Provisions of Section 43CA of Income Tax Act not Applicable to Agreement to Sale Entered and Part Payment received Prior to 01.04.2014: ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the provisions of Section 43CA of the Income Tax Act 1961, would not be applicable to agreements to sale entered and part payment received prior to 01.04.2014.

The Assessee, Alif Construction being a partnership firm engaged in the business of construction activities as a builder and developer, had shown its total income at Rs. „Nil‟ by filing its return of income for the AY under consideration on dated 26.11.2014, which was selected for scrutiny under CASS. During the assessment proceedings, the assessing officer on verification of copy of sale agreements executed by the Assessee during the AY 2014-15, found the Assessee had executed 3 sale agreements, out of which sale consideration received by the Assessee for 2 agreements/properties was less than the stamp duty valuation.

The assessing officer by observing that since valuation of the property by the Assessee was less than stamp duty value and as provisions of Section 43CA of the Income Tax were applicable in this case and made the addition being difference between stamp duty value and sale consideration of the properties, in the income of the Assessee

Subhash Bains,on behalf of the assessee submitted that Section 43CA of the Income Tax Act, which were introduced vide finance Act 2013 with effect from 01.04.2014 and would be applicable from financial year 2014-15 relevant to the AY 2015-16 onwards but not to the previous Assessment Years and therefore both authorities below misdirected themselves in applying the provisions of Section 43CA of the Income Tax Act for AY 2014-15.

The Assessee had claimed that it had initially/originally sold the flats/property under consideration to original allottees by issuing allotment letters, However the original allottees due to financial crunch, were unable to the pay the balance amount therefore they vide letter dated 13.12.2012 requested for cancellation of allotment. Consequently, the Assessee sold the said flats at a predetermined price of Rs. 40 Lakhs each by executing sale deeds even dated 28.12.2013 to other persons.

The Assessee therefore claimed that as per valuation letter dated 06.04.2010 of the Government Department, the value of the flat at particular time was lower than the amount of Rs. 48 Lakhs as agreed between the Assessee originally and therefore it can be construed that as the allotment of property has already been made in 2010 and the Assessee had received the part consideration and therefore the transactions goes back to AY 2011-12 when part payment was received, and hence the provisions of Section 43CA of the Income Tax Act were not applicable as on 01.04.2010 being not introduced/available.

Naganath B. Pasale,on behalf of the revenue  supported the orders passed by the authority below and emphasised that provisions of Section 43CA of the Income Tax Act had been introduced vide finance Act 2013 and made applicable with effect from 01.04.2014, therefore it could be construed that the same would be applicable from AY 2014-15 onwards.

The two-member Bench of B.R. Baskaran, (Accountant Member) and N. K. Choudhry, (Judicial Member) observed that It was an admitted fact that the provisions of Section 43CA of the Income Tax Act were introduced vide finance Act 2013 and made applicable w.e.f. 01.04.2014 and the Central Board of Direct Tax (CBDT) vide circular no. 3/2014 dated 24.01.2014 duly clarified that amendment made vide finance Act 2013 would take effect from 1st April, 2014 and would, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.

The Bench further allowed the appeal filed by the assessee holding, “Assessee sold the same on the same consideration amount as fixed in 2010, to the persons of particular community, we for proper and just decision of the case and for ends of substantial justice, are inclined to direct the assessing officer to refer the capital assets/properties under consideration to District Valuation Officer as per the provisions of section 50C of the Act.”

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