2022 (6) TMI 1277 - AT - Income Tax

Addition made u/s.43CA - difference between the stamp duty value and the reported sale consideration - AO applied the stamp duty value prevailing in February 2011 and since the said value was more than the registered value in 2014 by the assessee AO brought to tax the differential sum as an addition u/s.43CA - HELD THAT - As there is a proviso introduced by the Finance Act 2018 w.e.f. A.Y.2019-20 onwards and which was later amended by the Finance Act 2020 applicable from A.Y.2021-22, which states that if the difference between the stamp duty value and the reported sale consideration is not more than 10% then, the reported sale consideration shall have to be accepted and no addition in terms of 43CA is required to be made. We find that this amendment has been held to be retrospective in operation by the Co-ordinate Bench decision of this Tribunal in the case of Maria Fernandez Cheryl 2021 (1) TMI 620 - ITAT MUMBAI wherein it was held that amendment made in scheme to Section 50C(1) of the Act by inserting the proviso thereto and by enhancing tolerance band for variations between sale consideration vis a vis stamp duty valuation from 5% to 10% are effective from date on which section 50C itself was introduced i.e. from 01/04/2003 and therefore, having retrospective applicability thereon. The 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, respectively following the aforesaid decision of this Tribunal, 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 - Accordingly, the ld. AO is hereby directed to delete the addition of Rs.4,42,460/- made by him in the assessment. Accordingly, the grounds raised by the assessee are allowed. Revision u/s 263 by CIT - incorrect application of provisions of Section 43CA - HELD THAT - In the instant case, the ld. AO had duly applied the provisions of the Act more particularly the provisions of Section 43CA(3) and 43CA(4) of the Act. We find that the ld. PCIT in the instant case is proceeding on incorrect application of provisions of Section 43CA of the Act by directing the ld. AO to adopt the ready reckoner rates on the date of sale ignoring the fact that the ready reckoner rate is to be considered on the date of initial booking / allotment as per the provisions of section 43CA of the Act itself. We hold that the ld. AO had made due enquiries in the instant case while framing the assessment and the ld. PCIT is only trying to substitute his incorrect view by incorrect application of law and we hold that the order passed by the ld. AO in the instant case is neither erroneous nor prejudicial to the interest of the Revenue and hence there is no question of invocation of revisionary jurisdiction by the ld. PCIT u/s.263 of the Act. Hence, the revision order passed u/s.263 by the ld. PCIT is hereby quashed. Accordingly, the grounds raised by the assessee are allowed.

Summary

Issues:
1. Interpretation of Section 43CA of the Income Tax Act, 1961 regarding stamp duty value for property transactions.
2. Correct application of provisions of Section 43CA by the Assessing Officer and Principal Commissioner of Income Tax.

Issue 1: Interpretation of Section 43CA
In the case, the main issue was whether the addition made under Section 43CA of the Act was justified. The assessee, a builder/developer, sold a property in Mumbai in 2014, but the initial allotment was made in 2011, before Section 43CA was introduced. The Assessing Officer (AO) applied the stamp duty value from 2011, resulting in an addition of Rs.4,42,460. The assessee argued that the retrospective application of Section 43CA was incorrect. The Income Tax Appellate Tribunal (ITAT) examined the details of the transaction, including the sale deed and payments received. The ITAT noted that a proviso introduced in 2018, later amended in 2020, allowed a tolerance band of 10% between stamp duty value and reported sale consideration. Relying on a previous Tribunal decision, the ITAT held that the difference fell within the tolerance band, and the addition was not required. Thus, the ITAT directed the AO to delete the addition.

Issue 2: Correct Application of Section 43CA
In the second appeal, the Principal Commissioner of Income Tax (PCIT) invoked revision jurisdiction under Section 263 against the AO's order. The PCIT argued that the AO should have used the stamp duty value from 2014 and applied it to other property transactions. However, the ITAT found that the AO had conducted thorough enquiries during the assessment process. The AO had requested details of the flats sold and their booking dates, and the assessee provided the necessary information. The ITAT observed that the AO correctly applied Section 43CA by considering the ready reckoner rate at the time of initial booking, not the sale date. The ITAT concluded that the PCIT's revision order was based on an incorrect interpretation of the law. Therefore, the ITAT quashed the revision order, stating that the AO's original order was neither erroneous nor prejudicial to the Revenue's interest. Consequently, the ITAT allowed the appeals of the assessee in both cases.

In summary, the ITAT ruled in favor of the assessee, holding that the addition made under Section 43CA was not justified due to falling within the tolerance band. The ITAT also found that the AO had correctly applied the provisions of Section 43CA in the assessment, dismissing the PCIT's revision order. The judgment highlights the importance of correctly interpreting and applying tax laws in property transactions to avoid unnecessary additions or revisions.