel for the Assessee raised the , (i) Character of Asset: The subject lands were Trade' and reflected as such in the Balance Sheet. Consequently, they do not constitute a \"Capital Asset\" as defined under Section 2(14) for the purposes of Section 56; Reliance was placed on Utility Supply Pvt. Ltd. v. DCIT (ITA No. 3585/Mum/2024), where it was held that assets held trade fall outside the ambit of \"property\" under the Explanation to Section 56(2)(vii); thirdly, Statutory Interpretation It was argued that the definition of \"property\" in Explanation (d) to exhaustive, not inclusive. By applying the rule of , rural agricultural land and stock excluded from the levy; and lastly, Natural Justice: contended that the Show Cause Notice dated 24.12.2018 provid an illusory window for response, as the assessment order was passed just two days later, with an intervening public holiday. We have heard the rival submissions and perused the material In the case, assessee had purchased two parcels of th land situated at Bhisengaon, Karjat. The Assessing Officer found that those properties were registered at a value lower than the stamp duty valuation and accordingly he made addition for the difference aggregating to Rs.5,36,81,000/- u/s 56(2)(vii)(b)(ii Act. No details were filed before the Assessing Officer CIT(A) dismissed the appeal of the assessee mainly for the reason Neelesh Shyamsunder Sable 4 ITA No. 8304/MUM/2025 Before us, the Ld. Counsel for the Assessee raised the The subject lands were Trade' and reflected as such in the Balance Sheet. Consequently, they do not constitute a \"Capital Asset\" as defined under Section 2(14) for the purposes of Section 56; secondly (ii) Utility Supply Pvt. Ltd. v. , where it was held that assets held trade fall outside the ambit of \"property\" under the Statutory Interpretation: It was argued that the definition of \"property\" in Explanation (d) to , not inclusive. By applying the rule of , rural agricultural land and stock-in-trade are Natural Justice: The Assessee contended that the Show Cause Notice dated 24.12.2018 provided an illusory window for response, as the assessment order was passed just two days later, with an intervening public holiday. We have heard the rival submissions and perused the material In the case, assessee had purchased two parcels of the land situated at Bhisengaon, Karjat. The Assessing Officer found that those properties were registered at a value lower than the stamp duty valuation and accordingly he made addition for the u/s 56(2)(vii)(b)(ii) of the Act. No details were filed before the Assessing Officer. The Ld. CIT(A) dismissed the appeal of the assessee mainly for the reason Printed from counselvise.com that the assessee failed in filing the relevant books of accounts, purchase sales transaction or any other material business nature of the properties. the addition primarily on an evidentiary deficit. While the Ld. CIT(A) correctly identified the legal position capital assets and generally that the Assessee failed to discharge the the business nature of the land. contested that those properties were reflected as stock in trade in his balance sheet and therefore, provision of section 56(2)(vii) of the Act could not be attracted. The Ld. CIT(A) dismissed the appeal observing as under: “7.3.3 On a careful perusal of the record, submissions, and relevant provisions of law, it is observed that the in Explanation (d) to section 56(2)(vii) applies exclusively to capital assets and excludes stock consumables held by the recipient in the course of business. However, the legal burden lies on the app evidence that the properties in question were indeed held as stock in-trade. In the instant case, the appellant has failed to adduce any evidence such as detailed books of account, purchase transactions, or any other materi nature of the properties. development activity related to these lands during the relevant period undermines the claim of holding them as stock-in- trade. Further, the joint ownership with a business partner without clear delineation of trading activity does not satisfactorily establish that the appellant was engaged in a property trading business in respect of these lands. It is also noted that the appellant did not respond to the show cause notice issued by the AO and also to the hearing notices issued during the course of appellate proceeding. 7.3.4 In view of the foregoing and having regard to the settled legal position, the addition of Rs.5,36,81,000/ Neelesh Shyamsunder Sable ITA No. 8304/MUM/2025 that the assessee failed in filing the relevant books of accounts, purchase sales transaction or any other material demonstrating the business nature of the properties. Thus, the Ld. CIT(A) sustained the addition primarily on an evidentiary deficit. While the Ld. CIT(A) correctly identified the legal position—that Section 56(2)(vii) targets capital assets and generally excludes stock-in-trade that the Assessee failed to discharge the onus probandi the business nature of the land. Before the Ld. CIT(A), the assessee contested that those properties were reflected as stock in trade in sheet and therefore, provision of section 56(2)(vii) of the Act could not be attracted. The Ld. CIT(A) dismissed the appeal 7.3.3 On a careful perusal of the record, submissions, and relevant provisions of law, it is observed that the term \"property\" as defined in Explanation (d) to section 56(2)(vii) applies exclusively to capital assets and excludes stock-in-trade, raw materials, and consumables held by the recipient in the course of business. However, the legal burden lies on the appellant to prove by credible evidence that the properties in question were indeed held as stock trade. In the instant case, the appellant has failed to adduce any evidence such as detailed books of account, purchase transactions, or any other material demonstrating the business nature of the properties. The absence of any sale or development activity related to these lands during the relevant period undermines the claim of holding them as trade. Further, the joint ownership with a business partner without clear delineation of trading activity does not satisfactorily establish that the appellant was engaged in a property trading business in respect of these lands. It is also noted that the appellant did not respond to the show cause sued by the AO and also to the hearing notices issued during the course of appellate proceeding. 7.3.4 In view of the foregoing and having regard to the settled legal position, the addition of Rs.5,36,81,000/- made by the AO under Neelesh Shyamsunder Sable 5 ITA No. 8304/MUM/2025 that the assessee failed in filing the relevant books of accounts, demonstrating the he Ld. CIT(A) sustained the addition primarily on an evidentiary deficit. While the Ld. CIT(A) that Section 56(2)(vii) targets trade—he concluded onus probandi regarding Before the Ld. CIT(A), the assessee contested that those properties were reflected as stock in trade in sheet and therefore, provision of section 56(2)(vii) of the Act could not be attracted. The Ld. CIT(A) dismissed the appeal 7.3.3 On a careful perusal of the record, submissions, and relevant term \"property\" as defined in Explanation (d) to section 56(2)(vii) applies exclusively to capital trade, raw materials, and consumables held by the recipient in the course of business. ellant to prove by credible evidence that the properties in question were indeed held as stock- trade. In the instant case, the appellant has failed to adduce any evidence such as detailed books of account, purchase-sale al demonstrating the business The absence of any sale or development activity related to these lands during the relevant period undermines the claim of holding them as trade. Further, the joint ownership with a business partner without clear delineation of trading activity does not satisfactorily establish that the appellant was engaged in a property trading business in respect of these lands. It is also noted that the appellant did not respond to the show cause sued by the AO and also to the hearing notices issued during the course of appellate proceeding. 7.3.4 In view of the foregoing and having regard to the settled legal made by the AO under Printed from counselvise.com section 56(2)(vii)(b)(ii) the purchase consideration and the market value of the immovable properties is upheld. The contention of the appellant that the said provision is inapplicable to stock requisite evidence to substantiate such claim. Accordingly, the ground of appeal filed by the appellant is dismissed. 4.1 However, we note that the proceedings before the Lower Authorities , there was assessee failed to present his books of account and purchase registers. Before us, the Ld. counsel for the assessee submitted that one more opportunity might be granted to the assessee to file all the documents in support of its contention that properties in question were stock in trade of the business of the assessee. of justice, and considering the substantial tax implications, the Assessee deserves a final opportunity to substantiate the asset\" character of the properties. 4.2 Without expressing any opinion on the merits of the classification of the asset, we deem it fit to order. The matter is Officer for a de novo adjudication the books of accounts and the treatment of the subject land in the financial statements;(ii) No. 1/2011 and relevant judicial precedents concerning the definition of \"property\" under Section 56 reasonable and effective opportunity of being heard. Neelesh Shyamsunder Sable ITA No. 8304/MUM/2025 section 56(2)(vii)(b)(ii) of the Act on account of the difference between the purchase consideration and the market value of the immovable properties is upheld. The contention of the appellant that the said provision is inapplicable to stock-in-trade fails in absence of evidence to substantiate such claim. Accordingly, the ground of appeal filed by the appellant is dismissed.” (emphasis supplied externally) However, we note that the proceedings before the Lower , there was a lack of effective representation and a to present his books of account and purchase Before us, the Ld. counsel for the assessee submitted that one more opportunity might be granted to the assessee to file all the ments in support of its contention that properties in question were stock in trade of the business of the assessee. of justice, and considering the substantial tax implications, the Assessee deserves a final opportunity to substantiate the asset\" character of the properties. Without expressing any opinion on the merits of the classification of the asset, we deem it fit to set aside order. The matter is remanded/restored to the file of the Assessing adjudication. The AO is directed to the books of accounts and the treatment of the subject land in the ;(ii) Verify the applicability of the CBDT Circular No. 1/2011 and relevant judicial precedents concerning the finition of \"property\" under Section 56; (iii) Afford the Assessee a reasonable and effective opportunity of being heard. Neelesh Shyamsunder Sable 6 ITA No. 8304/MUM/2025 of the Act on account of the difference between the purchase consideration and the market value of the immovable properties is upheld. The contention of the appellant that the said trade fails in absence of evidence to substantiate such claim. Accordingly, the (emphasis supplied externally) However, we note that the proceedings before the Lower a lack of effective representation and a the to present his books of account and purchase-sale Before us, the Ld. counsel for the assessee submitted that one more opportunity might be granted to the assessee to file all the ments in support of its contention that properties in question were stock in trade of the business of the assessee. In the interest of justice, and considering the substantial tax implications, the Assessee deserves a final opportunity to substantiate the \"business Without expressing any opinion on the merits of the set aside the impugned to the file of the Assessing The AO is directed to ( i) Examine the books of accounts and the treatment of the subject land in the Verify the applicability of the CBDT Circular No. 1/2011 and relevant judicial precedents concerning the Afford the Assessee a Printed from counselvise.com 5. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on Sd/- (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 25/02/2026 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Neelesh Shyamsunder Sable ITA No. 8304/MUM/2025 In the result, the appeal of the assessee is allowed for ounced in the open Court on 25/02/2026 Sd/ (KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Neelesh Shyamsunder Sable 7 ITA No. 8304/MUM/2025 In the result, the appeal of the assessee is allowed for /02/2026. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "