Developer wins challenge against Section 43CA additions for pre-2014 agreements lacking retrospective application

M/s Reegal Construction Versus ITO, Ward-23 (1), Hooghly

M/s Reegal Construction Versus ITO, Ward-23 (1), Hooghly - TMI Issues Involved:
1. Whether the Assessing Officer correctly applied the provisions of section 43CA of the Income Tax Act.
2. Whether the addition of Rs. 12,05,200/- on account of concealment of sale consideration was justified.

Summary of Judgment:

Issue 1: Application of Section 43CA of the Income Tax Act
The assessee contested the application of section 43CA, arguing that the agreements to sell were entered into before the introduction of this section on 01.04.2014. The Tribunal noted that section 43CA was inserted to check suppressed sales of immovable properties, deeming the stamp duty value as the sale value if the actual sale value was less. However, subsection (3) allows for the stamp duty value on the date of the agreement to be considered if the agreement and registration dates differ, provided the consideration or part thereof was received through banking modes as per subsection (4).

The Tribunal found that the agreements to sell were made in 2012-13, with payments received through cheques before the execution of the sale deeds, indicating that the agreements were genuine. The Tribunal cited the decision in Disha Construction vs. JCIT and the Bombay High Court's ruling in PCIT vs. Swananda Properties (P) Ltd., which held that section 43CA cannot be applied retrospectively. Consequently, the Tribunal concluded that the additions made by the Assessing Officer under section 43CA were not sustainable and ordered their deletion.

Issue 2: Addition of Rs. 12,05,200/- for Concealment of Sale Consideration
The assessee argued that the flat in question was sold by the landowner, not by the assessee, as per the development agreement. The Tribunal reviewed the evidence, including sale and gift deeds, and found that the sale consideration of Rs. 12,05,200/- was indeed not received by the assessee. Therefore, the addition made by the Assessing Officer on this issue was not sustainable and was ordered to be deleted.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting the additions made by the Assessing Officer under section 43CA and for the alleged concealment of sale consideration.