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Facts
The assessee challenged an order related to AY 2016-17, disputing an addition made by the AO under Section 43CA of the Income Tax Act. The dispute arose from the sale of a residential property where the stamp duty valuation was significantly higher than the sale consideration.
Held
The Tribunal noted that while Section 43CA was applicable, the AO had not referred the valuation to the District Valuation Officer (DVO) as is the practice. Therefore, the Tribunal decided to remand the case to the AO for a fresh determination.
Key Issues
Whether the addition made under Section 43CA is sustainable without referring the property valuation to the DVO, and if the correct date for valuation under Section 43CA(3) was applied.
Sections Cited
43CA, 250, 2(47), 2(42A)
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRYSHRI PRABHASH SHANKAR
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 29.03.2024, impugned herein, passed by the National Faceless Appeal Centre (NFAC), Delhi/ u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2016-17.
2. At the outset, it is observed that there is a delay of 167 days in filing of the instant appeal, on which the Assessee has impugned order was sent on e-mail of the Assessee, which was rarely used by the Assessee. The Assessee only came to know about the impugned order during the recovery proceedings and therefore, the Assessee immediately requested his lawyer Shri. Jeetender C. Lala, to prefer an appeal before the Hon’ble Appellate Tribunal. Thus, on the aforesaid reason, the delay has been accrued, which was neither malafide nor dishonest but because of lack of computer knowledge and communication skill of the Assessee and therefore this Hon’ble Court is prayed to condone the delay.
2.1 On the contrary, the Ld. DR refuted the claim of the Assessee.
2.2 We have given thoughtful consideration to the peculiar facts and circumstances of the case specific to the point of limitation, the reasons for delay in filing of instant appeal though seems to be insufficient, however, the same appears to the bonafide and genuine and there is no malafide appears and therefore, we are inclined to condone the delay. Thus, the delay is condoned.
Coming to the merits of the case, we observe that case of the Assessee was selected for limited scrutiny under CASS of various reasons including value of property transferred as reported in the AIR, higher than value as reported in return of income (AIR 007 and schedule CG of ITR) and therefore, in order, to verify the transaction, the statutory notices were issue to the Assessee, in response to which the Assessee filed the relevant details.
On perusing the details filed, the AO had observed that, the Assessee has sold residential property situated at Plot No.5, 5thFloor, D- wing, Surana Regency, Annex, Amar Nagar, Sasmira Marg, Worli, Mumbai-400025 on a total consideration of Rs. 1,11,00,000/- however, the stamp duty valuation of said property is at Rs. 2,96,91,000/-, which is very high in respect of sale consideration and therefore vide show cause notice dated 18.12.2018, the AO show caused the Assessee “as to why provisions of Section 43CA should not be invoked and an amount of Rs.1,85,91,000/- (being Rs.2,96,91,000/- – 1,11,00,000/-) should not be added back in the total income of the Assessee”.
The Assessee in response to the aforesaid show cause notice, filed his reply inter-alia contending as under:
“….1. In pursuance to an MOU/agreement to sell flat no. 501, 5th Floor, Amar Nagar. Saxmira Marg. Worli, Mumbai 400025 in the building being developed by the undersigned under Slum Rehabilitation Scheme of Government of Maharashtra to Ashish M Vora (HUF) though the Karta mode payment of Rs. 1,00,00,000/- (Rs. One crore only) on 18.01.2013 by way of account payer cheque drawn Allahabad Bank Le during the financial year ended 31.03.2013 out of the total consideration of Rs. 1.11,00,000/- one crore eleven lakhs). Enclosed is a copy of affidavit by the said buyer to confirm what is stated hereinbefore. I issued to the buyer letter of allotment dated 18.01.2013 a copy of said possession letter is also enclosed. Copy of relevant bank statement and confirmation of the party is already submitted to von. Possession also was handed over to the buyer.
Sometime in the month of Love 2015 the oral agreement referred to above was reduced into writing and the agreement was lodged for registration,
3. It is submitted that the deeming provision of Sec. 43CA came into force from 01.04.2014 tv. for and from assessment year 2015-16 and the said provisions were not attracted in the assessment year 2013-14 was not attracted in the assessment Year 2013-14
4. The assessee follows percentage of completed work for accounting for profits. Profit on this flat is partly accounted in earlier years...”
Though the Ld. AO considered the aforesaid reply/submissions of the Assessee however found the same as not acceptable and ultimately made the addition of Rs. 93.85.534/, mainly on the following reasons:
“ It is seen from the details of sale deed executed during the year on 04.06.2015 that sale deed was registered in the year under consideration. The Assessee had produced the letter of allotment issued by the Assessee to the buyer. The argument of the Assessee is not found acceptable, as overall agreement is not as per the definition of “transfer” as per the Transfer of Property Act, 1882. As per Section 2(47) and 2(42A) of the Act, for justification of his claim, analyses of the said sections are as under: i. ……… ii. ………. iii. ……….
Since, there was no legal enforceable agreement for transfer of property executed in financial year 2012-13 hence, transfer has not happened in the financial year 2012-13. Therefore, the Assessee’s contention that provisions of Section 43CA are not applicable in his case is rejected”. ………………………………………………………………………………………….. ………………………………………………………………………………………….. ………………………………………………………………………………………….. ………………………………………………………………
4.2 As discussed above, there was no transfer executed in 2013; the provision of section 43CA will be applicable in the case. Therefore, during the course of assessment proceedings the assessee was vide notice dated 18.12.2018 required to explain as to why the higher amount should not be considered as the consideration receivable as per section 43CA of the LT. Act, 1961 and the difference be added as income for the year as per sub section 1 of section 43CA of the Income Tax Act, 1961
".....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 such transfer, the value so adopted or assessed or assessable shall for the purposes of computing profits and rains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer........."
Hence, section 43CA provides that the profits on transfer of immovable property held as stock-in-trade shall be computed on the basis of the stamp duty valuation.
As per the sub-section 3 of section 43CA of the Act-
"......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……." The sub section 3 of section 43CA has provided that stamp duty valuation of the property applicable as on the date when sale consideration is fixed between the parties by entering into the agreement is to be considered for comparing with the actual sale consideration agreed. For this purpose, stamp valuation authority of property as on 2013 is computed u/s 43CA(3) of the Act.
As per ready reckoner of 2013 for the area, rate = 302200 per Square meter Area of property as per sale deed =64.56 Square meter Valuation as per ready reckoner =Rs 19510032 As per ready reckoner guideline, since flat is situated at 5th floor hence 5% mark up is calculated, Hence, valuation after 5% mark up Rs 2,04,85.534
In view of the above discussed facts of the case and legal position, the stamp duty valuation of Rs.2.04,85.534/- considered as sale consideration and the difference of Rs.93.85.534/- added back in the assessee total income under the head income from business or profession for the year under consideration".
The Ld. Commissioner, on being challenged the said addition, affirmed the same, while holding as under:
"However, it is important to point out that the Assessing Officer duly considered the relief provided in subsection (3) of section 43CA and made addition of Rs.93.85.534/ only, instead of Rs. 1.85.91,000/- mentioned in the show cause notice. The subsection (3) provides that stamp duty value as on date of agreement needs to be reckoned with, where there is an agreement prior to the registration for transfer of asset. Accordingly, Assessing Officer did not assess the difference of Rs. 1,85,94,000/- as on date of registration of 4.6.2015 (Value as per the stamp valuation authority of Rs. 2,96,90,000/- less sale consideration of Rs. 1.11,00,000/-) u/s 43CA Rather, Assessing Officer worked out ready reckoner value as per earlier year of 2013, which corresponds to the year of MOU and year of initial payment of consideration, arriving at a valuation as per stamp duty ready reckoner rate of Rs. 2.04,85,534/-. The resulting difference of Rs. 93,85,534/-is only added u/s 43CA There is no more relief that is admissible to the appellant under Section 43CA(3) rus 43CA/4). Therefore, Ground No. 2. 3 and 4 raised by the assessee on this issue are dismissed."
The Assessee being aggrieved challenged the said addition by filling instant appeal and during the course of arguments, challenged the applicability of the provisions of Section 43CA of the Act, to the case of the Assessee. However, alternately submitted that as till date possession of the property has not been given to the Assessee by the builder and in spite, of asking specifically, both the authorities below determined the value of the property to the tune of Rs.1,95,10,032/ as per ready reference @ Rs. 302200 per square meter as on 2013, and after adding 5% mark, determined the same to the tune of Rs.2,04,85,534/- without being refereeing the valuation of the property, to the District Valuation Officer, as per the provisions of law and therefore the valuation of property may be referred to the DVO for proper adjudication of the case.
On the contrary, the Ld. DR has specifically submitted that the provisions of Section 43CA are applicable to the case of the Assessee as the sale deed of the property was executed only on 04.06.2015 l.e. after introduction of the provisions of Section 43CA in the Act, by the legislature.
We have heard the parties and given thoughtful consideration to the peculiar facts and circumstance. Admittedly, till date, the possession of the property has not been handed over to the Assessee as still the project as stated by the Assessee, is in hold and in doldrums and therefore, in our considered view, on being asked by the Assessee, the AO would have referred the valuation of the property to the District Valuation Officer, as per the provision of the Act. However, the AO determined the value of the property himself and by taking support of ready reference.
Thus, considering the peculiar facts and circumstances of the case for proper and just decision of the case and substantial justice, we are inclined to remand the instant case to the file of the Jurisdictional AO for determination afresh, by referring the valuation of the property to the District Valuation Officer, as on the date of agreement executed as on 18.01.2013 alleged by the Assessee. Suffice to say the AO shall afford the reasonable opportunity of being heard to the Assessee.
In the result, the Assessee's appeal is allowed for statistical purpose.
Order pronounced in the open court on 27.05.2025.