2023 (11) TMI 848 - AT - Income Tax

Addition u/s u/s 43CA - Difference in the sale value and stamp duty value - Addition made without awaiting the report of DVO - scope of proviso to subsection (1) of section 43CA - tolerance limit band - HELD THAT - We note that the Finance Act 2018 has inserted a proviso to subsection (1) of section 43CA which provides 5% tolerance limit if there is variation between declared sale consideration vis-a-vis stamp duty value, and in such an event then, no addition is warranted. Similar proviso was inserted by the Finance Act 2018 to sub-section (1) of section 50C of the Act. The said tolerance limit band was enhanced from 5% to 10% by the Finance Act 2020 w.e.f. 01/4/2021. As decided in Pune Tribunal in the case of Radhika Sales Corporation 2018 (11) TMI 1788 - ITAT PUNE wherein the Tribunal held that if the difference in the value declared by the assessee and the value determined by the DVO is less than 10%, then no addition may be made. As taking into consideration the Pune Tribunal s decision in the case of Radhika Sales Corporation 2018 (11) TMI 1788 - ITAT PUNE and case of Maria Fernandes Cheryle 2021 (1) TMI 620 - ITAT MUMBAI we are of the opinion that the proviso explaining the tolerance limit has to be read retrospectively. Therefore, in the present case in hand as noted difference between the declared sale value i.e. Rs. 9,50,00,000/- and the value decided by the DVO is Rs. 9,91,25,000/- which difference being less than 10% i.e, 4.35% , no addition is warranted. However, we note that the AO has not passed the consequential rectification order after the DVO had submitted his report dated 21.02.2019. Therefore, we deem it fit to set aside the impugned order and restore the matter back to the file of AO for limited purpose of verification of the facts stated and if assessee s claim as discussed is found to be correct, then, no addition is warranted. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Consideration of Fair Market Value vs. Stamp Duty Value
2. Retrospective Application of Curative Amendment in Section 43CA

Summary:

1. Consideration of Fair Market Value vs. Stamp Duty Value:
The assessee, a Private Limited Company engaged in Civil Construction, filed its return of income for the assessment year 2014-15. The Assessing Officer (AO) noted a discrepancy between the sale consideration and the stamp duty valuation of two units sold by the assessee. The AO made an addition of Rs. 2.44 crores under Section 43CA of the Income Tax Act, 1961, without awaiting the Departmental Valuation Officer's (DVO) report. The assessee argued that the difference between the DVO's valuation and the sale consideration was only Rs. 41,25,000/- (4.35%), which is below the tolerance limit of 5%. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal without considering the DVO report. The Tribunal noted that the difference was less than 10% and, therefore, no addition was warranted. The Tribunal directed the AO to verify the facts and, if found correct, to delete the addition.

2. Retrospective Application of Curative Amendment in Section 43CA:
The assessee argued that the curative amendment to Section 43CA, which provides a tolerance band of 10% for the difference between the sale consideration and the stamp duty value, should be applied retrospectively. The Tribunal supported this view, citing various precedents, including the Tribunal's decisions in the cases of Sai Bhargavanath Infra Vs. ACIT and Maria Fernandes Cheryle Vs. ITO. The Tribunal held that the amendment is curative in nature and should be applied retrospectively to provide relief to the assessee. The Tribunal directed the AO to verify the facts and, if the difference is found to be less than 10%, to delete the addition.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to verify the facts and, if the difference between the sale consideration and the DVO's valuation is less than 10%, to delete the addition. The Tribunal emphasized the retrospective application of the curative amendment to Section 43CA, aligning with previous judicial decisions.