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Facts
The Revenue appealed against an order allowing the assessee's appeal. The case involves a partnership firm that sold land for Rs. 2,50,00,000, while the stamp duty valuation was Rs. 3,49,54,000. The assessee firm did not file a return of income, leading the Assessing Officer to initiate proceedings under Section 147 and add Rs. 3,18,04,680 under Section 43CA.
Held
The Tribunal found that the land in question was mortgaged and could not be legally sold without clearance of the loan. Therefore, the transfer was considered void, and Section 43CA was not applicable. The addition made by the Assessing Officer was deemed unsustainable.
Key Issues
Whether Section 43CA of the Income Tax Act is applicable when the property sold was mortgaged and the transfer was potentially void. Whether the addition made by the Assessing Officer is sustainable given the conflicting statements and circumstances of the sale.
Sections Cited
147, 148, 142(1), 144, 43CA, 131
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2014-15 ITO, Ward Hingoli Camp At Vs. Sumangal Traders, Parbhani. House No.154, Ward No.16, Gangakhed Road, Parbhani- 431401. PAN : AAZFS5051Q Appellant Respondent Revenue by : Shri Akhilesh Srivastva Assessee by : None Date of hearing : 29.07.2025 Date of pronouncement : 07.08.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the Revenue is directed against the order dated 19.03.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2014-15.
2. The Revenue has raised the following grounds of appeal :-
1. On the facts and in the circumstances of the case, the Ld. CIT(A), NFAC failed to appreciate the facts of the case and without considering the same decided the case in favour of the assessee which is against the law and the order of the CIT(A) deserves to the set-aside.
2. The Ld. CIT(A) erred in law in holding that the property was not transferred.
3. The Ld. CIT(A) has erred in holding that no provisions of Section 43CA of the I. T. Act, 1961 are applicable in this case. 4. The appellant craves leave to add, amend or alter all or any of the Grounds of Appeal
.”
3. There is delay of 27 days in filing of the present appeal by the Revenue. We are satisfied with the reason mentioned in the application for condonation that the Revenue was prevented by sufficient cause for not filing the appeal within the prescribed time limit. Accordingly, we condone the delay of 27 days and proceed to adjudicate the appeal of the Revenue.
4. Facts of the case, in brief, are that the assessee is a registered partnership firm consisting of two partners namely (1) Kamlakar Rajaram Pant Kulkarni and (2) Shri Moreshwar Dinkar Pathak having equal share ratio in profit and loss in the firm. The firm has not furnished its return of income for the period under consideration. On the basis of information available with the Department that the assessee firm has sold land for a consideration of Rs.2,50,00,000/- whereas the stamp duty valuation of above land is Rs.3,49,54,000/-. Since no return of income was filed by the assessee partnership firm therefore there was reason to believe that income chargeable to tax in the hands of the assessee was escaped 147 of the IT Act. After obtaining approval from the appropriate authority notice u/s 148 of the IT Act was issued to the assessee. Subsequently, notice u/s 142(1) was issued to the assessee which was duly served on the assessee through its partner Shri Kamlakar Rajaram Pant Kulkarni. The assessee firm did not comply to any of the above notices and therefore the Assessing Officer completed the assessment u/s 147 r.w.s. 144 of the IT Act and determined the taxable income of Rs.3,18,04,680/- as against no return filed by the assessee partnership firm. The above assessed income was calculated on following basis :- Sr. No. Description Amount 01. Purchase of land as discussed in para-2 above in Rs.91,48,640/- the assessment year 2010-2011 to the extent of 16 acres 35 gunthas.
Less: Land sold immediately in assessment year Rs.28,50,000/- 2010-2021 03. Stock-in-trade of land to the extent of 16 acres Rs.62,98,640/- valued.
Value of 50% of the stock in trade sold to the extent Rs.31,49,320/- of 7 acres 93 gunthas.
Balance stock-in-trade still remains with the Rs.31,49,320/- assessee to the extent of 8 acres of land amounting to 06. Sale consideration of the land as discussed in para 3 Rs.2,50,00,000/- abvoe.
7. Value adopted by the State government authorities Rs.3,49,54,000/- for the purpose of stamp duty which is full value of the consideration for the purpose of computing profits and gains as per provisions of section 43CA of the Income-tax Act, 1961.
08. Less: cost of purchase for land sold as per column Rs.31,49,320/- No.4 above.
9. Amount of addition under section 43CA of the Rs.3,18,04,680/- Income-tax Act, 1961.
5. The assessee partnership firm preferred appeal before Ld. CIT(A)/NFAC & after considering the reply of the assessee Ld. CIT(A)/NFAC allowed the appeal by observing as under :- 5.17 I find that Mr. Kamlakar Kulkarni, one of the partners of the appellant firm has submitted affidavit dated 11/06/2018 to the Pr. Commissioner of Income Tax-1, Aurangabad on 11/06/2018. In the said affidavit Mr. Kamlakar Kulkarni has stated on oath that he had not received the consideration of Rs. 2,50,00,000 from Mr. Ganeshrao Dudhgoankar and Others and Sale Deed dated 20/07/2013 has been executed forcefully and his acceptance of receiving cash in front of Sub-Registrar was under undue influence. Shri. Kamlakar Kulkarni, partner of the appellant firm has also submitted application before the Hon'ble District Collector, Hingoli stating that, he has not received the consideration of Rs. 2,50,00,000 stated in the Sale Deed document No. 3369 dated 20/07/2013 and Shri Ganeshrao Dudhgoankar has got the Sale Deed executed forcefully and under influence from him. 5.18 Therefore, I find that it is immaterial whether one of partner of the appellant firm, Shri Kamlakar Rajarampant Kulkarni, actually sold a piece of land belonging to the aforesaid firm to the extend of 7 acres 93 gunthas for a consideration of Rs 2,50,00,000 as against the fair market value determined by the stamp duty authorities at Rs 3,49,54,000 vide registered sale deed bearing No. 3369/2013 dated 20.07.2013 executed before the Joint Sub-Registrar Class-II, Hingoli to (i) Shri Ganeshrao Nagorao Dudhgaonkar, (ii) Smti Sandhiya Shridharrao Kadam, (iii) Shri Pratap Shridharrao Kadam and (iv) Shri Jagaannath Digambarrao Kachve. The fact is that the land in question was mortgaged to the Bombay Mercantile C-op Bank Limited on 27.08.2012 i.e. much before the date of Sale Deed which is 20.07.2013 and such legally no mortgage property can be sold out till clearance of the loan amount. And when such transfer is not legal and is void, there can be no application of the provision of section 43CA of the Act. Therefore, even if the amount of Rs 2,50,00,000 was actually paid (disputed by the appellant) in lieu of the sale, it cannot be treated as income of the appellant as the appellant was not allowed to sell mortgaged property without any NOC from the Bank. In view of the I am of the considered view that the addition of Rs 3,18,04,680 u/s 43CA of the Act is not sustainable and is directed to be deleted. The appeal on Ground Nos 2 and 3 are thus allowed.
6. Ground No 4, 5 and 6 are general in nature and needs no adjudication.
Conclusion: In the result, appeal of the appellant is allowed.”
It is the above order against which the Revenue is in appeal before this Tribunal.
7. None appeared on behalf of the assessee despite due service of notice of hearing. On the earlier eight occasions also, the assessee remained absent before this Tribunal, therefore, we proceed to adjudicate the case on merits of the case as well as after hearing Ld. DR.
Ld. DR appearing from the side of the Revenue submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. DR submitted that Ld. CIT(A)/NFAC failed to appreciate the facts of the case and without considering the facts has decided the appeal in favour of the assessee. Ld. DR further submitted that Ld. CIT(A)/NFAC erred in law in holding that the property was not transferred whereas a duly registered sale deed was available. Ld. DR also submitted that the provisions of section 43CA of the IT Act are clearly applicable in this case. Ld. DR also submitted before the Bench that the assessee has accepted before the Registering Authority that the consideration in cash has been received by him and then only the sale deed of impugned property was registered by the authority. Ld DR also submitted that Ld. CIT(A)/NFAC failed to take cognizance of statement given u/s 131 of the IT Act by Shri Ganesh Rao Nago Rao, wherein he accepted to have paid Rs.2,50,00,000/- to Shri Kamlakar Rajaram Pant Kulkarni. It was also pointed out by Ld. DR that the sale deed is not cancelled by the Registering Authority. It was also pointed out by Ld. DR that Ld. CIT(A)/NFAC has not considered the fact that proceedings u/s 147 of the IT Act were initiated u/s 147 of the IT Act in the case of purchaser Shri Ganesh Rao Nago Rao on the basis of investment of Rs.2,50,00,000/- in purchase of the impugned property. Therefore, as per Ld. DR, Ld. CIT(A)/NFAC committed grave error in allowing the appeal of the assessee. Accordingly, Ld. DR requested before us to set-aside the order passed by Ld. CIT(A)/NFAC and further requested to confirm the order passed by the Assessing Officer.
We have heard Ld. DR and perused the material available on record. In this regard, we find that admittedly the impugned land 16 35 gunthas was purchased by the assessee partnership firm on 18-02-2010 & 35 gunthas was sold immediately. Subsequently during the period under consideration i.e. assessment year 2014-15, 7 acres 93 gunthas of land was sold to Shri Ganesh Rao Nago Rao & 4 others through registered sale deed for a consideration of Rs.2,50,00,000/- whereas the fair market value as per the stamp duty authority was Rs.3,49,54,000/-. However, the assessee firm has not furnished its return of income & since there was difference in stamp duty value & sale consideration, the Assessing Officer was of the view that provisions of section 43CA are attracted & accordingly after giving benefit of cost of purchase calculated the profit on sale of above impugned property & determined the taxable income of Rs.3,18,04,680/-. We also find that the sale deed of above impugned land was duly executed and registered before the appropriate authority wherein one of the partner namely Shri Kamlakar Rajaram Pant Kulkarni has accepted to have sold the impugned land for Rs.2,50,00,000/- to Shri Ganesh Rao Nago Rao & 4 others in the presence of two witnesses. However, during the course of statement recorded u/s 131 of the IT Act dated 16.02.2018 the above partner namely Shri Kamlakar Rajaram Pant Kulkarni Shri Ganesh Rao Nago Rao and others but no consideration was received by the firm. Further, Shri Kamlakar Rajaram Pant Kulkarni stated in his statement that the purchasers forcefully obtained his signature on the sale deed and he has not received any money from the purchasers. On the other hand Shri Ganesh Rao Nago Rao accepted in his statement which was also recorded u/s 131 of the IT Act that he has paid Rs.2,50,00,000/- for purchase of above land & the amount was paid out of MP, MLA pension, cash in hand & income from HUF respectively.
Considering the totality of the facts of the case, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and remand the matter back to the Jurisdictional Assessing Officer to pass assessment order afresh i.e. de novo after verifying the various contentions of the assessee & also verifying the statements & assessment orders u/s 147 of the IT Act of Shri Ganesh Rao Nago Rao one of the purchaser of the above impugned property and also after providing reasonable opportunity of hearing to the assessee. Thus, grounds of appeal raised by the Revenue are allowed for statistical purposes.