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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI KUL BHARAT & SHRI PRASHANT MAHARISHI
Assessee by : Shri Ruchesh Sinha, Adv Revenue by: Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 10/11/2021 Date of pronouncement 23/11/2021 O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order of the ld CIT(A)-7, New Delhi dated 05.12.2017 for the Assessment Year 2014-15 wherein, the assessee raised the following grounds of appeal:- “1. That on facts and circumstances of the case, the order passed by the Ld. CIT (Appeal) is bad both in the eyes of law and on facts.
2. That the Ld. CIT (Appeal) has erred on facts and in law in confirming the addition of Rs. 25,39,979/- u/s 43CA by ignoring the cogent reason of actual sale consideration below the stamp value.
3. That the Ld. CIT (Appeal) has erred on facts and in law in confirming the refusal by the AO, to make a reference to DVO, in spite of specific request of the appellant.
4. That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
5. That the Appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal.”
2. Brief facts of the case are that the assessee is engaged in the business of construction and real estate. The assessee filed return of income on 29.11.2014 declaring loss of Rs. 5,96,02,760/- . The case of the assessee was picked up for scrutiny.
3. During the course of assessment proceedings the ld AO noted that the assessee has sold three properties which are having sale consideration less than the value adopted / assessed /assessable for stamp duty purposes. Therefore, the ld AO was of the view that the provision of section 43CA are attracted. The assessee was questioned. The assessee submitted its reply on 13.12.2016 that the properties have been sold at a fair market value and requested the ld Page | 1 AO to refer the matter to the Valuation Officer for determination of the correct fair market value. The ld AO rejected the contention of the assessee and stated that the provision of section 43CA are very clear and ambiguous. He therefore, adopted the stamp duty value for the purpose of sale consideration and made an addition of Rs. 25,39,979/- as income of the assessee. Consequently, the assessment order was passed u/s 143(3) of the Act on 26.12.2016 determining the loss of the assessee at Rs. 5,70,62,780/-.
4. The assessee preferred an appeal before the ld CIT(A) who also agreed that the finding of the ld AO and confirmed the above addition. Therefore, has preferred this appeal.
5. The ld AR submitted that the assessee is engaged in the business of real estate and the flat sold by the assessee are its in stock in trade. He submitted that during the course of assessment proceedings the assessee objected to the applicability of the above section and requested the ld AO to refer the matter to valuation officer for determination of the fair market value. The ld AO without carrying out any detailed enquiry has made the addition. He further submitted that in the present circumstances the addition is deserves to be deleted as the entire proceedings are vitiated. According to him, the ld AO is duty bound to refer the matter to Valuation Cell. He relied upon the decision of the coordinate bench in case of ITA Vs. Aidtya Narain Verman (HUF) 88 Taxmann.com 840 for the reason that in that particular cased the non compliance by the ld AO of referring the matter to the Valuation Officer was held to be invalid. He further referred to the decision of the Mumbai Bench of ITAT in case of Md Ilyas Ansari Vs. ITO 123 Taxmann.com 122 wherein, it was held that addition is deserves to be quashed if the matter is not referred to the valuation cell even if request is made by the assessee. He submitted that the revenue should not be allowed to play a second innings.
6. He further submitted that without prejudice to the above submission that the difference between sale consideration of the stamp duty value is merely 10.03% which is more or less equal to tolerance band referred to in section 50C of the Act. He further submitted that 2nd Proviso inserted by enhancing the tolerance band relates back to the date of insertion of section 50C of the Act. Thus according to him the difference between the actual value and the stamp duty value is only 10.03%, the addition deserves to be deleted.
The ld DR vehemently supported the order of lower authorities.
We have carefully considered the rival contentions and perused the orders of the lower authorities. Admittedly in this case the difference between the sale consideration and stamp duty value with respect to stock in trade sold by the appellant was Rs. 25,39,979/-. The assessee objected the same before the ld AO and requested him to refer the matter to the valuation sale. The ld AO did not do so and made the addition. The ld CIT(A) confirmed the same.
The argument of the ld AR is that the addition should be quashed by the coordinate bench because of the failure of ld AO to refer the matter to the valuation officer. He relied on the decision of the coordinate bench in case of Aditya Narain (HUF) (supra). We have carefully considered the above decision and find that the assessee in that case has given a detailed reason which are recorded in paragraph No. 3.2 of that order stating that stamp duty value should not be adopted for the purpose of provision of section 50C of the Act. In the present case the assessee has merely requested the assessing officer to refer the matter to the valuation cell stating that the transactions have been entered into at the fair market value. Therefore the decision relied upon by the learned authorised representative is on facts distinguishable in the present appeal.
Second decision relied upon the ld AR is of Md Ilyas Ansari Vs. ITO (supra). According to para 10 of that order the assessee substantiated the sale consideration by submitting the copy of the valuation report of the registered valuer. In the present appeal, the learned AR was specifically questioned that whether any valuation report of the authorised valuer has been submitted or not. This was replied in negative. Therefore the facts of this decision relied upon is also distinguishable on facts. In view of this, both this decisions are not applicable to the facts of the present case.
With respect to the tolerance band the claim of the ld AR is that the difference between the sale consideration and fair market value is merely 10.03%. The reliance on the decision of the Maria Fernandes Vs. ITO 123 Taxmann.com 252 also do not apply to the fact of the case as the difference between in the present case is higher than 10%.
However, facts clearly shows that ld AO has mentioned in paragraph 3 of the assessment order itself that the assessee has objected the adoption of the stamp duty value for computing the business income by invoking the provision of section 43CA. Despite this, the learned assessing officer did not refer the matter to the valuation cell to determine the fair market value of the property by district valuation Officer. According to us, the ld AO should have given true effect to the provision of section 50C(2) and (3) of that section. The reference to those sections are clearly mentioned in provisions of Section 43CA (2) of the act. Therefore, according to us by looking to section 43CA(2) the ld AO should have referred the matter to the Valuation officer for determining the fair market value of the flat sold. We are conscious that second proviso to section 43CA has been inserted w.e.f. 01.04.2021 which has increased the tolerance band from 110% to 120% subject to certain conditions. The above enhancement should also be treated as retrospective in nature and should be applicable w.e.f 01.04.2014 Page | 3 following the ratio laid down by the coordinate bench in Maria Fernandes Vs. ITO 123 Taxmann.com 252. In view of the above facts we set aside the issue back to the file of the ld AO with a direction to the assessee to show before him that whether the case the is covered by the provisions of second proviso to section 43CA(1) or not. The learned AO is directed to also examined the same and if the assessee satisfies the condition laid down in second proviso to Section 43CA, the learned assessing officer should grant benefit of the same to the assessee. However, After examination of the same, if the ld AO is of the view that the conditions are not satisfied as mentioned in second proviso, he should make reference to the valuation officer for determination of the fair market value of the property sold. If then he finds any difference, he may make an addition u/s 43CA of the act an issue may be decided on the merits of the case.
Accordingly, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 23/11/2021.