2018 (9) TMI 1231 - AT - Income Tax

Addition invoking the provisions of section 43CA - applicability of provisions at the time of entering into the agreement to sell - Held that - 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. - decided in favour of assessee for statistical purposes.

Issues Involved:
1. Applicability of Section 43CA of the Income Tax Act, 1961.
2. Determination of sale consideration and its declaration in the books of accounts.
3. Timing and method of receipt of sale consideration.
4. Validity of the addition made by the Assessing Officer (AO) under Section 43CA.

Issue-wise Detailed Analysis:

1. Applicability of Section 43CA of the Income Tax Act, 1961:
The primary issue revolves around whether the provisions of Section 43CA, inserted by the Finance Act, 2013 and effective from April 1, 2014, are applicable to the sale transactions of two flats (Flat No. T-2 and Flat No. T-3 at Sapphire Heritage), where the agreements to sell were executed in 2007, and the possession was handed over in 2008 and 2010, but the sale deeds were registered in 2013. The AO invoked Section 43CA, arguing that the sale consideration declared was less than the value adopted by the stamp duty authority. However, the assessee contended that the sales were completed in earlier years, and the provisions of Section 43CA should not apply retrospectively.

2. Determination of Sale Consideration and Its Declaration in the Books of Accounts:
The assessee argued that the sale consideration for the two flats was already declared and taxed in the financial year 2008-09 (A.Y. 2009-10). The details of the sale consideration received, including cash and cheque payments, were provided. The AO, however, noted that the sale deeds were registered in 2013, and the value adopted by the stamp duty authority was higher than the declared sale consideration, leading to the addition under Section 43CA.

3. Timing and Method of Receipt of Sale Consideration:
The AO observed that part of the sale consideration was received in cash at the time of booking, which contravened the spirit of Section 43CA(4). The assessee contended that the cash payments were made at the time of the agreement to sell in 2007, long before the provisions of Section 43CA were enacted. The CIT(A) upheld the AO's addition, stating that the exceptions in Section 43CA(4) did not apply as the cash payments were made on the date of the agreement to sell.

4. Validity of the Addition Made by the AO under Section 43CA:
The Tribunal considered whether the provisions of Section 43CA could be invoked for transactions where the agreements to sell were executed before the enactment of Section 43CA. It was noted that the provisions of sub-section (4) of Section 43CA, which require consideration to be received by modes other than cash, should apply to agreements executed on or after April 1, 2013. Since the agreements in question were executed in 2007, the Tribunal held that the provisions of Section 43CA(4) were not applicable. The matter was remanded back to the CIT(A) to determine the valuation of the properties as on the date of the agreement to sell (April 9, 2007), and if the valuation was higher than declared, the differential amount could be taxed in the year under consideration.

Conclusion:
The appeal was allowed for statistical purposes, and the matter was remanded to the CIT(A) to reassess the valuation of the properties as on the date of the agreement to sell. The Tribunal emphasized that the provisions of Section 43CA(4) should not apply retrospectively to agreements executed before April 1, 2013.

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