2021 (7) TMI 725 - AT - Income Tax

Sale Deed Date Key in Income Tax Case Ruling

M/s Spytech Buildcon Versus A.C.I.T., Circle-6, Jaipur.

The ITAT upheld the addition under section 43CA of the Income Tax Act, 1961, in a case where the sale deeds were executed after the introduction of the ... Addition u/s 43CA - differential amount of consideration shown in the document and the Stamp Duty Valuation - assessee firm had sold three flats for less than the value as per stamp valuation authority for which agreements and date of registration were not same - assessee contended that the provisions of section 43CA are not applicable when the assessee has already entered into the agreement - HELD THAT:- As per sub-section (3) and (4) of section 43CA, the benefit of prior agreement is granted if the consideration is received at the time of agreement other than cash. In the case in hand, the booking is claimed to have been made prior to 01/04/2013 whereas the sale deeds were executed after 01.04.2013 which falls in the previous year relevant to the assessment year under consideration, therefore, provisions of Section 43CA are applicable for the assessment year under consideration. Thus once the provisions itself has taken care of such a situation or difference in date of prior agreement, then the applicability of provisions cannot be questioned based on mere existence of prior agreement. The transfer under the provisions of section 43CA is recognized only when a registered document is executed and therefore, in view of the facts and circumstances of the case, since the transfer through sale deed is made during, the previous year relevant to the assessment year under consideration for which the provisions of Section 43CA are applicable, then merely because an agreement has taken placed prior to 01/4/2013 would not take away the transaction from the ambit of the provisions of Section 43CA of the Act. More particularly when the entire sale consideration was not made through account payee cheque at the time of entering into an agreement to sell. See M/S. SPYTECH REALTORS PVT. LTD. VERSUS THE ACIT, CIRCLE-6, JAIPUR [2020 (1) TMI 1475 - ITAT JAIPUR] - Decided against assessee. Issues Involved:Challenging addition under section 43CA of the Income Tax Act, 1961.Analysis:1. The appeal was filed against the order of CIT(A) confirming the addition made by the AO under section 43CA. The assessee contended that the agreement for sale of flats was entered into before the introduction of section 43CA, thus the provision should not apply. However, the AO and CIT(A) disagreed, leading to the appeal before ITAT.2. The assessee argued that the sale consideration was decided before the introduction of section 43CA, and the sale deeds were executed after. The assessee relied on judicial pronouncements and contended that the provision should have a prospective effect, and the addition made by the AO should be deleted. Various judgments were cited to support this argument.3. The Department, on the other hand, argued that the sale deed occurred after the introduction of section 43CA, justifying the addition. The ITAT considered both parties' contentions and examined the facts of the case, where the assessee sold three flats below the Fair Market Value. The ITAT noted that the sale deeds were registered during the relevant year, and the assessee failed to establish that the consideration was received before the introduction of section 43CA.4. The ITAT analyzed the provisions of section 43CA, which deem the value adopted for stamp duty as the full consideration if it is less than the actual consideration. The ITAT observed that the legislature provided a remedy when the agreement precedes the sale deed. The ITAT upheld the applicability of section 43CA in the present case, emphasizing that the transfer through sale deed occurred during the relevant assessment year.5. Referring to a previous case involving the same assessee, the ITAT concluded that the facts and circumstances did not warrant the deletion of the addition made under section 43CA. Consequently, the appeal of the assessee was dismissed, and the ITAT upheld the orders of the lower authorities.In conclusion, the ITAT affirmed the addition under section 43CA, emphasizing the importance of the date of the sale deed for determining the applicability of the provision, despite the prior agreement. The judgment highlighted the legislative intent behind section 43CA and the need to comply with its provisions based on the timing of the actual transfer through a registered document.