M/S GODS GIFT LANDMARK,PUNE vs. INCOME-TAX OFFICER, WARD 3(4), PUNE

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ITA 600/PUN/2021Status: DisposedITAT Pune30 May 2022AY 2015-165 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal upheld the addition in principle, noting that the difference between sale value and market value exceeded 10%. However, it directed the AO to determine the fair market value by referring to the DVO as per Section 43CA(2).

What were the facts?

The Assessing Officer (AO) made an addition under Section 43CA(1) of the Income Tax Act, 1961, as the sale consideration of land was less than the market value. The assessee contended that the lands were stock-in-trade and the transactions were supported by registered agreements.

What were the issues?

Whether the addition under Section 43CA(1) for sale of land below market value is justified, and whether a reference to the DVO is mandatory for determining fair market value.

Which sections of the Income-tax Act were involved?

Section 43CA(1),Section 43CA(2),Section 50C(2),Section 50C(3),Section 143(3),Section 145(3),Section 37

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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI S.S.GODARA

For Appellant: Shri J.R. Chandekar
For Respondent: Shri Arvind Desai

आदेश / ORDER PER S.S. GODARA, JM :

1.

This assessee’s appeal for AY 2015-16 arises against the CIT(A)-3, Pune’s order No. PN/CIT(A)-3/ITO.Wd.3(4)/245/ 2017-18 dated 24-08-2020 involving proceedings under Section 143(3) of the Income Tax Act, 1961 in short the Act.

Heard both the parties. Case file perused.

2.

Coming to the assessee’s sole substantive grievance that both the lower authorities have erred in law and on facts in making Section 43CA(1) addition of Rs.17,42,610/-, the CIT(A)’s detailed discussion affirming the assessee’s action to this effect reads as under : “5.3 DECISION : The observations of the AO, submissions of the appellant and the material on record have been considered.

5.4 During the assessment proceedings, AO noticed from the “registered sale deeds” of land that sale consideration of the land is less than the market value of the land which comes under the purview of section 43CA of Income Tax Act, 1961. The A.R. of the appellant were confronted with the same vide order sheet noting dated 21/12/2017. AO has recorded in the assessment order that A.R. accepted the fact and did not raise any contention. Therefore, the amount of Rs. 17,42,610/- was added to the total income of the appellant. The amount was calculated as given below : S. No. Doc. No. Sale Value Market Value Difference Date of Registration 3287/2014 25/04/2014 9,00,000 14,10,750 5,10,750 1 3506/2014 02/05/2014 10,77,740 11,79,750 2 1,02,010 3 1784/2014 23/05/2014 9,07,500 1,07,500 8,00,000 4 1917/2014 31/05/2014 7,00,000 8,16,750 1,16,750 5 7141/2014 03/09/2014 3,55,000 9,05,600 12,60,600 Total 17,42,610

5.5 The appellant has now stated that the lands purchased and sold is a stock-in- trade of the business of the appellant. The transactions of sale and purchase are supported by registered agreements. The stamp duty paid is a deductible business expenditure under S. 37 of the Act. The appellant has also accepted that the transactions have been made by way of registered documents. The appellant has stated very meekly that the provisions of the Sec 43CA are not applicable. However, the appellant has not given any convincing reason for the same.

5.6 Then, the appellant has attempted to dispute the addition by saying that the books of accounts were not rejected by the AO. In this regard, it is relevant to refer to the decision in the case of Rallis India Ltd Vs CIT [2015] 374 ITR 462 wherein the Hon'ble High Court of Bombay has observed as given below:

"13. It is undisputed that the power of a CIT(A) is co-terminus with that of the Assessing Officer. In fact, the CIT(A) can do what the Assessing Officer can do and has failed to do as held by the Apex Court in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 "

Therefore, it is held that though the books of accounts of the appellant are audited they do not depict the true income of the appellant and are rejected u/s 145(3) and the addition made by the AO is confirmed. Grounds No 1 & 2 are DISMISSED.”

3.

Learned counsel could hardly dispute the impugned difference between the assessee’s actual sale prove vis-à-vis SRO value to be more than 10% even if it is held that Sec.43CA(1) proviso inserted by the Finance Act, 2018 w.e.f. 01-04-2019 carries retrospective effect. I therefore uphold the impugned addition in principle.

4.

Next comes equally important aspect of determination of fair market value of the assessee’s residential units sold in the relevant previous year. Learned departmental representative could hardly rebut the basic principle that Sec.43CA(2) adopts the provisions of Sec.50C(2) & (3) which require the Assessing Officer to mandatorily make reference to the DVO in light of Sunil Kumar Agarwal Vs. CIT (2014) 372 ITR 83 (Cal.) even if the taxpayer concerned does not raise such an objection. I therefore direct the Assessing Officer to determine fair market value of the assessee’s flat(s) sold forming subject matter of the impugned Sec.43CA addition after making statutory reference to the DVO as per law. Ordered accordingly.

5.

Delay of 373 days in filing of the instant appeal is condoned since the CIT(A)’s has passed his lower appellate order on 24-08-2020, i.e. during Covid-19 pandemic outbreak period.

6.

This assessee’s appeal is partly allowed for statistical purposes in above terms.

Order pronounced in the Open Court on 30th May, 2022.

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