Seema Promoters and Builders Pvt. Ltd Vs DCIT (ITAT Mumbai);
Conclusion: Income tax addition could not be made under section 43CA in absence of element of transfer. When assessee was not an owner of any asset, there couldn’t be any question of transferring the same to someone else whether provisions of sec43CA was complied with or not would be a secondary issue.
Held: Assessee-company was engaged in the business as Builder/promoter of residential and commercial complexes. It had e-filed its return of income declaring total income at Rs. 29,72,720/-. During the assessment proceedings it was seen that assessee had sold some immovable property. It was seen that there was a substantial difference between the market value and the agreement value in respect of these transactions. A show cause was issued to assessee as to why the amount of difference amounting to Rs 4,52,40,600/- shouldn’t be added u/s 43CA. It was held that assessee-company inadvertently entered into a transaction of purchase of agricultural land, which was void ab-initio. Assessee was never a lawful owner of the said agricultural land as mentioned supra. When assessee was not an owner of any asset, there couldn’t be any question of transferring the same to someone else whether provisions of sec43CA was complied with or not would 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. In view of the above action of AO in applying sec 43CA 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. Assessee being party of cancellation deed, did not tantamount to entering the transaction of sale /transfer. In absence of element of transfer sec 43CA could’t be applied. AO was directed to delete the addition amounting to Rs 4,52,40,600/-.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)-2, Thane [hereinafter referred to as [‘CIT(A)’] dated 30.09.2019passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as [‘the Act’] for the Assessment Year (AY) 2014-15. The assessee has raised the following grounds of appeal:
“Being aggrieved by the order dated 30.09.2019 passed by the learned Commissioner of Income Tax (Appeals 2. Thane (“Ld. CITA)” u/s 250 of the Income-tax Act, 1961 (Act”), your appellant prefers this appeal, among others, on the following grounds of appeal, each of which is without prejudice to, and independent of, the other
1.1 On the facts and in the circumstances of the case, and also in law, the Ld. CIT(A) erred in confirming the addition of Rs.4,52,40,600/- made by the Ld. AO by invoking provisions of Section 43CA of the Act in regard to certain registered Cancellation Deeds executed by the appellant for cancelling the earlier purchase transactions of the plots of agricultural land.
1.2 The Ld. CITIA) thus failed to appreciate, and ought to have held, that these Cancellation Deeds did not involve any transfer as envisaged under section 43CA of the Act since the earlier purchase transactions themselves were ab initio void, and illegal as per the provisions of Section 6h) of the Transfer of Property Act, 1882 read with Section 23 of the Indian Contract Act, 1872 and Section 63(1) of the Maharashtra Tenancy and Agricultural Lands Act, 1948.
Your appellant, therefore, prays that the addition of Rs.4,52,40,600/- be deleted.”
2. Brief facts of the case are that the assessee-company is engaged in the business as Builder/promoter of residential and commercial complexes at Neral e-filed its return of income on 28.11.2014 declaring total income at Rs. 29,72,720/-.
3. During the assessment proceedings it is seen that assessee has sold some immovable property. It was seen that there is a substantial difference between the market value and the agreement value in respect of these transactions. The same is summarised as under:
