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Income Tax Appellate Tribunal, DELHI BENCH “A” DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI PRADIP KUMAR KEDIA
The captioned Cross Appeals have been filed by the Assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals)-XIX, New Delhi [‘CIT(A)’ in short],
I.T.As. No.4974 & 5111/Del/2019 2 dated 27.03.2019 arising from the assessment order dated 30.12.2017 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2015-16.
Both Revenue and the Assessee have challenged the first appellate order passed by the CIT(A) dated 27.03.2019 arising from assessment order dated 30.12.2017 passed under Section 143(3) of the Act.
The Grounds of appeal raised by the Revenue read as under:
“1. The order of the CIT(A) is bad in law and not in consonance with the facts of the case. 2. On the facts and circumstances of the case the Ld. CIT(A) has erred by down scaling the addition of Rs.3,66,41,140/-. 3. On the facts and circumstances of the case the Ld. CIT(A) has erred in giving the assessee the benefit of section 43CA(3) of the I.T. Act.”
The Grounds of appeal raised by the assessee read as under:
“1. That on the facts of the case and under the law, the Id CIT(A) had erred in sustaining the addition made by the Id ASSESSEE u/s 43CA, to the extent of Rs.23,23,048/- (as per the details tabulated in respect of Rama Swarn Garden). The Id. CIT(A) had failed to appreciate (a) that the agreements were entered into by & between the assessee and the buyers, much prior to the date of insertion of section 43CA in the I.T. Act 1961; and the assessee was not in a position to ask for monies, over & above the consideration as already agreed by & between the assessee and the buyers.
2. That on the facts of the case and under the law the Id CIT(A) had erred in sustaining the addition to the extent of Rs. 16,31,225/- (as per the details tabulated in respect of Rama Krishna Farm). The Id. CIT(A) had failed to appreciate (a) that the agreements
I.T.As. No.4974 & 5111/Del/2019 3 were entered into by & between the assessee and the buyers, much prior to the date of insertion of section 43CA in the I.T. Act 1961; and the assessee was not in a position to ask for monies, over & above the consideration as already agreed by & between the assessee and the buyers.
3. That on the facts of the case and under the law the Id CIT(A) had erred in sustaining the addition to the extent of Rs.6,24,316/- (as per the r details tabulated in respect of Rama Bankey Bihari Upavan). The Id. CIT(A) had failed to appreciate (a) that the agreements were entered into by & between the assessee and the buyers, much prior to the date of insertion of section 43CA in the IT. Act 1961; and the assessee was not in a position to ask for monies, over & above the consideration as already agreed by & between the assessee and the buyers.”
Briefly stated, the assessee is engaged in real estate business by way of acquisition, developing and selling of plots. The assessee filed return of income for Assessment Year 2015-16 in question declaring taxable income at Rs.22,48,840/-. The return so filed was subjected to scrutiny assessment. As per the first paragraph of the assessment order, the assessee admittedly appeared before the Assessing Officer from time to time and furnished the relevant details/information/evidences. In the course of the assessment, the Assessing Officer inter alia noticed that the assessee has earned income from sale of plot to the tune of Rs.2,35,74,920/-. On perusal of the sale deeds submitted by the assessee in this regard, the Assessing Officer observed that the assessee has sold various plots at a consideration which is lower than the circle rate/stamp duty rate prescribed by the State Government. The Assessing Officer invoked the provisions of Section 43CA of the Act and made an addition of Rs.3,66,41,140/- towards difference between the circle rate and the actual sale consideration received towards sale of plots under its various
I.T.As. No.4974 & 5111/Del/2019 4 plans/schemes.
Aggrieved by the additions so made, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee filed detailed submissions and assailed the action of the AO to artificially assume the difference between the circle rate of FY 2014-15 (AY 2015-16) and the agreement value mentioned in sale deeds as deemed income taking shelter of Section 43CA of the Act. The Assessee challenged the very applicability of S. 43CA where the agreement by way of allotment of plots were already reached with the prospective buyers much prior the insertion of S. 43CA in the Statute.
6.1 On facts, the assessee inter alia submitted documentary evidences towards allotment to several allotees in the earlier years, receipt of partial payments against agreed consideration in cash and in cheques, ITR, balance sheet, bank statement of the allottees etc. and broadly contended that when reckoned from the date of first payment and allotment letter determining agreement value, the circle rate of the later year would naturally show disparity due to time gap and circle rate would naturally exceed the actual sale considerations realized on sale of plots.
6.2 The CIT(A) called for the remand report on the evidences furnished by the assessee. Rejoinder of the assessee thereon was also taken note of and forms part of the first appellate order. The CIT(A) also analyzed the tabulated data placed before it towards allotment of plot to various parties under different schemes and noted that since the part payments for the plots have been received by the assessee over a period of several years against the I.T.As. No.4974 & 5111/Del/2019 5 allotment letters, the benefit of Section 43CA(3) and (4) is required to be given and thus actual sale consideration requires to be adopted instead of circle rate wrongly adopted by the AO. It was further observed that provisions of Section 43CA inserted by Finance Act, 2013 came into force w.e.f Assessment Year 2014-15 onwards and since in the instant case, the allotment was issued much prior to that date as tabulated in the first appellate order, impugned additions made by the Assessing Officer by applying provisions of Section 43CA(4) is contrary to the judicial view in this regard. Reference was made to the decision of the Co-ordinate Bench in the case of Index One Trade Con P. Ltd. vs. DCIT (2018) 97 taxmann.com 174 (Jaipur) (Trib.) wherein in the similar circumstances, the additions under Section 43CA was reversed.
6.3 The relevant operative paragraph of the order of the CIT(A) is reproduced hereunder for the sake of easy reference.
“7.1 I find that the requisite details as reproduced in para 6 above were before the A.O. On the basis of examination in one case only, the Id. A.O. has hypothesized that cash must have been received for sale. Based upon my examination, I find that this is not the correct position. In almost all cases some amount (or rather the substantive amount or almost the entire consideration) has been received by cheque. However, for purposes of benefit of section 43CA(3), the limiting condition is prescribed in section 43CA(4). Accordingly, it is relevant to find out the instances where amount was received in cash only, on or before the date of agreement. It is only in such cases that benefit of provisions of section 43CA(3) is not available to an assessee. 7.2 I have examined the documents being allotment letter, sale deeds and other records. I have downloaded published circle rate which are available in public domain on the internet. I have required the appellant to provide details, which have been provided by the appellant vide letter dated 04.02.2019 as follows:-
I.T.As. No.4974 & 5111/Del/2019 6 I.T.As. No.4974 & 5111/Del/2019 7 I.T.As. No.4974 & 5111/Del/2019 8 I.T.As. No.4974 & 5111/Del/2019 9 I.T.As. No.4974 & 5111/Del/2019 10 I.T.As. No.4974 & 5111/Del/2019 11 I.T.As. No.4974 & 5111/Del/2019 12 I.T.As. No.4974 & 5111/Del/2019 13 I.T.As. No.4974 & 5111/Del/2019 14 I.T.As. No.4974 & 5111/Del/2019 15 I.T.As. No.4974 & 5111/Del/2019 16 Thus on the basis of aforesaid analysis, the following additions survive- I.T.As. No.4974 & 5111/Del/2019 17
Sr. No Name of the Scheme Rs. 01 Rama Bankey Bihari Upvan Nil 02 Rama Swarn Garden (Vrindawan) 23.23,048 03 Rama Krishna Farm (Hemlata) 16,31,225 04 Rama Bankey Bihar Upvan 6,24,316 05 Total 45,78,589 Thus in view of the aforesaid analysis, the addition amounting to Rs.3,66,41,140/- gets down scale to Rs. 45,78,589 /-. Further the appellant has claimed set off of amounts by pleading "that the circle rate value as on the date of agreement, in few cases exceeds the actual sale consideration received by the assessee and in few cases is less than it is less than the circle rate value as on the date of agreement. The assessee has worked out the figures of such difference and has noticed that the resultant sum is Rs. 15,13,565/- (Rs. 29,47,364 - Rs. 14,33,799). Your honor is therefore requested to kindly hold that provisions of sub-section 3 of section 43CA applies to the case of the assessee and delete the addition of Rs. 3,66,41,140/- as made by the Id. A.O without prejudice, the addition of Rs. 3,66,41, 140/- may kindly be restricted to Rs. 15,13,565/-." Even with regard to addition of Rs. 16,31,225/- as in the case of Hemlata, as referred to in para 8.3 above, the appellant pleaded that the intention of law was to provide relief when booking/allotment/agreement was done in the prior year. As such, the condition of not having received cash should not be read into the provisions. To this effect, the appellant sought to rely upon order of Hon ble ITAT in the case of Indexone Tradecone (P) Ltd. vs. DCIT, reported as 97 taxmann.com 174(Jaipur) 172 ITD 396, date of order 16.07.2018. Para 12 and 13 of that order are as follows- "12. The provisions of section 43CA have been inserted by the Finance Act, 2013 we.f 01.04.2014 relevant to assessment year 2014-15 and if we look at the provisions of sub-section (3) and sub-section (4), it emphasizes a scenario where the date of agreement fixing value of consideration for transfer of the assets and date of registration are not the same and provides that the value as on the date of agreement would be considered provided the amount of consideration or part thereof has been received by any mode other than cash on or before the date of agreement for transfer of the assets.
In the present case, where the date of agreement to sell in respect
I.T.As. No.4974 & 5111/Del/2019 18 of the two flats is 9.4.2007, which is much prior to the financial year relevant to assessment year 2014-15 when the provisions of section 43CA have become effective, there is no way the assessee would have foreseen these provisions at the time of entering into the agreement to sell that it has to receive the consideration only by any mode other than cash. At the relevant point in time when it had entered into agreement to sell, there was no such requirement of receiving the whole of the consideration in mode other than cash. Therefore, in order to make the provisions of sub-section (4) workable, in our view, the provisions of sub-section (4) would be applicable in respect of agreement to sell for transfer of an asset which has been executed on or after 1st April, 2013 and thus, not applicable in the instant case. The matter is accordingly remanded back to the file of the ld CIT(A) to determine the valuation of the two properties in terms of sub- section (3) as on the date of agreement to sell which is 9.4.2007 and where it is so determined that such valuation is higher than what has been declared by the assessee, the same can be brought to tax in the year under consideration." I note that what the appellant want is a different interpretation. In my understanding when the provisions are clear and unambiguous no laws of interpretation or intention have to be referred to. This argument/consideration/ fact was not before the Hon'ble ITAT. Accordingly, the plea of the appellant with regard to addition of Rs. 16,31,225/-, is rejected. I note that based on my examination and analysis, the addition of Rs. 45,78,589/-, is to survive. The assessee however, has pleaded for a set off as detailed in the earlier paragraph, and after set off, according to the appellant, at best and without prejudice, even the addition of Rs. 29,47,364/- may get down scaled to Rs. 15,13,565/-. I am of the view that law does not provide for such a set off. Therefore, this plea of the appellant is to be rejected summarily. The appellant in his pleadings during the course of hearing explained that even as per the A.O., no amount of sale consideration has been received over and above the sale consideration. The appellant pleaded that there is no concealment whatsoever, and therefore, the income actually received and shown in the sale deeds is to be considered. I note that this is not a case where any concealment has been made or detected. I also note that the case here is not that of receipt of consideration over and above the sale deed consideration. However, the addition has been made on account of provisions of law contained in section 43CA(1) till 43CA(4) of the Income Tax Act, 1961. In this view of the matter also, the appellant's plea of deletion of addition or restricting the addition to Rs. 15,13,565 /- is also to be reiected.
In final analysis, the appellant succeeds in part in this appeal. The addition amounting to Rs. 3,66,41,140/-, gets down scaled to Rs. 45,78,589/-.”
I.T.As. No.4974 & 5111/Del/2019 19
Based on appreciation of facts and legal position, the CIT(A) in the final analysis granted substantial relief to the assessee and scaled down additions under Section 43CA of the Act from Rs.3,66,41,140/- to Rs.45,78,589/-.
Aggrieved by the partial relief, both the Revenue and assessee are in appeal before the Tribunal as per their respective cross appeals.
With reference to revenue appeal, the ld. DR for the Revenue supported the action of the Assessing Officer and submitted that the provisions of Section 43CA inserted by Finance Act, 2013, the Assessing Officer has merely adopted the circle rate instead of agreement rate/allotment rate in tune with Section 43CA of the Act. The Ld. DR thus submitted that where the circle rate is in excess of the actual sale consideration, the actual sale consideration is required to be substituted by the deeming provisions of S. 43CA in force and the no fault could be found with the action of AO.
10. As regards appeal of the assessee on the addition of Rs.16,31,225/- in the case of Hemlata as confirmed by the CIT(A), the ld. DR relied upon the averments made in the first appellate order and submitted that the law under Section 43CA has been correctly applied for this allottee.
The ld. counsel for the assessee, on the other hand, strongly relied upon the submissions made before the CIT(A) and the findings thereon by the CIT(A). The Ld. Counsel submitted that the payments were received and the allotment letters were issued as tabulated by the CIT(A) in its detailed order while analyzing the factual matrix. It was submitted that the AO has grossly erred in applying the stamp duty rate/ circle rate despite the fact that the I.T.As. No.4974 & 5111/Del/2019 20 plots were allotted in different years much earlier to the assessment year AY 2014-15 when Section 43CA came into force. It was asserted that at the time of allotment and fixation of sale consideration, the provisons of Section 43CA was not in existence and could not be visualized by the assessee. It was thus submitted that the CIT(A) has rightly endorsed the legitimate action of the Assessee and applied the law correctly in sync with judicial dicta while granting relief.
As regards the assessee appeal, the ld. counsel submitted that he does not seek to press all other grounds except ground no.2 concerning addition of Rs.16,31,225/- in respect of plot at Rama Krishna Farm allotted to Hemlata. The ld. counsel thus submitted that all other grounds may be treated as not pressed except ground no.2 of the assessee appeal.
13. As regards the additions under Section 43CA in respect of Hemlata, the ld. counsel submitted that de facto agreements were duly entered into by and between the assessee and Hemlata, i.e., the buyer and also other buyers on issuance of allotment letter much prior to the date of insertion of Section 43CA of the Act and therefore, the stamp duty rate / circle rate of the current year cannot be applied for the actual consideration agreed on allotment of plots in the earlier years. The payment in cash was not a bar at the time of allotment. The bar placed by Section 43CA coming into force subsequently could not be adopted for the purposes of disallowance. The ld. counsel thus submitted that while the CIT(A) has applied the principles of law correctly in respect of other allotments, no justifiable reason has been assigned for denying the relief in respect of allottee Hemlata and additions of Rs.16,31,225/- has been wrongly affirmed with the aid of Section 43CA which requires to be I.T.As. No.4974 & 5111/Del/2019 21 reversed.
We have carefully considered the rival submissions and perused the material available on record.
The application of Section 43CA in the facts of the case of AY 2015-16 is in question. Section 43CA has been inserted by Finance Act, 2013 and is applicable from Assessment Year 2014-15 onwards corresponding to previous year 2013-14. On a broader reckoning, section 43CA [w.e.f. 1-4-2014] of the Income-tax Act create deeming fiction as regards full value of consideration received on transfer of asset, being immovable property. Consequently, where the consideration for the transfer of an asset (other than a capital asset), being land or building or both, is less than the value adopted for stamp duty purposes, the value so adopted or assessed shall be deemed to be the full value of consideration for the purposes of computing income under the head profits and gains of business or profession.
15.1 In the case under consideration, the applicability of S. 43CA has been subject matter of controversy. In the present case, the undisputed facts are that the assessee, engaged in real estate business, has received a part consideration of certain mutually agreed sale price and issued allotment letters in lieu thereof towards sale of plots to various allottees. The Assessee has received majority payment through banking channel in the earlier years much prior to the insertion of Section 43CA of the Act w.e.f 1-4-2014 i.e AY 2014-15. The AO however, applied the provisions of section 43CA and substituted the sale consideration determined at the time of allotment of plots to various customers with the corresponding stamp duty valuation applicable for this year where agreement for sale of plot was executed for the purposes of transfer of plots. The CIT(A) took cognizance of the allotment letter and noticed that it is I.T.As. No.4974 & 5111/Del/2019 22 actually an agreement where the sale consideration is already fixed at the time of allotment in the light of judgment of the Hon’ble Supreme Court in the case of DLF Universal Ltd. vs. Appropriate Authority & anrs. 243 ITR 730(SC); R. N. Sons (P) Ltd. vs. Appropriate Authority 330 ITR 455(Del.). The CIT(A) thus observed that the date of agreement of transfer (by way of allotment of plots) is different than the date of transfer during the AY 2015-16 in question and hence the stamp duty value as on the date of agreement by way of allotment letter is to be considered as full value of consideration and not the stamp duty value as on the date of transfer. Several decisions of co-ordinate bench of tribunal were referred to and relied upon.
15.2 The assessee points out that the CIT(A) has analyzed the provisions of Section 43CA of the Act in conjunction with the judicial precedents with reference to the purport of allotment letter / agreement with various allottees and found merit in the plea of the assessee towards non applicability of Section 43CA in the facts of the case where the obligation to handover the plots to various allottees at a pre-determined consideration already arose to the assessee prior to the insertion of S. 43CA in the statute. The CIT(A) thus agreed with the contention of the assessee for adoption of predetermined value for sale as the full value of consideration. The CIT(A) found that where the assessee committed for proposed sale and offer were accepted by the allotees of the plots at certain price much prior to the insertion of S. 43CA, the circle rate notified in the year of transfer can not be adopted for the purposes of S. 43CA.
15.3 The Assessee contends that where allotment were issued much prior to the financial year relevant to assessment year 2014-15 when the provisions of Section 43CA have become effective, there is I.T.As. No.4974 & 5111/Del/2019 23 no way an assessee could have foreseen these provisions at the time of allotment. Besides, at the relevant point in time when the allotment letter were issued there was no such requirement of receiving the whole of the consideration in the mode other than cash. In fact, as stated, the assessee has received majority payment by cheque in the earlier years from various allottees, except in the case of an allotee namely ‘Hemlata’ where a part of the consideration of Rs. 37500/- was received in cash on 08/12/2006.
15.4 The issue is squarely covered in favour of the assessee by hosts of the judgments including Index One Trade Con P. Ltd. (supra).
On appraisal of the factual analysis carried out by the CIT(A) and applicable legal position thereon, we see no perceptible error in the findings rendered by the CIT(A) on first principles that the circle rate on the date of agreement can not be substituted for agreed and actual sale consideration determined in terms of allotment letter whereby the contractual obligations to transfer the plots had already been fastened on the assessee in the earlier years, much prior to insertion of s. 43CA. The relief thus granted by the CIT(A) is in tune with the schematic interpretation of S. 43CA and thus deserves to hold the field. Hence, We decline to interfere. The appeal of the revenue thus fails.
We now turn to the appeal of the Assessee seeking to challenge the denial of relief granted in the case of one allotee namely, Hemlata on the ground that allotment letter for transfer of plot has been issued for consideration received in cash albeit in FY 2006-07.
17.1 The CIT(A) denied relief and sustained application of S. 43CA
I.T.As. No.4974 & 5111/Del/2019 24 to transaction carried out in cash in the earlier year taking shelter of sub-section (4) of Section 43CA of the Act. The action of the CIT(A) is squarely opposed to the decision of the co-ordinate bench in Indexone (supra). We see no justifiable reason to deny the benefit of agreement value instead of circle rate in the case of Hemlata where the condition of receipt in cheque has been unjustly read into the provisions in contradiction to the judgment of the Co-ordinate Bench in Index One Trade Con P. Ltd. The transaction in cash occurred in AY 2007-08 when the provisions of Section 43CA was not at all existing in statute book.
17.2 Significantly, the assessee is in the business of real estate and has issued allotment letters for sale of plot to large number of parties and sold about 70 plots. Thus, the assessee has not entered into an isolated instance of allotment of plot with Hemlata alone. Large number of allottess shows the bona fide of the modus operandi of the assessee. When tested on the touchstone of preponderance of probabilities, the bona fide transaction and contractual commitment with Hemlata way back in FY 2006-07 cannot be doubted merely to invoke and apply a prospective law of S. 43CA. It was only initial payment of Rs.37,500/- which was received in cash from Hemlata. The booking amount in cash was received way back on 08.12.2006 for a plot in Rama Krishna Farm Vrindavan. The formal booking of plot was carried out on 22.07.2007 and allotment letter was accordingly issued to her on 25.09.2007. The sale agreement was executed by and between the assessee and Hemlata for the sale of plot in FY 2014-15 on 24.07.2014 and registered in favour of Hemlata on 28.07.2014. Since the plot was already allotted by the assessee against the sale consideration of Rs.2,50,000/-, the assessee had no choice but to execute the sale deed in respect of plot no. C-41A admeasuring 500
I.T.As. No.4974 & 5111/Del/2019 25 sq. yard in Rama Krishna Farm in favour of Hemlata and in the wake of contractual obligations to abide by the terms of agreement entered in the year 2007, there was no reason to draw adverse inference against the assessee under Section 43CA(4) of the Act inserted w.e.f Assessment Year 2014-15. The addition of Rs. 16,31,225 attributable to allotment carried in the name of Hemlata is thus wholly unjustified.
17.3 Hence, in respect to appeal of the assessee, we find justifiable reason to reverse the action of the CIT(A) to the extent of additions confirmed for transaction with Hemlata amounting to Rs. 16,31,225/-. The action of the CIT(A) to this extent is thus set aside and reversed.
17.4 Other issues raised in the grounds of appeal by the assessee remains uncontested in the course of hearing and are thus dismissed as not pressed.
In the result, the appeal of the Revenue is dismissed while the appeal of the assessee is partly allowed. Order pronounced in the open Court on 29/05/2023