Section 43CA Inapplicable to Pre-Enactment Sale Agreements: Jaipur ITAT

Kashyan Promoters And Developers Pvt. Ltd. Vs ITO (ITAT Jaipur)

Jaipur ITAT: Section 43CA Cannot Be Invoked Where Agreement to Sell and Substantial Consideration Pre-dated Its Introduction

The Jaipur ITAT deleted an addition of ₹7.54 crore made under Section 43CA, holding that the provision cannot be applied where the agreement to sell was executed and substantial consideration was received before Section 43CA came into force, even though the sale deed was registered in a later year after the provision was introduced.

The assessee had entered into an agreement to sell on 27.06.2011 and received substantial consideration through RTGS in FY 2011-12. The sale deeds were registered during AY 2015-16, whereupon the Assessing Officer invoked Section 43CA by substituting the stamp duty value as on the date of the agreement and made an addition of ₹7.54 crore.

The Tribunal held that the character of a transaction is governed by the law prevailing when the parties entered into the transaction and assumed substantial contractual obligations, and a subsequent statutory amendment cannot alter that character merely because registration took place later. Since Section 43CA was introduced only with effect from AY 2014-15, it could not be retrospectively applied to a transaction substantially concluded in FY 2011-12.