The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT), deleted income tax addition and held that no application of Sec 43CA of the Income Tax Act, 1961 on absence of element of transfer.
The assessee-company,Seema Promoters and Builders Pvt. Ltd is engaged in the business as Builder or promoter of residential and commercial complexes, e-filed its return of income declaring total income at Rupees twenty- nine lakhs. During the assessment proceedings it is seen that assessee has sold some immovable property and that there is a substantial difference between the market value and the agreement value in respect of these transactions.
Sec. 43CA of the Income Tax Act, 1961 is applicable in the case of transfer of property in addition to other ingredients of the section. In this case what we observed assessee-company inadvertently entered into a transaction of purchase of agricultural land, which was void ab-initio. It means assessee was never a lawful owner of the said agricultural land.
When assessee is not an owner of any asset, there can’t be any question of transferring the same to someone else whether provisions of sec 43CA of the Income Tax Act is complied with or not will be a secondary issue. In this case assessee-company simply rectified its earlier mistake to safe-guard the financial interest of the company and to come out an unlawful transaction entered earlier.
A Bench consisting of Shrivikas Ashwathy, Judicial Member and Gagan Goyal, Accountant Member held that “In view of the above action of AO in applying sec 43CA of the Income Tax Act. On the given facts of case was unlawful. AO and CIT(A) committed a mistake by ignoring the facts of the case and provisions of other civil laws applicable in the present case. In our considered opinion assessee being party of cancellation deed, do not tantamount to entering the transaction of sale /transfer. In absence of element of transfer sec 43CA of the Income Tax Act can’t be applied.”
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