2022 (1) TMI 1417 - AT - Income Tax

Addition u/s 43CA - difference between the agreement value and market value as per registered agreement - assessee stated that payment allotment letters for the impugned items were received much earlier - CIT(A) has held that he was of the opinion that invariably the stamp value date on registration has to be adopted and hence he was upholding the order of the AO HELD THAT - CIT(A) conclusion is quiet contrary to what the AO has held. AO has clearly accepted the assessee s contentions that he is in agreement that ready recokner value on the date of allotment is being considered. Hence the reason for CIT(A) in upholding the addition is not as per the facts on record. In any case we note that this is assessees plea that section 43CA was introduced w.e.f. 01.04.2013 and the agreement under consideration were entered into prior to 31.03.2013.This is assessees plea that difference is only 5% between the ready recokner rate and sale consideration. Hence this is assessees plea that the same has to be ignored on the touchstone of Krishna Enterprises vs ACIT 2016 (12) TMI 52 - ITAT MUMBAI - Thus issue decided in favour of the assessee.

Summary

Issues:
1. Applicability of section 43CA to the sale of properties.
2. Interpretation of the ready reckoner rates in relation to the sale consideration.
3. Determination of the completion of sale for the purpose of invoking section 43CA.

Issue 1: Applicability of section 43CA to the sale of properties.

The case involved the question of whether the provisions of section 43CA were applicable to the sale of properties by the assessee. The Assessing Officer (AO) noted a difference between the agreement value and market value, leading to the invocation of section 43CA. The assessee argued that the allotment letters for the properties were received much earlier, and hence, the provisions of section 43CA were not applicable. The assessee provided evidence such as allotment letters, bank statements, and ledger accounts to support their claim. The AO, however, concluded that two properties were sold below market value and added back the differential amount to the total income of the assessee.

Issue 2: Interpretation of the ready reckoner rates in relation to the sale consideration.

The dispute also revolved around the interpretation of ready reckoner rates concerning the sale consideration. The assessee contended that the ready reckoner rates were for ready possession shops and not for shops under construction. The assessee argued that the marginal difference of less than 5% between the ready reckoner rates and the sale consideration for the impugned shops should be disregarded. The AO, however, upheld the addition based on the differential between the market value derived from the adoption of ready reckoner values and the actual sale consideration.

Issue 3: Determination of the completion of sale for the purpose of invoking section 43CA.

The case further delved into the determination of when the sale of properties was considered completed for the purpose of invoking section 43CA. The Commissioner of Income Tax (Appeals) upheld the AO's addition, stating that the sale was completed in the relevant assessment year when the properties were registered. The assessee argued that the sale was part of a contract that was formalized earlier, and registration was a mere formality. The Income Tax Appellate Tribunal (ITAT) found in favor of the assessee, emphasizing that the properties were agreed to be sold before the introduction of section 43CA and that the difference in ready reckoner rates and sale consideration, being less than 5%, should be disregarded. The ITAT set aside the orders of the lower authorities and decided the issue in favor of the assessee.

In conclusion, the judgment addressed the applicability of section 43CA, the interpretation of ready reckoner rates, and the determination of the completion of the sale. The ITAT ruled in favor of the assessee, emphasizing that the properties were agreed to be sold before the introduction of section 43CA and that the marginal difference in rates should be ignored, ultimately allowing the appeal by the assessee.