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Facts
The appeal is against the order of the NFAC for AY 2015-16. The assessee, a builder and developer, was selected for limited scrutiny to verify "High Closing Stock" and "Percentage of Completion Method". The assessment order confirmed additions made by the AO. The CIT(A) also confirmed the AO's order, leading to the present appeal.
Held
Regarding the addition on account of Flat No. D-401, the Tribunal found that the transaction with the first party was cancelled and the second party's transaction was relevant. However, the addition was sustained. For Flat No. D-501, the addition under Section 43CA was deleted as it was within the tolerance limit. The addition for building maintenance charges was dismissed as it was considered business income, chargeable under Section 28. The addition for advance received from customers was restored to the AO for verification regarding potential double taxation.
Key Issues
Dispute over additions made on account of stamp duty value vs. sale consideration (Sec 43CA & 50C), collection of maintenance charges, and advance received from flat buyers.
Sections Cited
43CA, 50C, 28, 68, 143(2), 142(1), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL
PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of National Faceless Appeal Centre (NFAC), Delhi dated 12.05.2023 u/s. 250 of the Income Tax Act,
On the facts and circumstances of the case and in law, the Id. Commissioner of Income Tax (Appeals), NFAC erred in confirming the addition of Rs. 10, 13,000/- under section 43CA r.w.s 50C i.e. difference in stamp duty value and actual sale consideration.
On the facts and circumstances of the case and in law, the Id. Commissioner of Income Tax (Appeals), NFAC erred in confirming the addition of Rs. 59, 14,301/- The said amount is collected from the flat owners for the building maintenance and used for the same.
3. On the facts and circumstances of the case and in law, the Id. Commissioner of Income Tax (Appeals), NFAC erred in confirming the addition of Rs.5, 29, 67,033/- without appreciating that the appellant followed Project completion method. The same income is offered in AY 2017-18. Therefore, the said addition is resultant in double taxation.
The appellant craves leaves to add, to delete or amend any of the above grounds of appeal at the time of hearing.
2. The brief facts of the case are that assessee is a partnership firm filed its return of income on 15.10.2015, declaring total income at Rs. 7,01,510/-. Case of the assessee was selected for “Limited Scrutiny” under CASS. Statutory notices as prescribed u/s. 142(1) and 143(2) of the Act were issued. Assessee firm is engaged in the business of builders and developers. Case of the assessee was selected for scrutiny to verify “High Closing Stock” amount and whether assessee had adopted “Percentage of Completion Method”. Case of the assessee was assessed at Rs. 6, 05, 95,850/- after making addition vide para 7, 8, 9 and 10 of the assessment Pyramid Developers order. Assessee being aggrieved with this order preferred an appeal before the Ld. CIT (A), who in turn confirmed the order of the AO. Assessee being further aggrieved with this order preferred this present appeal before us.
We have thoroughly considered the order of AO, Order of the Ld. CIT (A) and submissions of the assessee alongwith grounds of appeal raised. Assessee has taken total 3 grounds of appeal. First ground of appeal pertains to addition made u/s. 43CA r.w.s. 50C of the Act amounting to Rs. 10, 13,000/-. In this matter two properties of the assessee are involved and alleged to be sold below the price fixed by the Stamp Duty Authorities of the State. 1st property was Flat No. D-401, sold to one Mr. Jitendra Tank for Rs. 15, 42,000/- under an allotment letter and total consideration was discharged before 31.03.2013. Buyer Mr. Jitendra Tank before entering into a registered sale deed with the assessee firm, sold the same to one Mr. Sanjay Khaire for Rs. 23,25,000/- in November 2015 and ultimately, final registered agreement was entered into between Mr. Sanjay Khaire and assessee at Rs. 23,25,000/- on 26.11.2014.
4. To appreciate the facts of the matter and law applicable we have referred the documents presented before us vide page no 65 to 105 of the factual paper book. Before discussing the contents of the documents referred (supra), we deem it fit to reproduce the relevant sections as under:
2(47) ["transfer", in relation to a capital asset, includes, — (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment;] [or] [(iva) the maturity or redemption of a zero-coupon bond; or] [(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. [Explanation 1]. —For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA.] [Explanation 2.—For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;]
SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882 Part performance.
53A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.
Section - 43CA, Income-tax Act, 1961 - FA, 2023
[Special provision for full value of consideration for transfer of assets other than capital assets in certain cases.
43CA. (1) 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 of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer:
[Provided that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and [ten] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration:] [Provided further that in the transfer of such residential unit takes place during the case of transfer of an asset, period beginning from the 12th day of November, 2020 and being a residential unit, the ending on the 30th day of June, 2021; provisions of this proviso shall have the effect as if for the words "one hundred and ten per cent", the words "one hundred and twenty per cent" had been substituted, if the following conditions are satisfied, namely: —(i) (ii) such transfer is by way of first-time allotment of the residential unit to any person; and (iii) the consideration received or accruing as a result of such transfer does not exceed two crore rupees.] (2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1). (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.] [Explanation. —For the purposes of this section, "residential unit" means an independent housing unit with separate facilities for living, cooking and sanitary requirement, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through an interior door in a shared hallway and not by walking through the living space of another household.]
Section - 50C, Income-tax Act, 1961 - FA, 2023 [Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of 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 (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer : [Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer:
Provided further that the first proviso 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 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 the agreement for transfer:] [Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and [ten] per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.] (2) Without prejudice to the provisions of sub-section (1), where— (a) the assessee claims before any Assessing Officer that the value adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub- section (1) of section 16A of that Act. [Explanation 1]. —For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). [Explanation 2. —For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the Pyramid Developers contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed [or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.] 5. Considering the sections reproduced (supra) and documents of paper book mentioned (supra), we observed that transfer was never completed with the first party namely Mr. Jitendra Tank. Rather, the whole transaction was routed through assessee builder only. Second party Mr. Sanjay Khaire made payments to the assessee builder and in turn an amount of Rs. 22.78 Lacs were transferred to the first party. In substance the transaction with 1st party was cancelled and only 2nd party is relevant in this scenario. Transaction with second party took place after introduction of section 43CA in the statute and very much applicable to the case. It is pertinent to mention here that assessee booked revenue at original figure of Rs. 15.42 Lacs, whereas second party actually paid Rs. 24,28,641/- and get the property registered at Rs. 23.25 Lacs. Document of any communication/understanding between 1st Party and 2nd Party is not there on record to substantiate the version of the assessee. Further there is no reference in the registered document about the previous transaction and 1st party’s consent. In the result, we found that assessee is not able to substantiate its arguments before us and case laws relied upon by the assessee are also of no help in this matter, as they pertain to single party transaction and facts are not matching with the facts of the assessee’s matter. As here 1st party exit before the conclusion of transaction and when 2nd party came into picture provisions of Pyramid Developers section 43CA of the Act are applicable. In above terms addition on account of Flat No. D-401 is sustained and orders of the authorities below are confirmed.
Second sale of flat under dispute pertains to Flat No. D-501, sold to one Mr. Mr. Jogendra Kumar Vishwakarma via agreement of sale dated: 09-06-2014 for a consideration of Rs. 22.11 Lacs, whereas value as per stamp duty authorities were Rs. 24.41 Lacs. Hence there is a difference of Rs. 2.30 Lacs as per the provisions of section 43CA of the Act. This difference in terms of percentage comes to 10.40% and moreover in the paras discussed above pertaining to transaction against Flat No. D-401, stamp duty valuation was taken at Rs. 23.25 Lacs by the stamp duty authorities on 26.11.2014 and on 09.06.2014, the same authority is taking value of Rs. 24.41 Lacs, i.e., on earlier transaction higher stamp duty and lower stamp duty on later transaction, which is not possible. It confirms the fact as argued by the assessee that within a span of 6 months there can’t be any change in stamp duty valuation that is too during the same financial year and above this towards lower side. In view of these facts, we agreed with the arguments of the assessee that stamp duty valuation as accepted by revenue itself in previous transaction (Flat No. D-401) of Rs. 23.25 Lacs is the real stamp duty valuation for the purposes of Section 43CA and transaction of assessee is within the tolerance limit of 10%, hence no addition can be made u/s. 43CA of the Act. In the result addition on 1st transaction is sustained and addition on 2nd transaction made u/s. 43CA of the Act is deleted. In view of above, Ground No. 1 is partly allowed.
Ground No. 2 pertains to addition made of Rs. 59, 14,301/- being amount collected from the flat owners for building maintenance. During the year under consideration assessee builder shown an amount of Rs. 59, 14,301/- as amount Pyramid Developers payable to proposed society of flat owners. As per assessee this amount was received- in fiduciary capacity such as society formation charges and society maintenance charges etc. During the year under consideration assessee received a total of Rs. 1, 0051, 469/-, out of this assessee spent 41, 37,168/- for the purposes of maintenance of the society as per page 5 of the Paper Book (Proposed Society Account) produced by the assessee. As per the submission of the assessee there was no addition in previous year, i.e. A.Y. 2014-15 on this account (No Scrutiny Case) and the same has been accepted by the revenue in A.Y. 2017-18 also (Scrutiny Case u/s. 143(3) of the Act).
Assessee further submits that details regarding members of the proposed society have already been submitted to the AO during the assessment proceedings from whom this amount under various heads has been collected. On this issue, in our considered view section 68 of the Act can’t be applied as the Identification, Creditworthiness and Genuineness is not under challenge. The only challenge is the taxability of the amount from income point of view; hence the same can be considered u/s. 28 of the Act and not u/s. 68 of the Act. Now this issue needs to be analyzed from another angel also, i.e., perpetual status of this account in the books of the assessee in previous years and future years also. This fact emerged out of assessee’s own admission that this amount was never liable to tax by the revenue in previous years and in the A.Y. 2017-18. It confirms a regular pattern of collection and spending by the assessee, but till A.Y. 2017-18 flat owner’s society is not formed, which is in actual a fiduciary duty of the builder. We further examined the balance-sheet of the assessee and found that cash-in-hand and bank balance of the assessee is only 5, 81,431/-, which further
In view of the above facts, we are of the considered view that somewhere intentions of the assessee are not bonafide, as the surplus arising out of “Proposed Society Account” is being used by the assessee. Claim of retaining amount in fiduciary capacity is not valid and the same is chargeable to tax u/s. 28 of the Act as business income, with a liberty to claim the same in the year in which society is formed and balance in “Proposed Society Account” become NIL. In the result Ground No. 2 is dismissed with above findings and action of the authorities below is sustained.
Ground no. 3 pertains to addition of Rs. 5, 29, 67,033/-. During the year under consideration, assessee shown an amount of Rs. 9, 60, 73,193/- as advance received from the customers on account of flats in building E & F. As per assessee itself, advance received in terms of percentage comes around 91%. Despite of receiving a substantial amount, assessee has not offered any revenue against this advance received. Considering this fact, AO worked out the amount of addition to be made amounting to Rs. 5, 29, 67,033/-.
On this issue, we have considered the submissions of the assessee alongwith the paper book filed vide page no. 26-35 (for AY 2016-17) and page no. 36-55 (for AY 2017-18). Vide these submissions, assessee produced ITR for AY 2016-17, 2017-18 and audited financial results. Assessee revised its ITR for AY 2017-18 from a figure of Rs. 101,67,752/- to Rs. 501,61,752/-. Original return was filed on 08.02.2018 whereas revised return was filed on 28.03.2018. This additional figure of Rs. 4 Crore was declared by assessee on account of amount Pyramid Developers surrendered during the income tax survey. Now as per the submission of the assessee, this amount of addition made by the AO has been declared for the purposes of income tax in the year 2017-18; hence the same cannot be sustained here as the same will tantamount to double taxation. On principle, we are agreed with the submission of the assessee that if the figure of Rs. 5, 29, 67,033/- is included in the figure of revenue in the year 2017-18, same needs to be deleted here. Here it is pertinent to mention that assessee is claiming that revenue has been declared in A.Y. 2017-18 and the case has been verified and assessed under scrutiny, but the relevant assessment order u/s. 143(3) of the Act has not been placed on record before us. Considering the submissions of the assessee and absence of assessment order before us, we deem it fit to restore the matter back to the file of jurisdictional AO to verify whether the relevant amount of revenue under consideration has been offered for tax in the year 2017-18. Our direction is for limited purpose i.e. to verify the claim of the assessee as mentioned (supra). If the result of verification matches with the claim of the assessee, same is to be treated as allowed otherwise this addition will sustain. With above directions, ground of the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 20th of December, 2023.