Sreenivas Narayan Vs ITO (ITAT Bangalore)
Summary: The Income Tax Appellate Tribunal, Bangalore, in Sreenivas Narayan Vs Income Tax Officer, held that the stamp duty value on the date of the agreement for sale should be considered for computing business profits under Section 43CA(3) of the Income-tax Act, 1961, where the agreement date and registration date differed and part of the sale consideration had already been received through banking channels. The Tribunal set aside an addition of ₹34,82,499 made by adopting the stamp duty value prevailing on the date of registration of a duplex flat. The assessee, engaged in building and construction through a proprietary concern, had entered into an agreement for sale on 3 August 2014, while the registered sale deed was executed on 12 June 2017. The Assessing Officer had adopted the registration-date stamp duty value of ₹1,39,00,000 instead of the consideration recorded in the transaction, resulting in the disputed addition.
The assessee contended that the sale consideration and other material terms had been fixed under the agreement dated 3 August 2014. The purchaser had obtained housing finance through HDFC Ltd., and payments were made in instalments. The Assessing Officer rejected the contention because legal ownership passed only upon registration in 2017. The Commissioner of Income Tax (Appeals) upheld the addition, reasoning that the full consideration and possession were transferred in 2017 and that no completed sale had taken place in 2014.
On examining the sale deed and payment records, the Tribunal found that the assessee had received ₹10 lakh on 25 June 2014, ₹8 lakh on 26 June 2014 and ₹7 lakh on 27 June 2014 through RTGS from HDFC Bank Ltd., before the agreement dated 3 August 2014. The Tribunal also found that the original agreement terms had remained unchanged. Accordingly, the conditions for applying Section 43CA(3) read with Section 43CA(4) were satisfied. The Tribunal directed the Assessing Officer to adopt the stamp duty value as on 3 August 2014 for computing the profits and gains arising from the transfer and to afford the assessee a reasonable opportunity of hearing. The appeal was allowed for statistical purposes.
The ruling highlights that the difference between the agreement date and the registration date does not automatically justify using the later stamp duty valuation. Where the consideration was fixed under an earlier agreement and the statutory non-cash payment condition is fulfilled, the earlier valuation date may apply. The relevant inquiry is whether the conditions prescribed under Section 43CA are met, rather than merely whether legal ownership was transferred on the date of the earlier agreement.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The assessee has filed the present appeal against the impugned order dated 02/12/2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2018-19.
2. In this appeal, the assessee has raised the following grounds: –
1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case, to the extent prejudicial to the interests of the appellant and is opposed to the principles of equity, natural Justice and fair play.
2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction.
3. For that the Commissioner of Income Tax (Appeals) erred in upholding the addition to the tune of Rs.34,82,499/- made u/s.43CA of the Income Tax Act in respect of transfer of an asset (Other than capital asset).
4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 43CA of the Income Tax Act are not invocable in the facts and circumstances of the instant case.
5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer erred in adopting the guideline value as the full value of consideration by invoking the provisions of section 43CA of the Income Tax Act.
6. For that the appellant had complied with all the statutory conditions as prescribed under section 43CA of the Income Tax Act.
7. For that the appellant objects to the levy of interest under sections 234A and 234B of the Income Tax Act.
3. The solitary grievance of the assessee, in the present appeal, is against the addition made under section 43CA of the Act.
4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and is engaged in the business of building and construction through his proprietary concern. For the year under consideration, the assessee did not file his return of income. Subsequently, on the basis of the information available under the NMS category of the Insight Portal that during the year under consideration, the assessee has entered into a transaction of sale of immovable property, notice under section 148 of the Act was issued on 04/04/2022. In response to the said notice, the assessee filed his return of income, declaring a total income of ₹ 4,68,430. During the assessment proceedings, in response to the statutory notices, the assessee submitted that during the year under consideration he sold a duplex flat for a sum of ₹ 1,04,17,500, in respect of which the sale deed was registered in the month of June 2017, and the purchaser recovered TDS on the sale consideration at 1%, i.e. ₹ 1,04,175. After considering the submissions of the assessee, notice was issued to the assessee to show cause as to why the stamp duty value on the date of the sale deed should not be considered as the full value of consideration for computing the profits and gains from transfer of the immovable property under section 43CA of the Act. In response, the assessee submitted that the agreement for sale was entered into with the purchaser in the year 2014 and therefore, as per the provisions of section 43CA(3) of the Act, the stamp duty value in the year 2014 should be taken into consideration for the purpose of computation of profits and gains from transfer of immovable property.
5. The Assessing Officer (“AO”), vide order dated 19/03/2024 passed under section 147 read with section 144B of the Act, disagreed with the submissions of the assessee and held that merely on the basis of an agreement for sale, the ownership of the property does not transfer to the purchaser and the transfer of actual ownership takes place when the sale of immovable property is executed by way of a registered sale deed. The AO held that since the sale transaction of the immovable property was made only on 12/06/2017, which is the date of registration of the agreement between the assessee and the purchaser, the stamp duty value on the said date should be taken into consideration. As the stamp duty value of the property on the date of registration of the sale deed was ₹ 1,39,00,000, the differential amount of ₹ 34,82,499 over and above the agreement value of ₹ 1,04,70,501 was added to the total income of the assessee under section 43CA of the Act.
6. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on this issue and held that the sale transaction will be completed on fulfilment of two conditions, such as payment of full value of sale consideration by the purchaser and handover of the possession of the property to the purchaser. Since, in the present case, on the date of the agreement in 2014, the assessee had not received the full value of consideration and possession of the property was not handed over, the learned CIT(A) held that no sale transaction took place in 2014. It was further held that the full value of consideration was received in the year 2017 and possession of the property was also handed over by the assessee to the buyer in the year 2017, and therefore, the stamp duty value as on the date of registration of the sale deed should be taken into consideration for the purpose of section 43CA of the Act. Being aggrieved, the assessee is in appeal before us.
7. We have considered the submissions of both sides and perused the material available on record. Since the impugned addition in the present case was made under section 43CA of the Act, at the outset, it is relevant to note the provisions of the said section and the same are reproduced as follows: –
“43CA. (1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
(2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1).
(3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement.
(4) The provisions of sub-section (3) shall apply only in a case where the amount of consideration or a part thereof has been received by any mode other than cash on or before the date of agreement for transfer of the asset.”
8. Therefore, as per the provisions of section 43CA(1) of the Act, where the consideration received or accrued as a result of the transfer by an assessee of a land or building is less than the value adopted by the stamp duty authority, then the value so adopted shall be deemed to be the full value of the consideration received or accruing as a result of such transfer for the purpose of computing profits and gains from transfer of such asset. The provisions of section 43CA(3) further provide that where the date of agreement fixing the value of consideration and the date of registration of such transfer of asset are not the same, then stamp duty value as on the date of agreement shall be taken as the full value of the consideration for the purpose of computing profits and gains from transfer of such asset.
9. In the present case, as per the assessee, he entered into an agreement for sale of a duplex flat on 03/08/2014 for a total consideration of ₹ 1,04,17,501. It is further submitted that, in respect of the property, the purchaser took a home loan from HDFC Ltd and a tripartite agreement was also entered into between the assessee, being the builder, HDFC Ltd., being the financier, and the buyer. Pursuant to which, the buyer was sanctioned a home loan, and the entire agreed sale consideration was received from the buyer and HDFC Ltd. in various stages on different dates between the financial years 2014 and 2017. As per the assessee, in 2017 only the sale deed was registered. However, all the terms and conditions, including the dimensions of the duplex flat and sale consideration, etc., were already agreed vide agreement for sale dated 03/08/2014. Thus, as per the assessee, for the purpose of section 43CA of the Act, the stamp duty value as on the date of the agreement for sale should be taken into consideration instead of the stamp duty value on the date of the sale deed, which was entered on 12/06/2017. It is evident from the record that the Revenue authorities disagreed with the submissions of the assessee and considered the stamp duty value as on the date of the sale deed, i.e. 12/06/2017, and made the impugned addition of ₹34,82,499 under section 43CA of the Act.
10. From the perusal of the sale deed executed on 12/06/2017, forming part of the paper book from pages 2-27, we find that the assessee sold Apartment No. FF – 1 and SF – 1 admeasuring 2522 ft² super built-up area in Jasmine Chalet. We further find that the sale consideration agreed between the parties was ₹ 1,04,17,500, which, as evident from pages 6 and 7 of the sale deed, was paid in various instalments. We further find that till the date of the agreement for sale, i.e. 03/08/2014, the assessee was paid ₹ 10 lakh on 25/06/2014, ₹ 8 lakh on 26/06/2014, and ₹ 7 lakh on 27/06/2014 by way of RTGS from HDFC Bank Ltd. Therefore, it is evident that the assessee had already received part of the consideration through banking channels on or before the date of the agreement for sale. Further, it is undisputed that there was no change in the terms and conditions of the sale transaction agreed to vide the agreement for sale. Thus, the parties honoured the agreement for sale entered into on 03/08/2014 for the sale of the duplex flat. Therefore, since the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same in the present case, we are of the considered view that the provisions of section 43CA(3) of the Act are squarely applicable to the present case and the stamp duty value as on the date of agreement for sale, i.e. on 03/08/2014, be considered as full value of consideration for computing the profits and gains of the assessee from the sale of duplex flat. Accordingly, we set aside the impugned order and delete the addition made by considering the stamp duty value as on the date of registration of the agreement. We direct the AO to compute the profits and gains from the transfer of the duplex flat in light of the provisions of section 43CA(3) of the Act by considering the stamp duty value as on the date of the agreement for sale, i.e. 03/08/2014. We further direct that no order shall be passed without affording reasonable opportunity of being heard to the assessee. Accordingly, grounds raised by the assessee are allowed for statistical purposes.
11. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 21-Sept-2026.
