Harmony Construction Vs ITO (ITAT Pune)
Pune ITAT: Section 43CA Cannot Be Applied to Pre-2013 Sale Agreements
The Pune ITAT held that Section 43CA cannot be invoked merely because the final sale deeds were executed after 1 April 2013 when the underlying agreements to sell had been registered and substantial consideration had already been received before the provision came into force. Accordingly, the Tribunal deleted the addition of ₹68.27 lakh made on the basis of higher stamp duty valuation.
The assessee, a real estate developer, had sold certain flats during AY 2014-15. The Assessing Officer compared the sale consideration with the stamp duty value and made an addition of ₹68.27 lakh under Section 43CA in respect of 11 units. However, the assessee demonstrated that the agreements to sell for all these units had been executed and registered during FYs 2010-11 and 2012-13, well before Section 43CA became effective, and substantial sale consideration had already been received through banking channels and recognised under the percentage completion method.
The Tribunal observed that Section 43CA, introduced from 1 April 2014, is a prospective provision and cannot be applied retrospectively to transactions substantially concluded before its introduction. Relying on judicial precedents, including the Bombay High Court’s ruling in Swananda Properties Pvt. Ltd., the Tribunal held that where agreements were entered into and consideration was substantially received before 1 April 2013, the stamp duty valuation mechanism under Section 43CA could not be triggered merely because the final conveyance deed was executed later.
Holding that the Revenue had wrongly invoked Section 43CA, the ITAT deleted the entire addition of ₹68.27 lakh and allowed the assessee’s grounds of appeal.
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal at the instance of assessee pertaining to A.Y. 2014-15 is directed against the order dated 13.11.2019 of CIT(A)-1, Nashik arising out of Assessment Order dated 22.12.2016 passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter also called ‘the Act’).
