Loading judgment…
Facts
The assessee, a builder and developer, sold 12 flats for a consideration lower than the market value on the date of sale. The Assessing Officer invoked Section 43CA of the Income Tax Act to add the difference between the market value and the sale consideration to the assessee's income. The CIT(A) upheld the addition.
Held
The Tribunal held that Section 43CA(3) and (4) are applicable when the date of agreement and registration are different, and consideration is received before the agreement date. As the agreements were entered into in 2009 and consideration was received subsequently, and the stamp duty value on the agreement date was lower than the agreement value, no addition was warranted.
Key Issues
Whether Section 43CA of the Income Tax Act is applicable when the sale consideration is less than the market value on the date of registration, but the agreement was made earlier with consideration received as per agreement?
Sections Cited
43CA, 143(2), 142(1), 234B, 234C, 271(1)(c), 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
Bansal Land Developers ITO, Ward-1, Panvel E2, C Wing, Pushp Valley, Vs. Vichumbe Taluka Panvel – 410206 PAN: AAJFB3643F (Appellant) (Respondent) Assessee by : Shri Divesh Chawla Department by : Shri Vishwas Mundhe Date of hearing : 18-02-2025 Date of pronouncement : 20-02-2025 O R D E R PER R. K. PANDA, VP :
This appeal filed by the assessee is directed against the order dated 18.09.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2016-17.
Facts of the case, in brief, are that the assessee is a partnership firm engaged in business as builders and developers and follows the Percentage completion method. It filed its return of income on 15.10.2016 declaring total income of Rs.4,59,330/-. The case was selected for scrutiny under CASS and accordingly statutory notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) were issued and served on the assessee, in response to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details.
During the course of assessment proceedings the Assessing Officer noted that the assessee has hold 50 units / flats held as stock-in-trade, out of which 12 flats were sold for a consideration less than the market value (Govt. value). He further noted from the audit report of the assessee firm that the auditor in column No.17 of the report has pointed out that certain flats were sold at less than the market value (Govt. value). The Assessing Officer, therefore, vide a show cause notice dated 25.09.2018 asked the following question to the assessee which has been reproduced by him in the body of the assessment order: “You have sold 12 flats to Push Vinayak for total consideration of Rs.85,37,500/- and the Market Price of the same is shown at Rs.1,24,07,367/- as pointed out by the Auditor in his Audit Report dated 13.10.2016. Please explain why the difference of Rs.38,69,867/- should not be included in your income as provided in section 43CA of the Income Tax Act.”
The assessee in response to the same filed the following details and submitted that those 12 flats were sold to the purchasers at the prevailing rate of market value as on the date of booking: “6.1. In response to the above, the A.R. of the assessee Shri Mahendra Jain, C.A. has filed reply through e-proceedings, the relevant part of the reply is re-produced as under: "Difference of Rs.38,69,867/-: During the year we have given the possession of 50 flat valued at Rs.53,13,3000/-, whereas 12 flat out of 50 flat whose market value is more than agreement value & the difference is valued at Rs.38,69,867/-.
Flat Date of Date of Agreement Mkt. Value on Area of Difference No. Booking Agreement (Sale date of Flat Value) Agreement 1403 07/12/2009 08/11/2012 5,80,000 10,06,500 464 4,26,500 1503 01/02/2010 25/01/2012 6,82,000 7,30,000 232 48,000 1405 12/12/2009 29/08/2012 8,63,950 10,06,500 384 1,42,550 1409 07/12/2009 22/10/2012 5,80,000 9,55,867 464 3,75,867 1401 20/10/2009 01/06/2011 6,52,400 6,60,000 378 7,600 1410 07/12/2009 27/12/2012 5,80,000 10,07,000 464 4,27,000 1301 24/09/2009 16/06/2015 5,83,750 13,92,000 320 8,08,250 1412 07/12/2009 06/08/2012 5,80,000 10,07,000 464 4,27,000 1508 12/12/2009 26/12/2014 6,82,500 10,70,500 258 3,88,000 1417 02/03/2011 26/12/2014 12,85,000 13,28,000 320 43,000 1511 15/02/2010 25/01/2016 7,76,000 11,22,000 258 3,46,000 1507 09/01/2010 02/03/2016 6,91,900 11,22,000 258 4,30,100 Market Value as per sq. ft for 2011 1451psf. Market Value per sq.ft. for 2010 1115psf. Market Value per sq. ft. for 2008 1115psf. We have sold/allotted flat to purchaser at prevailing rate of market value as on date of booking.”
However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He noted that since the Auditor has already pointed out that the addition of Rs.38,69,867/- could be made as per the provisions of section 43CA of the Act, therefore, applying the provisions of section 43CA, the Assessing Officer made addition of Rs.38,69,867/- being the difference between the market value and the agreement value.
In appeal the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer by observing as under:
“8. During the course of appeal proceedings, hearing notices were sent and the appellant e-filed documents/submissions. I have gone through the facts of the case and also submissions made by the appellant. The issues raised in the grounds which require adjudication, are as under: 5.2 It is noticed that, Sub section (3) of section 43CA have provided to adopt stamp duty value of the property assessable as on the date of entering into sale agreement instead of the value assessed as on the date of transfer of the property. Sub section (3) and sub section (4) of section 43CA read as under: "(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 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 any made other than cash on or before the date of agreement for transfer of the asset." 5.3 As a normal business practice, the sale consideration between the seller and the buyer used to be negotiated at the time of entering into sale agreement and not at the time of transfer of the property. Hence, sub section (3) 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. Whereas, as per the sub section (4) of the Act, it mandates that the amount of consideration or a part thereof must be received by the builder any made other than cash on or before the date of agreement for transfer of the asset. 5.4 In the instant case, it appears that the appellant has sold 50 flats, but the sale consideration received from 12 flats alone is less than the prevailing market rate on the date of registration of the said flats. Further, the appellant could not furnish the reasons for selling the said 12 flats for lesser consideration out of sale of 50 flats during the year. Whereas, the appellant has simply submitted the letters of allotment entered with the said 12 buyers during the year 2009 and accordingly claimed that as per section 43CA(3) of the Act, the addition by the AO u/s 43CA is not sustainable. 5.5 Whereas, the appellant has not submitted necessary documentary evidences as per the sub section (4) of the Act that, the amount of consideration or a part thereof has been received by the appellant from the said buyers of the flat by any made other than cash on or before the date of agreement for transfer of the asset. Further, tax audit report also has clearly quantified the above amount of Rs.38,69,867/- to be added to the total income as per the provisions of section 43CA of the Act on account of receipt of lesser sale consideration than the prevailing market rate on the date of transfer. 5.6 In view of the above facts, I am of the considered view that the action of the AO by invoking the provisions of section 43CA of the Act based on the tax audit report is sustainable and accordingly the addition made by the AO is confirmed. Hence, the ground of appeal is dismissed.
6. As a result, the appeal is dismissed.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds:
1. The Learned Assessing Officer (AO) and Commissioner of Income-tax (Appeal) (hereinafter referred to as the CIT(A)) (collectively referred to as lower authorities) erred in making the addition of income of Rs.38,69,867 under Section 43CA on the ground that the appellant has received lesser sale consideration than the prevailing market value as on the date of transfer. a) The appellants submit that the sale consideration received is higher than the market value as adopted or assessed in the year of the sale, though the registration was not in that year. b) The appellants submit that the condition laid under Section 43CA(3) has been fulfilled as stamp duty was paid on the higher of the value of consideration or stamp value referred to in Section 43CA(1). c) The appellants submit that the condition laid under Section 43CA(4) has been fulfilled as the consideration was received in any mode other than cash. d) The appellants further submit that the provisions of Section 43CA are not applicable on the ground that Section 43CA was introduced by Finance Act, 2013 w.e.f from 1st April 2014, whereas the agreement between the buyer and the appellant was entered in the year 2012 The Appellant prays that the addition made by the learned AO and confirmation thereof by CIT(A) be deleted
2. The lower authorities have erred in consequentially levying erroneous interest under Sections 234B and 234C of the Act. The Appellant prays for directions to be given for deletion of erroneous interest under Section 234B and 234C of the Act.
3. The AO erred in initiating penalty proceedings under Section 271(1)(c) read with Section 270A of the Act and CITA) erred in confirming the levy thereof. The appellant prays that no penalty is leviable in their case and pray that the penalty may be deleted. Your appellant crave leave to add to, alter or amend or delete the aforestated ground of appeal, in the course of the hearing or any time before the hearing as may be advised.
The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the details given before the Assessing Officer and submitted that on the date of booking the market value (Govt. value) was less than the agreement value. He submitted that the respective flats were sold much after the date of booking and the assessee had received the initial amount at the time of booking through banking channel. Referring to the provisions of section 43CA(3) and 43CA(4) of the Act, he submitted that the section is very clear, according to which 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.
Referring to the decision of Pune Bench of the Tribunal in the case of Kolte Patil Developers Ltd. vs. DCIT (2024) 167 taxmann.com 385 (Pune-Trib.), he submitted that the Tribunal in the said decision has held that where the assessee- builder had received a part of consideration in respect of sale of flats in advance by cheque as per agreement and sale deeds were made on the basis of agreement value, in view of provisions of sub-sections (3) and (4) of section 43CA, no addition was called for.
Referring to the decision of Jabalpur Bench of the Tribunal in the case of ACIT vs. Rajul Constructions (2024) 159 taxmann.com 1261 (Jabalpur – Trib.), he submitted that the Tribunal in the said decision has held that where assessee-firm, engaged in business of builders and land developers, sold certain plots and consideration received by assessee was less than value assessed by stamp valuation authority, assessee would be entitled for benefit of provision of section 43CA(3) in respect of plots booked in preceding assessment years. He accordingly submitted that since the sale consideration amount was higher than the stamp duty value at the time of booking of the flats, therefore, no addition is called for in view of the specific provisions of sub-sections (3) and (4) of section 43CA of the Act.
The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.38,69,867/- by invoking the provisions of section 43CA of the Act on the ground that the assessee has sold 12 flats for a total consideration of Rs.85,37,500/- whereas the market price of the same was shown at Rs.1,24,07,367/- as pointed out by the Auditor in the audit report and therefore, the provisions of section 43CA of the Act are applicable. We find the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the assessee during the course of assessment proceedings has explained to the Assessing Officer that the provisions of section 43CA have been fulfilled since the value as per the agreement to sale was higher than the stamp duty value as on the date of booking of flats and therefore, no addition is called for.
We find some force in the above arguments of the Ld. Counsel for the assessee. A perusal of the assessment order itself shows that the assessee during the course of assessment proceedings has filed its reply which has already been reproduced in the preceding paragraphs. A perusal of the same shows that the dates of booking of 12 flats in question were much prior to the dates of registration. A perusal of the details filed by the assessee in the paper book shows that in all the 12 cases the market value (Govt. value) is more than the agreed value as on the date of booking. Since there is a long gap between the date of booking and the date of sale, therefore, the market price (Govt. value) has gone up. Merely because the Auditor has mentioned in the audit report that the assessee has sold certain flats which is less than the market value (Govt. value), the same cannot be the basis for addition without looking to the clear provisions of the Act. As mentioned earlier, the Assessing Officer himself has reproduced the details filed by the assessee in the body of the assessment order which clearly shows the gap between the date of booking and the date of agreement. The documents clearly show that the market value i.e. Govt. value as on the date of booking was less than the agreement value as on the date of booking.
14. We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of Kolte Patil Developers Ltd. vs. DCIT (supra) where the Tribunal has decided the issue in favour of the assessee by holding that since the assessee has received a part of consideration as advance as per agreement and the sale deeds were made on the basis of agreement value although the market price has gone up by that time, therefore, in view of provisions of sub-sections (3) and (4) of section 43CA, no addition was called for. The relevant observations of the Tribunal from para 13 to 14 read as under: “13. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed by both the sides. We find the Assessing Officer in the instant case made addition of Rs.25,02,250/- in respect of 8 flats on the ground that the market value of these flats was Rs.2,73,16,150/- whereas the assessee company has registered the flats for a consideration of Rs.2,48,13,900/- on the basis of agreement value and therefore, the provisions of section 43CA of the Act are applicable. We find the CIT(A) / NFAC, relying on the decision of the Pune Bench of the Tribunal in the case of Rahul Constructions Vs. DIT (supra), deleted the addition in respect of certain flats where the difference is less than 10%. He, however, sustained the addition in respect of remaining flats where the difference is more than 10% between the agreement value and the market price. It is the submission of the Ld. Counsel for the assessee that since the assessee had received part of the consideration in cheque as per agreement much prior to the date of sale, therefore, such agreement value has to be considered for the purpose of provisions of section 43CA of the Act and no addition is called for. We find some force in the above argument of the Ld. Counsel for the assessee. Sub-clauses (3) and (4) of section 43CA of the Act are as under:
43CA (1)…. (2)….. (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.
A perusal of the details filed by the assessee in the paper book reveals that the assessee has received advances by cheque in respect of those three flats as per agreement and the sale deeds were executed subsequently where the market price is more than the agreement value. Since the assessee has received a part of the consideration as advance as per agreement and the sale deeds were made on the basis of the agreement value, although the market price gone by that time, therefore, in view of the provisions of sub-clauses (3) and (4) of section 43CA of the Act, no addition is called for since a part of the consideration has been received by cheque on the basis of agreement and the sale deeds were registered on the basis of value mentioned in the agreement. We, therefore, set aside the order of the CIT(A) / NFAC and direct the Assessing Officer to delete the addition of Rs.14,70,250/-. The first issue raised by the assessee is accordingly allowed.”
Similarly, we find the Jabalpur Bench of the Tribunal in the case of ACIT vs. Rajul Constructions (supra) while deciding an identical issue has held that where assessee-firm, engaged in business of builders and land developers, sold certain plots and consideration received by assessee was less than the value assessed by stamp valuation authority, assessee would be entitled for benefit of provision of section 43CA(3) in respect of plots booked in preceding assessment years. Since, admittedly in the instant case the assessee has received a part of the consideration as advance as per the agreement and the sale deeds were made on the basis of such agreement value, although the market price has gone up by that time, therefore, in view of the provisions of sub-sections (3) and (4) of section 43CA of the Act, no addition is called for. In this view of the matter, the order of the Ld. CIT(A) / NFAC is set aside and the grounds raised by the assessee are allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 20th February, 2025.
Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 20th February, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपीलार्थी / The Appellant; 1. 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘SMC’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune
S.No. Details Date Initials Designation 1 Draft dictated on 18.02.2025 Sr. PS/PS 2 Draft placed before author 19.02.2025 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to the Head 9 Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order