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Facts
The assessee, a real estate developer, sold four commercial units in 2013. The sale was concluded with full payment and possession transfer in July 2013, and income was offered in AY 2014-15. However, the Assessing Officer (AO) invoked Section 43CA and made an addition based on stamp duty value for AY 2015-16, treating the registration date as the transfer date.
Held
The Tribunal held that the transaction was completed in AY 2014-15 when possession and full consideration were exchanged, and income was offered. The addition made by the AO for AY 2015-16, based on a later registration date and invoking Section 43CA, was unsustainable as the income was already taxed in the correct year.
Key Issues
Whether the addition made under Section 43CA for AY 2015-16 is valid when the transfer of property and offering of income had already occurred in AY 2014-15.
Sections Cited
143(3), 43CA, 147, 148, 2(47)(v), 53A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 24/07/2024 passed by NFAC, Delhi for the quantum of assessment passed u/s.143(3) for the A.Y.2015-16 against final assessment order dated 27/12/2017.
Navketan Premises Pvt. Ltd.
In the grounds of appeal, assessee has mainly challenged the addition of Rs.3,56,85,000 u/s. 43CA of the Income-tax Act, 1961, on account of the difference between the stated consideration and the stamp duty value of commercial properties sold by the assessee.
The assessee is a real estate developer engaged in the construction and sale of commercial and residential units. In the present case, the assessee, during the period relevant to assessment year 2015–16, sold four commercial properties bearing Unit Nos. LG-1, LG-14, 3F-1 and 3F-27 located in “Hi-Life Mall” at Santacruz (West), Mumbai. This Mall was developed by the assessee in collaboration with other developers. As per records, the occupancy certificate for the completed project was granted by the Municipal Corporation of Greater Mumbai on 17.07.2007.
Despite the completion of the project, the assessee was unable to sell the said units for a prolonged period of over six years due to certain commercially adverse conditions, most notably the lack of an adequate approach road to the Mall which severely restricted access and rendered the project commercially unattractive. The assessee had during this entire period attempted to market and sells the units, including during the pre-completion phase, which is a common practice in real estate development in metropolitan cities such as Mumbai. However, these efforts did not yield success. Faced with a prolonged holding period and the attendant financial constraints, the assessee, exercising Navketan Premises Pvt. Ltd. commercial prudence, decided to liquidate the unsold inventory through a bulk, distress sale. A deal was accordingly negotiated with M/s Nisar Realtors to sell all four units for a consolidated consideration of Rs.7.34 crores. The transaction was concluded on 13th July 2013, on which date the buyer paid the full consideration by way of banking channels and simultaneously took possession of the premises. The transaction was duly recorded in the books of account of the assessee, and the income arising therefrom was offered to tax in the return filed for assessment year 2014–15.
It was brought to our notice that, notwithstanding the completion of the transaction in July 2013, the formal documentation was executed at a later point. The agreement to sell was executed on 31.12.2014 and registered on 3.3.2015. The buyer, having already taken possession and made full payment, delayed registration at their own volition. It was also explained that the timing of such registration is entirely the prerogative of the buyer, particularly when possession is already secured, and that the developer-seller has neither the locus nor the leverage to compel such formalities once the consideration is received and possession transferred.
The ld.AO while framing the assessment under section 143(3), proceeded to invoke the provisions of section 43CA of the Act for AY 2015–16, taking the registration date as the operative date of transfer. The ld. AO has referred the matter Navketan Premises Pvt. Ltd. to the DVO who has compared the stated consideration in the agreements with the stamp duty valuation as adopted by the DVO as on 3rd May 2015, a date neither coinciding with the execution of the agreement nor the date of actual transfer. Relying upon the differential between the DVO’s valuation and the stated consideration, the ld.AO computed an addition of Rs.3,56,85,000. The relevant facts as noted by the ld. AO in the order are as under:-
4.2 From the details filed by the assessee with respect to the questions asked it was found that assessee has registered 4 transfer agreements related to the 4 units of commercial property at HI-LIFE Premises Co-op Ltd. Santacruz (W), Mumbai. The agreement was entered with Nisar Realtors. The observations made for the respective market values (ready reckoner value) of the said 4 units along with their actual transfer value as mentioned in the agreement is explained in the following table: Sl. Unit Floor Area Market Agreement Difference No. No. Value Value of Market- Agreement 1 LG-1 Lower 1262 395,59,000 376,72,000 18,87,000/- Ground 2 LG-14 Lower 746 233,86,000 222,70,000 11,16,000/- Ground 3 01 Third 1753 369,50,000 351,90,000 17,60,000/- 4 27 Third 436 91,90,000 87,53,000 4,37,,000/- From the above table it was observed that there was huge difference between the market values of these units and the agreement value. In relation to the above, the AR of the assessee was asked to explain the difference along with the actual amount offered in the profit and loss account for the Assessment Year 2015-16. 4.3 In response to the above query, assessee filed reply in tabular form as required. The details filed by assessee is reproduced as under:
Transaction Transaction Sale Agreement Agreement Market Amount Date offered in Date Value Value FY 2013- 14 LG-01, 395,50,000 03/03/2015 233,50,000 31/12/2014 376,72,000 395,59,000 The said unit was Kiran N allotted on 17. 07. 13 at a Nisar, lump sum value of Rs. Leena K 2,33,50,000 and sale Nisar was offered of Rs. 2,33,50,000 in FY 2013- 14 however there was a revision in value as the company had agreed with the party to refurbish the units. There was a delay in registration of units and agreement was registered in FY 14-15 for Rs. 3,76,72,000. The difference in agreement value and the original allotment value was towards cost of refurbishment/alterations to be executed by the assessee. However, due to diverse reasons the assessee could not execute the additional work. Hence no revenue accrued LG-014, 233,86,000 03/03/2015 125,00,000 31/12/2014 222,70,000 233,86,000 The said unit was Kiran N allotted on 17/07/13 at a Nisar, lump sum value of Rs. Leena K 1,25,00,000 and sale Nisar was offered of Rs.1,25,00,000 in FY 2013-14 however there was revision in value as the company had agreed with the party to refurbish the units. There was a delay in registration of units and agreement was registered in FY 14-15 for Rs.2,22,70,000 The difference in agreement value and the original allotment value was towards cost of refurbishment/ altorations to be executed by the assessee. However due to diverse reasons the assessee could not execute the additional work. Hence no revenue accrued. 03-01, 369,50,000 03/03/2015 300,00,000 31/12/2014 351,90,000 369,50,000 he said unit was allotted Nisar on 17/07/13 at a lump Realtors sum value of Rs. 3,00,00,000 and sale was offered of Rs.3,00,00,000 in FY 2013-14 however there was a revision in value as the company had agreed with the party to refurbish the units. There was a delay in registration of units and agreement was registered in FY 14-15 for Rs. 3,51,90,000. The difference in agreement value and the original allotment value was towards cost of refurbishment/alterations to be executed by the assessee. However, due to diverse reasons the assessee could not execute the additional work. Hence no revenue accrued 0327, 91,90,000 03/03/2015 75,00,000 31/12/2014 87,53,000 91,90,000 The said unit was Nisar allotted on 17/07/13 at a Realtors lump sum value of Rs. 75,00,000 and same was offered of Rs.75,00,000 in FY 2013-14 however there was a revision In value as the company had agreed with the party to refurbish the units. There was a delay in registration of units and agreement was registered in FY 14-15 for Rs. 87,53,000. The difference in agreement value and the original allotment value was towards cost of refurbishment/alterations to be executed by the assessee. However, due to diverse reasons the assessee could not execute the additional work. Hence no revenue accrued in the hands of assessee.
4.4. From the above submission made by assessee it was found that each unit can be categorized into three parts for the purpose of amount of transfer: these are the Market Value, Agreement Value and the Amount Offered in profit and loss account. In this regard following observations were made:
4.4.1. It was observed that the market value of each unit is higher than what is registered in the agreement 4.4.2. it was observed that the agreement value of each unit is higher than what is offered in the profit and loss account.
4.4.3. Therefore, it is clear that assessee has offered a substantially lower amount in the profit and loss account as income in the AY 2014-15 (as claimed by the assessee).
4.5. Considering the above submissions made by the assessee it is clear that the income should have been offered Navketan Premises Pvt. Ltd. on the Market Value of these units as per section 43CA of the IT Act, however there is a substantial difference in the amount which was not offered for the income. The difference of the amount for these 4 units is calculated in the following table: Sl. Unit Floor Area Market Agreement Amount Difference of No. No. Value Value offered in P&L Market-Value & Offered in P& L 1 LG-1 Lower 1262 395,59,000 376,72,000 233,50,000 1,62,09,000/- Ground 2 LG- Lower 746 233,86,000 222,70,000 125,50,000 1,08,36,000/- 14 Ground 3 01 Third 1753 369,50,000 351,90,000 300,00,000 69,50,000/- 4 27 Third 436 91,90,000 87,53,000 75,00,000 16,90,000/- 3,56,85,000/-
Assessee in response to the Assessment Order has mentioned as under:- 4.8. The assessee was also asked about the ultimately offered amount in the profit and loss account with respect to these units, that why lower income was offered in the profit and loss account as compared to the agreement value. The assessee replied that: "the assessee has sold four units during Financial Year 2013- 14 for agreed lump sum consideration to various parties. The building was completed in Financial Year 2007-2008 hence the units which were on lower ground level (basement) and third- floor were in bad condition. The purchasers requested the assessee to bring these units in ready to move condition. This also required certain permissions from BMC (Bombay Municipal Corporation) and Fire Department. The procedure was a bit time consuming and tedious. The assessee hence decided to do away with the work of refurbishment".
We were further informed that the ld.AO being uncertain of the correct year of assessment, also initiated reassessment proceedings under section 147 in respect of AY 2014–15 on the same transaction. By order dated 18.11.2019, he passed a reassessment order making an identical addition of Rs.3,56,85,000 for that year. Hence, the same transaction Navketan Premises Pvt. Ltd. was brought to tax in two different years by the same officer under two separate proceedings.
Both these assessments were carried in appeal before the Ld. CIT(A), NFAC. Curiously, the appellate orders for both years were passed on the same date, 24.07.2024. While the CIT(A) deleted the addition in AY 2014–15 by accepting the assessee’s contention that the transfer had taken place in that year itself, he simultaneously confirmed the addition in the present year, i.e. AY 2015–16, on the ground that the agreement was registered in this year. No appeal has been preferred by the Revenue against the deletion made by the CIT(A) in AY 2014–15, which has since attained finality.
The ld. Counsel for the assessee Mr. Bindal submitted that ld. AO himself was not sure whether the income was to be assessed in the A.Y.2015-16 or in the preceding A.Y.2014- 15. Here the actual transfer of flats in terms of definition u/s. 2(47)(v) had already taken place in the AY 2014-15 and that is the reason why ld. AO has issued a notice u/s 148 of the Act for the AY 2014-15 and completed assessment u/s 147 vide assessment order dated 18.11.2019, wherein the addition was made which has been assessed in AY 2015-16 i.e. the difference of amount of Rs. 3,56,85,000/-as per the ready reckoner rates and sales value was thus assessed. The very said amount has been assessed on substantive basis in both the AYs i.e. AY 2014-15 and AY 2015-16. A copy of the assessment order has been placed in the paper book before us.
The ld. counsel for the assessee drew our attention to the provisions of section 2(47)(v) of the Act, which provides that any transaction involving the allowing of possession of immovable property in part performance of a contract, as referred to in section 53A of the Transfer of Property Act, 1882, shall constitute a “transfer” for the purpose of the Act. He submitted that in the present case, all the essential conditions of section 53A were fulfilled the agreement was in writing, signed, and consideration was fully paid. Possession had already been handed over to the transferee, who was ready and willing to perform their part. Accordingly, the transaction stood concluded in July 2013, i.e. during AY 2014–15.
He further submitted that section 43CA(3) and (4) clearly provide that where any part of the consideration is received through banking channels prior to the date of agreement, then the stamp duty value as on the date of agreement is to be adopted. In this case, not merely part but the entire consideration had been received by 13.07.2013, more than a year prior to the execution of the agreement. Thus, the question of applying stamp duty valuation as of March 2015 or May 2015 does not arise.
The DVO valuation dated 03.05.2015, according to the learned counsel, was wholly irrelevant and devoid of legal foundation. It pertained to a date which neither coincided with the date of agreement nor with the actual date of transfer. Furthermore, in the reassessment order for AY 2014–15, the DVO report was not even referred to, despite Navketan Premises Pvt. Ltd. being available. This, according to the counsel, highlighted the inconsistency and lack of application of mind by the Revenue.
On the other hand, the ld. DR supported the findings of the ld.AO, primarily on the ground that the agreement was registered during the year under appeal. However, he was fair in conceding that the facts regarding possession and receipt of full consideration in July 2013 were not in dispute.
We have heard the rival contentions and perused the materials placed on record before us. It is a matter of record that the sale transaction in question was completed in its entirety on 13.07.2013. On that date, the assessee received the full sale consideration through recognised banking channels and also delivered possession of the commercial premises to the buyer. The income arising therefrom was offered to tax in the return filed for AY 2014–15. These facts are not only reflected in the books of account but also accepted by the Assessing Officer himself while initiating reassessment for AY 2014–15.
Once the property has been sold in the F.Y.2013-14 (relevant to A.Y.2014-15) and possession was handed over and the entire receipt of sale consideration was received and booked as income in A.Y.2014-15 then there was no reason as to why ld. AO is taxing the difference amount between the sale consideration and the ready reckoner in A.Y.2015-16, when the actual transfer of property took place on 13.07.2013.
The legal position on this point is equally well-settled. Section 2(47)(v) read with section 53A of the Transfer of Property Act leaves no room for ambiguity. Once possession is handed over in part performance of a written agreement for consideration and the transferee is willing to perform their obligations, the transaction qualifies as a transfer for the purpose of taxation. The formal registration of the agreement at a later date, being merely a procedural formality, cannot defer the taxability of the transaction.
The Revenue’s conduct in this case is also materially significant. Having assessed the income in AY 2014–15 and failed to pursue its appeal against the ld.CIT(A)’s order deleting the addition in that year, it cannot now seek to revive the same addition in a subsequent year based on an inconsistent and contradictory factual position. The same income cannot be taxed twice. The doctrine of consistency and finality of proceedings operates with full force in such circumstances.
The invocation of section 43CA in the impugned year is also misplaced. The conditions for applicability of section 43CA(1) are not satisfied once it is accepted that the transaction occurred in the prior year. Even if section 43CA were to apply, sub-sections (3) and (4) direct that the stamp duty valuation as on the date of agreement must be taken when part or whole of the consideration has been received earlier. In the present case, the entire consideration was received more than one year prior to the date of the agreement.
The DVO valuation as of 03.05.2015 is completely disconnected from the facts and fails the test of relevance. Moreover, the absence of reference to the same in the AY 2014-15 order further erodes its evidentiary weight.
In view of the foregoing discussion, we are of the considered opinion that the addition of Rs.3,56,85,000 made under section 43CA in AY 2015-16 is wholly unsustainable in law and on facts. The transaction was already taxed in the correct year, i.e. AY 2014-15, and the Revenue, having accepted the appellate outcome for that year, cannot now take a contradictory stand. Accordingly, the impugned addition is deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced on 6th August, 2025.