MALA KONDAIAH MADDULURI,HYDERABAD vs. DCIT, CIRCLE-3(1), HYDERABAD

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ITA 2120/HYD/2025Status: DisposedITAT Hyderabad04 November 2026AY 2010-1110 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Section 43CA was inserted by the Finance Bill 2013 and is applicable from April 1, 2014, meaning it applies to Assessment Year 2014-2015 and subsequent years. Therefore, Section 43CA is not applicable for the Assessment Year 2010-2011. The Tribunal noted that the CIT(A) had accepted the assessee's claim that the property was stock-in-trade, making Section 50C inapplicable. However, the CIT(A)'s direction to assess the difference between the registered value and market value under Section 43CA was found to be contrary to law. Regarding the revenue's contention that the differential amount should be assessed under Section 28, the Tribunal found no substance, as there was no allegation of the assessee showing less sale consideration than actually received or receiving any on-money. Consequently, the directions given by the CIT(A) under Section 43CA were set aside, and the addition made by the AO was deleted. The appeal of the assessee was allowed.

What were the facts?

The assessee, Mala Kondaiah Madduluri, filed an appeal against the order of the CIT(A)-NFAC, Delhi, for Assessment Year 2010-2011. The Assessing Officer (AO) reopened the assessment under Section 148, alleging escapement of income from the sale of land. The AO made an addition of Rs. 3,06,98,295/- by invoking Section 50C, treating the sale of land as a capital asset. The assessee contended that the land was stock-in-trade, and the income should be treated as business income. The CIT(A) accepted this contention, holding that Section 50C was not applicable. However, the CIT(A) directed the AO to assess the difference between the registered value and market value as income under Section 43CA, reducing the addition to Rs. 11,03,500/-.

What were the issues?

1. Whether the notice issued by the AO under Section 148 is bad in law. 2. Whether the reasons recorded by the AO are valid. 3. Whether the provisions of Section 43CA are applicable for the Assessment Year 2010-2011. 4. Whether the entire addition amounting to Rs. 11,03,500/- made by the AO should be deleted. 5. Whether the transaction is a business transaction for which fair market value cannot be applied. Assessee's Arguments: The assessee argued that Section 43CA was inserted by the Finance Act, 2013, effective from April 1, 2014, and therefore, it is not applicable for AY 2010-2011. The assessee also contended that the CIT(A) erred in directing the AO to consider the difference between the registered value and market value under Section 43CA, as this provision is not applicable. The assessee further argued that the transaction was a business transaction and fair market value cannot be applied. Revenue's Arguments: The revenue contended that even without Section 43CA, the income of the assessee should be assessed as per the market value of the plots of land sold under Section 28 of the Act. The revenue relied on the orders of the authorities below.

Which sections of the Income-tax Act were involved?

Section 148,Section 43CA,Section 50C,Section 28

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.

Pronounced: 04.11.2026

आदेश / ORDER PER VIJAY PAL RAO, VICE PRESIDENT: This appeal by the assessee is directed against the Order dated 19.09.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short "NFAC"], Delhi, for the assessment year 2010-2011.

2.

The assessee has raised the following grounds of appeal:

1) “The order of the CIT(A) is erroneous both in law and on facts

2) The Ld. CIT(A) ought to have considered that the notice issued u/s.148 by the AO is bad in law. 3) The Ld.CIT(A) ought to have held that the reasons recorded by the AO are not valid. 4) The Ld.CIT(A) ought to have observe that the provisions of sec.43CA is applicable from the A.Y 2014-15 and not for the year under consideration. 5) The Ld.CIT(A) should have deleted the entire addition amounting to Rs 11035000 made by the AO. 6) The CIT(A) should have consider that the transaction is business transaction for which the fair market value cannot be applied 7) The appellant craves to add /leave/ alter/ modify any grounds at the time of hearing.”

3.

At the time of hearing, the learned Authorised Representative of the Assessee has submitted that the only grievance of the assessee against the impugned order of the learned CIT(A) is regarding the applicability of the provisions of sec.43CA of the Income Tax Act [in short "the Act"], 1961 which was inserted by the Finance Act 2013 w.e.f. 01.04.2014 and therefore, the said provisions is not applicable for the assessment year under consideration i.e., 2010-2011. He has referred to the finding of the learned CIT(A) in Para no.6.3 of the order and submitted that the learned CIT(A) has accepted the fact that the plots of land in question sold by the assessee during the year under consideration was business income of the assessee and therefore, the provisions of sec.50C are not applicable as applied by the Assessing Officer. Further, the learned CIT(A) has directed the Assessing Officer to consider the difference between the registered value and market value to be included in the income u/sec.43CA of the Act. This finding and direction of the learned CIT(A) is not sustainable as the said provisions of sec.43CA are not applicable for the year under consideration. He has referred to the Finance Bill 2013 and pointed out that in the finance bill itself makes it clear that this amendment will take effect from 01.04.2014 and will accordingly be applicable in relation to the assessment year 2014-2015 and subsequent years. Thus, the learned Authorised Representative of the Assessee has submitted that the impugned order of the learned CIT(A) to the extent of directions given to the Assessing Officer to add the difference of registered value and market value as per sec.43CA be set aside.

4.

On the other hand, the learned DR has submitted that even without application of sec.43CA, the income of the assessee has to be assessed as per the market value of the plots of land sold by the assessee u/sec.28 of the Act. He has relied upon the orders of the authorities below.

5.

We have considered the rival submissions as well as relevant material on record. The Assessing Officer has reopened the assessment on the ground that there was an escapement of income in respect of the sale of plot of land in view of sec.50C of the Act. The Assessing Officer has made the addition of Rs.3,06,98,295/- by taking full value consideration as per the provisions of sec.50C of the Act. The assessee challenged the action of the Assessing Officer before the learned CIT(A) and submitted that these plots of land are stock in trade of the assessee and therefore, the income arising from sale of these properties is business income of the assessee and provisions of sec.50C are not applicable. The learned CIT(A) after considering the relevant facts and record has accepted this claim of the assessee that the property in question is part of the stock in trade of the assessee and therefore, the provisions of sec.50C are not applicable. Further, the learned CIT(A) has directed the Assessing Officer to assess the difference between the registered value and market value as income u/sec.43CA of the Act. The relevant findings of the learned CIT(A) in Para nos.6.3 and 6.4 are as under:

“6.3. The seventh ground of appeal relates to invocation of provisions of section 50C when the appellant had already shown the income as business income. On going through the submissions of the appellant, various documents submitted, remand repost of the AO and further comments of the appellant this contention is found to be acceptable. As such the income from sale of this property is held to be assessable as business income and the difference between registered value and market value is liable to be included in the income. u/s 43CA. This ground of appeal is allowed and its effect will be allowed along with the next ground of appeal. 6.4. The eighth ground of appeal is regarding the addition made on account of capital gain u/s 50C Rs. 3,06,98,295/-, As held in para 6.3 above the income is liable to be assessed as business income. However the appellant has not been to make out a viable case to neglect the value adopted by the stamp valuation authority. Simply stating that it was distress sale is not enough. The AO is not supposed to make enquiries in vacuum. The appellant has not submitted any viable basis for not recognizing the value. He has given no evidence of the reasons of distress sale. As such there is no reason not to make the assessment on the basis of this value. However the appellant duly deserves credit on account of business income shown on the basis of registered value of the sale deed. As such the addition made is. reduced to Rs. 1,10,35,000/- being the difference between registered value and market value. This ground is thus allowed partly.”

5.1. At the outset, we note that sec.43CA was inserted in the statute by the Finance Bill 2013 and Clause (8) of the Bill reads as under:

“Computation of income under the head "Profits and gains of business or profession" for transfer of immovable property in certain cases.

Currently, when a capital asset, being immovable property, is transferred for a consideration which is less than the value adopted, assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, then such value (stamp duty value) is taken as full value of consideration under section 50C of the Income-tax Act. These provisions do not apply to transfer of immovable property, held by the transferor as stock-in-trade. It is proposed to provide by inserting a new section 43CA that where the consideration for the transfer of an asset (other than capital asset), being land or building or both, is less than the stamp duty value, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration for the purposes of computing income under the head "Profits and gains of business of profession". It is also proposed to provide that where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the stamp duty value may be taken as on the date of the agreement for transfer and not as on the date of registration for such transfer. However, this exception shall apply only in those cases where amount of consideration or a part thereof for the transfer has been received by any mode other than cash on or before the date of the agreement.

These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years. [Clause-8].”

5.2. Thus, the Finance Bill 2013 makes it clear that the provisions of sec.50C are applicable only in respect of the transfer of immovable property being a capital asset but not applicable in respect of the transfer of immovable property held by the transferor as stock in trade. Therefore, the provisions of sec.43CA have been inserted to bring the difference between the value of the transfer of asset as agreed between the parties and stamp duty value on the date of registration of such transfer as income from profits and gains of business or profession. It is also made clear in the bill that the amendment will take effect from 1st April 2014 and accordingly will apply in relation to assessment year 2014- 2015 and subsequent assessment year. Therefore, the provisions of sec.43CA as amended by Finance Bill 2013 are not applicable for the year under consideration. As regards the contention of the learned DR that the differential amount between the sale consideration in the sale document and fair market value/market price shall be assessed u/sec.28 of the Act, we do not find any substance or merit in this contention of the learned DR in view of the fact that it is not the case of the Assessing Officer that the assessee has shown less sale consideration than the actual consideration received by the assessee. When there is no allegation of any on-money received by the assessee over and above the sale consideration reported by the assessee as mentioned in the sale deed then no addition can be made by invoking the deeming provisions. Accordingly, in the facts and circumstances of the case, when the provisions of sec.43CA are not applicable for the year under consideration as discussed above then, the directions given by the learned CIT(A) in Para nos.6.3 and 6.4 of the impugned order are contrary to the law and liable to be set aside. Hence, the order of the learned CIT(A) in light of the directions given in Para nos.6.3 and 6.4 are set aside and addition made by the Assessing Officer is deleted. 6. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 04.11.2026.

Sd/- Sd/- MANJUNATHA G. VIJAY PAL RAO ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 04th day of November, 2026. VBP Copy to: MALA KONDAIAH MADDULURI, C/O B.NARSING RAO & CO. 1 LLP, PLOT NO.554, ROAD NO.92, JUBILEE HILLS, HYDERABAD-500096, TELANGANA DCIT, CIRCLE-3(1), 2 HYDERABAD-500001, TELANGANA 3 THE PR. CIT, HYDERABAD. 4 THE D.R., ITAT, HYDERABAD B-BENCH, HYDERABAD. 5 GUARD FILE TRUE COPY Digitally signed VADREVU by VADREVU PRASADA RAO PRASADA Date: ASSISTANT REGISTRAR / RAO 2026.11.04 I.T.A.T., HYDERABAD 14:25:06 +05'30'

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