Indexone Tradecone Pvt. Ltd. Vs DCIT (ITAT Jaipur)
The question that arises for consideration is whether the provision of section 43CA can be invoked in respect of such transactions and the differential amount can be brought to tax for the reason that the sale deed has been executed during the year under consideration wherein the value adopted by the Sub-Registrar for purposes of payment of stamp duty is higher than what has been agreed to between the assessee and the buyer and the exceptions provided under sub-section (4) are not available to the assessee.
The provisions of section 43CA have been inserted by the Finance Act, 2013 w.e.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 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.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This is an appeal filed by the assessee against the order of ld. CIT(A)- 01, Jaipur dated 01.02.2018 pertaining to assessment year 2014-15 wherein the assessee has challenged the order of ld. CIT(A) in sustaining the addition of Rs. 20,38,324/- while invoking the provisions of section 43CA of the Act.
2. Briefly stated, the facts of the case are that the assessee company is engaged in business of developing and constructing residential/commercial property in Jaipur. During the course of assessment proceedings, the Assessing Officer observed that the assessee has sold various properties during the year under consideration and got them registered. It was noticed by the Assessing Officer that the assessee company has shown sale value less than the value ascertained by Sub-Registrar and as such the sale was shown less than 50C value. In its submission before the AO, the assessee submitted that the agreement to sale has been made by it in earlier years and as such the sale price has been shown accordingly. It was further stated that all the bookings have been made in earlier years through sale agreements, wherein booking amount cheques were received at the time of booking and as such the provision of section 43CA are not applicable on it. The Assessing Officer, on perusal of the registered documents filed in respect to the sale affected during the year, observed that cash payments were also received apart from payments received through cheques. Accordingly, a show cause notice dated 18.10.2016 was issued to the assessee company as to why appropriate addition should not be made in terms of provisions of section 43CA of the Act given that advances were received in cash at the time of booking in terms of copies of the agreement dated 09.07.2007. After considering the submissions of the assessee, the AO finally held that the assessee has entered into agreement to sell in earlier years and at the time of agreement, the assessee company had received payment through cheques as well as in cash as booking amount. As far as cheque payments are concerned, the same was found acceptable. However, in respect to sale transaction in respect of Flat No. 3 and T-2 situated at Sapphire Heritage, the AO observed that the assessee company received the booking amount in cash and as such it is a case of contravention of the spirit of legislature as discussed/defined in subsection (4) of such 43CA of IT Act, 1961. Accordingly, the differential amount of the sale consideration as per the sale consideration declared by the assessee in the respective sale deeds and the value adopted by the stamp duty authority for the purpose of charging the stamp duty was brought to tax in the hands of the assessee company u/s 43CA of the Act.
3. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). It was submitted before the ld. CIT(A) that provisions of section 43CA have been wrongly applied by the Assessing Officer as the sale consideration in respect of two flats (Flat No. 3 and T-2 situated at Sapphire Heritage) were already taken into consideration in earlier years in its books of accounts and offered to tax when the entire consideration was received and the possession of the flats were handed over to the buyers on 28.06.2008 and 30.06.2010 respectively. It was submitted that in terms of provisions of section 2(47)(v) of the Act, the transfer was complete on these dates and therefore, the AO was not justified in invoking the provisions of section 43CA of the Act.
4. The ld. CIT(A) referred to the provisions of section 43CA inserted by Finance Act, 2013 w.e.f 01.04.2014 and the CBDT Circular No. 3/2014[F. No. 142/24/2013-TPL] dated 24.01.2014 and held that the said provisions are applicable from A.Y 2014-15 in cases where valuation of the property adopted by the stamp duty authorities is more than the sale consideration declared in the sale deed. It was held by the ld. CIT(A) that it is undisputed fact that the sale deeds in respect of Flat No. T-3 and T-2 were registered during year under consideration and therefore, the provisions of section 43CA are clearly It was further held by the ld. CIT(A) that it is nowhere stated in section 43CA that this provisions would not be applicable to the sale transactions as covered under the provisions of section 2(47)(v) of the Act.
5. Regarding another contention of the assessee that the petty amount were received in cash at the time of executing the agreement to sell for these two flats and the remaining consideration was received through banking channels and therefore, its case is covered under the exceptions as stated in section 43CA(4) of the Act, it was held by the ld CIT(A) that there is no equity in tax laws and as per the provisions of section 43CA(4) of the Act, the exceptions to section 43CA(3) could be allowed only in those cases, wherein a part of the sale consideration was received by modes other than cash on or before the date of the ‘Agreement to Sell’ and in the instant case, the cash amount was paid by the buyers on the date of agreement to sell and therefore, the case of the assessee could not be excluded from the applicability of provisions of section 43CA(1) of the Act. Accordingly, the ld. CIT(A) upheld the addition of Rs. 20,38,324/- made by the Assessing Officer u/s 43CA of the Act. Now, the assessee is in appeal before us against the said findings of the ld CIT(A).
6. The ld AR submitted that the assessee Company is a developer & builder of residential and commercial properties. After sale of constructed property, in majority of cases, the Buyers get the properties registered in the office of Sub-Registrar in their names; however in few cases after completion of sales, the same are registered afterwards, in office of Sub-registrar as per the convenience of buyers. Since the sales in such cases are complete, these are disclosed in regular books of accounts as sales. In assessee’s case, two residential flats (Flat No. T-2 and Flat No T-3) were sold and disclosed in books of accounts as “Sale of Units” in period relevant to A.Y. 2009- 10. However, both the sold properties were got registered in the office of sub-registrar on 09.12.2013 and 03.10.2013 respectively by the Buyers. Invoking provisions of section 43CA of IT Act, both the lower authorities made/sustained addition of Rs.20,38,324/- in A.Y. 2014-15, which was the difference in actual sale price disclosed and accepted by the Deptt. in A.Y. 2009-10 and DLC rates in F.Y. 2013-14.
It was further submitted that the purchase consideration of the two residential flats (stock in trade) was received as per following details:
