2020 (1) TMI 853 - AT - Income Tax

Addition u/s 43CA - transfer of business assets / property - stamp value - applicability of tolerance limit of 5% - difference in consideration received in respect of agreement to sale executed during the year and brought to tax as per revenue recognised on percentage completion method - as per assessee difference between the value adopted by the stamp valuation authority and the actual sale consideration received by the assessee on the transfer of the aforesaid property works out to 9.56% i.e less than 15%, therefore, no addition of the impugned difference HELD THAT - As long as the difference between the value adopted by the stamp valuation authority and the actual consideration received or accrued to the assessee on the transfer of the asset (other than a capital asset) is not in excess of five percent, then such difference is to be ignored and the profits and gains on transfer of the asset has to be worked out on the basis of the actual consideration received or accruing to the assessee. In case, the aforesaid claim of the assessee that if the difference between the value adopted by the stamp valuation authority and the actual consideration received or accruing as a result of transfer of the asset (other than a capital asset) does not exceed 15%, then no addition would be called for u/s 43CA is accepted, then we are afraid that the same would render the aforesaid proviso to Sec. 43CA(1) as had specifically been made available on the statute vide the Finance Act, 2018 w.e.f A.Y. 2019-20 would be rendered as meaningless. A s a tolerance limit of 5% between the value adopted by the stamp valuation authority and the actual consideration received or accruing as a result of transfer of the asset (other than a capital asset), had been made available on the statute only vide the Finance Act, 2018 w.e.f A.Y. 01.04.2019, therefore, it would be absolutely incorrect to infer that prior to the aforesaid amendment a tolerance limit of 15% was already available and/or inbuilt in the said statutory provision. In our considered view, if that would have been so, then there would have been no requirement for incorporation of the proviso to Sec. 43CA (1) of the Act. On the basis of our aforesaid observations, we are of the considered view, that the contention of the ld. A.R that as the difference of ₹ 4,48,350/- between the value adopted by the stamp valuation authority and the actual consideration received as a result of transfer of the aforesaid property works out to 9.56%, i.e less than 15%, therefore, the same was to be ignored and no addition was called for in the hands of the assessee, does not merit acceptance and is resultantly rejected. We thus in terms of our aforesaid observations, finding no infirmity in sustaining of the addition by the CIT(A), uphold his order. - Decided against assessee.

Summary

Issues Involved:
1. Addition under Section 43CA of the Income Tax Act, 1961.
2. Applicability of judicial pronouncements and tolerance limits in valuation differences.

Detailed Analysis:

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

The case pertains to the assessee's appeal against the CIT(A)-21, Mumbai's order, which upheld the addition of ?4,48,350 under Section 43CA of the Income Tax Act, 1961. The assessee argued that the difference between the stamp duty value and the actual sale consideration was less than 15%, referencing the Supreme Court's judgment in C.B. Gautam Vs. Union of India, where a tolerance limit of 15% was accepted.

During the assessment, it was observed that the sale consideration for Flats Nos. 401 & 402 was lower than the value adopted by the Sub-registrar, Government of Maharashtra. The A.O. invoked Section 43CA, deeming the stamp duty value as the full value of consideration. The assessee claimed that the stamp duty value reported was incorrect and only the additional area purchased by tenants should be considered. The A.O., agreeing partially, recalculated the stamp duty value but still added ?4,48,350 to the assessee's income.

The CIT(A) upheld this addition, rejecting the assessee's argument that the difference was within the 15% tolerance limit and should be ignored.

2. Applicability of judicial pronouncements and tolerance limits in valuation differences:

The assessee's primary contention was that the difference between the stamp duty value and the actual sale consideration was less than 15%, thus no addition should be made. The assessee cited several judicial pronouncements to support this claim. However, the Tribunal found these references distinguishable and not directly applicable to Section 43CA.

Section 43CA mandates that if the sale consideration is less than the stamp duty value, the latter should be deemed as the full value for computing profits and gains. The Tribunal noted that the Finance Act, 2018, introduced a proviso effective from 01.04.2019, allowing a 5% tolerance limit. This amendment was not applicable to the assessment year in question.

The Tribunal rejected the assessee's claim, stating that prior to the amendment, no tolerance limit was envisaged in Section 43CA. The Tribunal emphasized that statutory provisions should be interpreted as written, without reading in any additional words or limits not explicitly provided by the legislature.

The Tribunal concluded that the assessee's reliance on the 15% tolerance limit was misplaced and upheld the CIT(A)'s order, sustaining the addition of ?4,48,350.

Conclusion:

The Tribunal dismissed the appeal, confirming that the addition under Section 43CA was justified as the statutory provision did not allow for a 15% tolerance limit prior to the amendment by the Finance Act, 2018. The appeal was dismissed, and the order pronounced on 29.11.2019.