M/S. RAVI DEVELOPMENTS,MUMBAI vs. DCIT CENTRAL CIRCLE -2, MUMBAI

PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of Ld. CIT (A)- 11, Pune dated 22.09.2022 u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2015-16. The assessee has raised the following grounds of appeal:-

2. That on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the A.O.'s action by not appreciating the facts that section 43CA is not applicable on agreement to sale entered before 01.04.2013.

3. That on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the addition u/s. 43CA despite the fact that income with respect to the flats had already been offered for taxation in earlier years.

4. That on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming AO's action in rejecting the valuation of property as adopted by the appellant and in not referring the matter to the valuation officer u/s. 50C, before making the addition under section 43CA.

5. That on the facts and circumstances of the case and in law, Ld. CIT(A) erred in upholding the order of the Ld. A.O., wherein the additions were made without any corroborative evidence.

6. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming AO's action in making addition of Rs.24,52,359/- under section 22 r.w.s 23 of the Income Tax Act, 1961 and in adding the same to the total income of appellant.

2. The Brief facts of the case are that assessee is a partner-ship firm, engaged in the business of construction and real estate development. Assessee filed its return of income u/s. 139 of the Act on 31.10.2015 declaring total income at Rs. 7,38,06,330/-. Case of the assessee was selected for scrutiny and relevant notices u/s. 142(1) and 143(2) of the Act were issued and served. Case of the assessee was assessed u/s. 143(3) of the Act and additions u/s. 43CA and sections 22 r.w.s. 23 was made amounting to Rs. 34,66,134/- and 24,52,359/- respectively. Assessee being aggrieved with this order preferred an appeal before the Ld. CIT (A), who in turn confirmed the order of AO. Assessee being further aggrieved with the order of Ld. CIT (A) passed u/s. 250 of the Act, preferred present appeal before us.

3. We have gone through the order of AO, Order of Ld. CIT (A) and submissions of the assessee along with case laws relied upon. It is observed vide assessment order Page No. 6 vide Para No. 5.4, that AO pointed out as under:

“[Special provision for full value of consideration for transfer of assets other than capital assets in certain cases.

43CA. (1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer: [Provided that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and [ten] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration:] [Provided further that in case of transfer of an asset, being a residential unit, the provisions of this proviso shall have the effect as if for the words "one hundred and ten per cent", the words "one hundred and twenty per cent" had been substituted, if the following conditions are satisfied, namely: — the transfer of such residential unit takes place during the period beginning from the (i) 12th day of November, 2020 and ending on the 30th day of June, 2021; (ii) such transfer is by way of first-time allotment of the residential unit to any person; and (iii) the consideration received or accruing as a result of such transfer does not exceed two crore rupees.] (2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1). (3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement.

(4) The provisions of sub-section (3) shall apply only in a case where the amount of consideration or a part thereof has been received [by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account] [or through such other electronic mode as may be prescribed] on or before the date of agreement for transfer of the asset.] [Explanation. —For the purposes of this section, "residential unit" means an independent housing unit with separate facilities for living, cooking and sanitary requirement, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through an interior door in a shared hallway and not by walking through the living space of another household.]”

[Provided that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and [ten] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration:]

[2022] 144 taxmann.com 168 (Pune - Trib.) Sai Bhargavanath Infra v. ACIT [2021] 123 taxmann.com 252 (Mumbai - Trib.) Maria Fernandes Cheryl v. Income Tax Officer, (International Taxation) 8. As far as balance transactions of Table-2 at Page No.6 of the assessment order at serial no. 1, 2, 3, 5, and 6 are concerned we rely upon the ruling of Hon’ble Punjab and Haryana High Court in the case of CIT vs. Chandani Bhuchar [2010] 323 ITR 510/191 Taxman 142 (Punjab & Haryana) for the preposition that “The valuation done by any State Agency for the purpose of stamp duty would not ipso facto substitute the actual sale consideration as being passed on to the seller by the purchaser in the absence of any admissible evidence. The Assessing Officer is obliged to bring on record positive evidence supporting the price assessed by the State Government for the purpose of stamp duty. From a plain reading of the provision, it emerges that the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of land or building or both, shall for the purpose of Section 48 of the Act be deemed to be the full value of the consideration received or accruing as a result of transfer. It nowhere provides that the valuation done by the State Government for the purpose of stamp duty etc., would ipso facto take place the actual consideration as being passed on to the seller by the purchaser in the absence of any other evidence. The Assessing Officer is required to bring positive evidence on record indicating the fact that assessee has paid anything more than the one disclosed in the purchase deed.”

Kumar Beharay Rathi vs ITO (2019) (4) TMI 389- ITAT Pune Pegasus Properties P. Ltd. 135 Taxmann.com 294 Runwal Constructions Runwal & Omkar Esquare 2018 (2) TMI- ITAT Mumbai Sarovar Developers P. Ltd. 2019 (10) TMI 278-ITAT Ahmadabad

“The assessee is engaged in building activities. It argues that flats are held as part of its inventory of stock-in-trade, and are not let out. The further argument is that unlike in the other instances, where such builders let out flats, here there is no letting out and that deemed income - which is the basis for assessment under the ALV method, should not be attributed. The argument, though attractive cannot be accepted. The levy of income tax in the case of one holding house property is premised not on whether the assessee carries on business, as landlord, but on the ownership. The incidence of charge is because of the fact of ownership. [Para 13] Intention of assessee is to be seen  In every case, the Court has to discern the intention of the assessee; in this case the intention of the assessee was to hold the properties till they were sold. The capacity of being an owner was not diminished one whit because the assessee carried on business of developing, building and selling flats in housing estates. The argument that income tax is levied not on the actual receipt (which never arose in this case) but on a notional basis, i.e. ALV and that it is therefore not sanctioned by law, is meritless. ALV is a method to arrive at a figure on the basis of which the impost is to be effectuated. The existence of an artificial method itself would not mean that levy is impermissible. Parliament has resorted to several other presumptive methods, for the purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received; it is premised on what constitutes a reasonable letting value, if the property were to be leased out in the marketplace. [Para 13] Assessee is not occupier  As far as the alternative argument that the assessee itself is occupier, because it holds the property till it is sold, is concerned, there is no merit in this submission. While there can be no quarrel with the proposition that 'occupation' can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carrying on business, to be exempted from the levy of income tax was that such property should be used for the purpose of business. The intention of the lawmakers, in other words, was that occupation of one's own property, in the course of business, and for the purpose of business, i.e., an active use of the property, (instead of mere passive possession) qualifies as 'own' occupation for business purpose. This contention is, therefore, rejected. [Para 14]  Thus, the assessee was liable to pay income tax on the annual letting value of unsold flats owned by it under the head 'income from house property'. [Para 14]”