2023 (3) TMI 1539 - AT - Income Tax

Sale of immovable properties (flats) for consideration lower than the market price of the said flats adopted for stamp duty purposes - Applicability of Section 43CA - HELD THAT - We observe from the submissions made by the Ld. AR that assessee has sold various flats and the sale consideration declared by them and registered stamp duty are different having a difference between 5.37% to 28.7%. AR made a submissions that the amendment made to section 43CA are retrospective in nature and in this regard he relied on the decision of the Shri Harish H Gandhi v. ACIT 2022 (6) TMI 1277 - ITAT MUMBAI as held that language of provisions of Section 50C are exactly pari materia with provisions of Section 43CA of the Act. Hence, though the aforesaid decision was rendered in the context of Section 50C of the Act, the same analogy would apply for provisions of Section 43CA of the Act also as similar proviso is available in Section 43CA of the Act also. Hence we hold that the difference added by the ld. AO in the assessment falls below the tolerance band of 10% and hence, by applying the proviso to Section 43CA of the Act, no addition is required to be made in the instant case u/s. 43CA. Thus the amendment made to section 43CA is retrospective in nature. Accordingly, as per the proviso the percentage range up to 10% are outside the provisions of section 40CA of the Act . Accordingly, Sl. No. 3, 4 5 8 are outside the provisions of this section considering the fact the difference is less than 10%. In Sl. No. 9 for Flat No. 302 the difference is 10.06% which is near to the specified limit fixed at 10%, since the difference is very meager we direct the Assessing Officer to exclude Sl. No. 9 also. We are inclined to partly allow the ground raised by the assessee.

Summary

Issues Involved:

1. Applicability of Section 43CA of the Income Tax Act, 1961.
2. Requirement of referring property valuation to the Valuation Officer.
3. Retrospective applicability of the amendment to Section 43CA regarding tolerance limits.
4. Impact of the Income Disclosure Scheme, 2016 (IDS-2016) on the assessment.

Issue-wise Detailed Analysis:

1. Applicability of Section 43CA of the Income Tax Act, 1961:

The primary issue was whether the provisions of Section 43CA applied to the sale of flats by the assessee for consideration lower than the market value adopted for stamp duty purposes. The Assessing Officer (AO) determined that Section 43CA was applicable to flats mentioned at Serial No. 4 to 19 in the show cause notice, treating the difference in sale consideration and stamp duty valuation as income. The assessee argued that Section 43CA was not applicable as the properties were allotted before its effective date of 01.04.2013. However, the AO relied on the provisions of Section 43CA, which mandates that the difference between the sale price and the stamp duty value should be treated as income.

2. Requirement of Referring Property Valuation to the Valuation Officer:

The assessee contended that the AO should have referred the property valuation to the Valuation Officer as per Section 43CA(2) when the value adopted by the stamp duty authority exceeded the fair market value. The CIT(A) observed that the assessee did not claim that the market value was lower than the stamp duty valuation, but rather that flats were sold at a lower value to generate cash flow. Consequently, the CIT(A) dismissed the argument, stating that the reference to the Valuation Officer was unnecessary since the assessee did not dispute the market value adopted by the stamp authority.

3. Retrospective Applicability of the Amendment to Section 43CA Regarding Tolerance Limits:

The assessee argued that the amendment to Section 43CA, which increased the tolerance limit for the difference between sale consideration and stamp duty value from 5% to 10%, should be applied retrospectively. The CIT(A) acknowledged the retrospective nature of the 5% tolerance limit but not the 10% limit, which was applicable from AY 2021-22. The Tribunal, however, noted that similar provisions in Section 50C were deemed retrospective by judicial precedents and applied the 10% tolerance limit retrospectively for the flats where the difference was within this range, granting partial relief to the assessee.

4. Impact of the Income Disclosure Scheme, 2016 (IDS-2016) on the Assessment:

The assessee claimed that the discrepancies were covered under the IDS-2016, where an amount of Rs. 11,75,00,000 was declared as business income. However, no substantial submissions were made regarding this claim during the appeal, and the Tribunal did not address this ground, dismissing it as not pressed.

Conclusion:

The Tribunal partly allowed the appeal, upholding the addition for flats where the difference exceeded the 10% tolerance limit but granting relief for those within the limit, following the retrospective application of the amendment to Section 43CA. The ground regarding the IDS-2016 was dismissed due to lack of argumentation.