DY COMMISSIONER OF INCOME TAX , PANVEL vs. BALAJI REALTORS , PANVEL

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ITA 794/PUN/2023Status: DisposedITAT Pune29 July 2024AY 2015-16Bench: SHRI SATBEER SINGH GODARA (Judicial Member), SHRI INTURI RAMA RAO (Accountant Member)16 pages
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What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in not proportionately reducing the sale consideration for the reduced area and that a reference to the DVO under Section 43CA(2) and (3) is mandatory. The Tribunal also upheld the deletion of brokerage expenses, considering it a routine business expenditure.

What were the facts?

The Revenue appealed against the deletion of an addition made under Section 43CA concerning enhanced sales consideration based on stamp duty valuation. The assessee sold land for Rs. 9 crore, but the stamp duty valuation was Rs. 12.76 crore. The CIT(A) deleted the addition, citing discrepancies in land area measurement and the AO's failure to refer the case to the DVO.

What were the issues?

Whether the addition under Section 43CA was correctly deleted by the CIT(A) and if a mandatory reference to the DVO was required. Whether brokerage expenses were justified.

Which sections of the Income-tax Act were involved?

Section 43CA,Section 55A,Section 50C

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Income Tax Appellate Tribunal, PUNE “A” BENCH : PUNE

Before: SHRI SATBEER SINGH GODARA & SHRI INTURI RAMA RAO

Hearing: 24.06.2024Pronounced: 29.07.2024

short the “NFAC”] Delhi’s Din and Order No. ITBA/NFAC/S/ 250/2023-24/1052356158(1), dated 26.04.2023, in proceedings u/s.143(3) of the Income Tax Act, 1961 (in short “the Act”).

Heard both the parties. Case file perused.

2.

The Revenue pleads the following substantive grounds in the instant appeal :

2 ITA.No.794/PUN./2023

1.

“On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs.3,76,62,000/- by not appreciating that the addition

was made on account of enhanced sales consideration u/s. 43CA of the Act as per valuation of stamp duty authority.

2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the AO should have referred the case to the DVO u/s.55A of the Act when the impugned Valuation Report was never part of any submissions of assessee made during assessment

proceedings. 3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in considering the area of sold property as 7314 sq. mtrs. When the actual area as per

Sale Deed is 10020 sq. mtrs.

4. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs.7,50,000/- made on account of brokerage expenses

without appreciating that there was one common partner in the assessee firm and the buyer firm and hence the payment of brokerage was not justified.”

3.

We advert to the first and foremost issue of Sec.43CA addition amounting to Rs.3,76,62,000/- made in the course of assessment and deleted in the lower appellate

3 ITA.No.794/PUN./2023 discussion. We make it clear that there is no dispute between the parties inter alia on the relevant facts that the assessee had indeed sold the land in question in the relevant previous year involving actual sale consideration of Rs.9 crore which carried stamp value of Rs.12,76,62,000/-. Faced with this situation, learned assessing authority invoked sec.43CA of the Act to make the impugned addition of Rs.3,76,62,000/-.

4.

The learned CIT(A)-NFAC has reversed the same vide following detailed discussion :

4 ITA.No.794/PUN./2023 5 ITA.No.794/PUN./2023 6 ITA.No.794/PUN./2023 7 ITA.No.794/PUN./2023 8 ITA.No.794/PUN./2023 9 ITA.No.794/PUN./2023 10 ITA.No.794/PUN./2023 11 ITA.No.794/PUN./2023 12 ITA.No.794/PUN./2023 This leaves the Revenue aggrieved.

5.

Both the learned representatives reiterated their respective stands during the course of hearing before us. The assessee has vehemently supported the CIT(A)-NFAC’s above extracted discussion that the land in question in fact involves an area admeasuring 7814.210 sq. metre than that taken by the Assessing Officer of 10020 sq. metres. Mr. Gujarati sought to clarify that the actual area herein is to the extent of above former measurement(s) only and therefore, the lower appellate findings have rightly granted the relief herein to that taxpayer.

He further stated that the Assessing Officer had not taken into consideration all these clinching facts indicating various distressing factors regarding that land sold in the relevant previous year. He lastly buttresses the point that the assessee had filed registered valuer’s report as well as it’s Architect’s certificate duly proving the land as not usable to the extent of difference between the measurements quoted in the sale agreement deed vis-à-vis the actual area in question.

13 ITA.No.794/PUN./2023

6.

All these assessee’s arguments failed to evoke our concurrence in principle. It prima facie emerges from the relevant tabulation in para-5.2.2 of the lower appellate discussion that the CIT(A)-NFAC has treated the entire sale consideration of Rs.9 crores for the above reduced area of 7814.2 square metres only whereas the transaction reveals the said price as pertaining to the entire parcel of the land admeasuring 10020 sq. metres (supra). He has not reduced the said consideration proportionately in other words. There is further no material before us that the learned CIT(A)-NFAC had obtained any remand report from the field authorities regarding the variation in the actual area hereinabove (supra).

Faced with this situation, we are of the considered view that the Revenue’s instant first and former substantive ground deserves to be restored to the assessing authority for it’s afresh appropriate adjudication as per law, preferably within three effective opportunities of hearing.

6.1. Learned counsel at this stage reiterated the fact that no DVO had been appointed going by the mandates of sec.43CA (2) and (3) of the Act. We find force in the assessee’s instant plea in light of Sunil Kumar Agarwal vs. CIT [2015] 372 ITR 83 (Cal.) (HC) wherein their lordships’ hold in the context of sec.50C, applicable mutatis mutandis herein, that such a reference is indeed mandatory even if the assessee concerned does not raise any such plea before the 14 ITA.No.794/PUN./2023 departmental authorities. We thus direct the learned assessing authority to make a statutory reference to the DVO in very terms to be followed by further consequential proceedings as

per law. This Revenue’s former substantive grounds is allowed for statistical purposes. Ordered accordingly.

7.

Next comes the Revenue’s latter substantive grounds seeking to restore brokerage expenditure disallowance of Rs.7,50,000/- for the reason that there was a common partner between the taxpayer and the recipient firm. The lower appellate discussion in question has granted the impugned relief to the assessee as under :

15 ITA.No.794/PUN./2023

8.

Suffice to say, it has come on record that the assessee had raised it’s claim of Rs.18 lakhs which stands accepted only to the tune of Rs.7.5 lakhs in question. Learned CIT(A)-NFAC is found to have given due consideration to all these relevant facts in the lower appellate discussion. Faced

1.

16 ITA.No.794/PUN./2023 with this situation, we find no reason to accept the Revenue’s instant latter arguments seeking to disallow brokerage expenditure in real estate development activity being in the nature of routine business expenditure. Rejected accordingly.

9.

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

Order pronounced in the open Court on 29.07.2024.

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