2024 (9) TMI 1700 - AT - Income Tax

Addition u/s 43CA - difference between the market value as per Stamp Duty Authority and Agreement value - HELD THAT - Since in the present case excess of stamp duty value over the sale consideration is less than 5% of the sale consideration we are of the considered view that the provisions of section 43CA of the Act are not applicable to the present case. On this short ground only the assessee is entitled to relief. Appeal by the assessee is allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the addition of 7,37,505 to the assessee's income by the Assessment Unit-NFAC, based on the difference between the market value as per the Stamp Duty Authority and the agreement value, was justified.
• Whether the amendment introduced by the Finance Act, 2018, providing a 5% tolerance limit between the Stamp Duty Authority value and the agreement value, applies retrospectively to the assessment year 2016-17.
• Whether the National Faceless Appeal Centre/CIT(A) erred in passing an ex parte order without providing the assessee an opportunity for a hearing.

ISSUE-WISE DETAILED ANALYSIS

1. Addition of 7,37,505 to Income

• Relevant Legal Framework and Precedents: The relevant provision is Section 43CA of the Income Tax Act, which states that if the sale consideration of immovable property is less than the value adopted by the State Government authority for stamp duty purposes, the latter value shall be deemed the full value of consideration for computing profits and gains.
• Court's Interpretation and Reasoning: The Tribunal noted that the Finance Act, 2018, introduced a proviso to Section 43CA(1), effective from 01/04/2019, allowing a 5% tolerance limit for differences between the stamp duty value and the sale consideration.
• Application of Law to Facts: Since the difference between the sale consideration and the stamp duty value was 3.79%, which is within the 5% tolerance limit introduced by the Finance Act, 2018, the Tribunal found that the provisions of Section 43CA were not applicable.
• Treatment of Competing Arguments: The Revenue argued that the amendment was prospective and not applicable to the assessment year 2016-17. However, the Tribunal relied on precedents that held such amendments to be curative and retrospective.
• Conclusions: The addition of 7,37,505 was not justified as the difference fell within the permissible limit, and the amendment was applicable retrospectively.

2. Retrospective Application of the Finance Act, 2018 Amendment

• Relevant Legal Framework and Precedents: The Tribunal referred to decisions in Maria Fernandes Cheryl v/s ITO and Karb Associates (P.) Ltd. v. Dy. CIT, which held that the amendment to Section 50C, similar to Section 43CA, was curative and applicable retrospectively.
• Court's Interpretation and Reasoning: The Tribunal observed that the amendment aimed to mitigate hardships in genuine transactions and should apply to the entire period during which the original provision was in effect.
• Key Evidence and Findings: The Tribunal found that the rationale for the amendment was to address unintended consequences of the original provision, thus supporting its retrospective application.
• Conclusions: The Tribunal concluded that the amendment to Section 43CA was curative and applicable retrospectively to the assessment year 2016-17.

3. Ex Parte Order by National Faceless Appeal Centre/CIT(A)

• Relevant Legal Framework: The principles of natural justice require that parties be given an opportunity to present their case.
• Court's Interpretation and Reasoning: Although the Tribunal noted the assessee's claim of not receiving the notice, it focused on the substantive issue of the addition under Section 43CA, which rendered this procedural issue academic.
• Conclusions: The Tribunal did not make a specific determination on the procedural fairness of the ex parte order, as the substantive issue resolved the appeal in favor of the assessee.

SIGNIFICANT HOLDINGS

• The Tribunal held that the provisions of Section 43CA of the Act were not applicable as the difference between the sale consideration and the stamp duty value was within the 5% tolerance limit introduced by the Finance Act, 2018.
• The Tribunal concluded that the amendment to Section 43CA was curative and retrospective, aligning with similar interpretations of Section 50C.
• The Tribunal set aside the impugned order and allowed the appeal, deleting the addition of 7,37,505.

Order pronounced in the open Court on 20/09/2024.