2025 (8) TMI 756 - AT - Income Tax

Sale of Commercial Property Taxed Only Once Under Section 43CA, No Double Taxation Allowed

The ITAT Mumbai held that the sale of commercial properties completed and accounted for in AY 2014-15 cannot be subjected to a fresh addition under ... Addition u/s. 43CA - difference between the stated consideration and the stamp duty value of commercial properties sold by the assessee - year of assessment - assessee is a real estate developer engaged in the construction and sale of commercial and residential units HELD THAT:- It is a matter of record that the sale transaction in question was completed in its entirety on 13.07.2013. On that date, the assessee received the full sale consideration through recognised banking channels and also delivered possession of the commercial premises to the buyer. The income arising therefrom was offered to tax in the return filed for AY 2014–15. These facts are not only reflected in the books of account but also accepted by the AO himself while initiating reassessment for AY 2014–15. Once the property has been sold in the F.Y.2013-14 (relevant to A.Y.2014-15) and possession was handed over and the entire receipt of sale consideration was received and booked as income in A.Y.2014-15 then there was no reason as to why ld. AO is taxing the difference amount between the sale consideration and the ready reckoner in A.Y.2015-16, when the actual transfer of property took place on 13.07.2013. The legal position on this point is equally well-settled. Section 2(47)(v) read with section 53A of the Transfer of Property Act leaves no room for ambiguity. Once possession is handed over in part performance of a written agreement for consideration and the transferee is willing to perform their obligations, the transaction qualifies as a transfer for the purpose of taxation. The formal registration of the agreement at a later date, being merely a procedural formality, cannot defer the taxability of the transaction. Revenue’s conduct in this case is also materially significant. Having assessed the income in AY 2014–15 and failed to pursue its appeal against the CIT(A)’s order deleting the addition in that year, it cannot now seek to revive the same addition in a subsequent year based on an inconsistent and contradictory factual position. The same income cannot be taxed twice. The doctrine of consistency and finality of proceedings operates with full force in such circumstances. The invocation of section 43CA in the impugned year is also misplaced. The conditions for applicability of section 43CA(1) are not satisfied once it is accepted that the transaction occurred in the prior year. Even if section 43CA were to apply, sub-sections (3) and (4) direct that the stamp duty valuation as on the date of agreement must be taken when part or whole of the consideration has been received earlier. In the present case, the entire consideration was received more than one year prior to the date of the agreement. DVO valuation as of 03.05.2015 is completely disconnected from the facts and fails the test of relevance. Moreover, the absence of reference to the same in the AY 2014-15 order further erodes its evidentiary weight. We are of the considered opinion that the addition made u/s 43CA in AY 2015-16 is wholly unsustainable in law and on facts. The transaction was already taxed in the correct year, i.e. AY 2014-15, and the Revenue, having accepted the appellate outcome for that year, cannot now take a contradictory stand. Accordingly, the impugned addition is deleted. Appeal of the assessee is allowed. 1. Issues Presented and Considered Whether the addition under section 43CA of the Income-tax Act, 1961, on account of difference between stated consideration and stamp duty value of commercial properties sold, is justified for the assessment year (AY) 2015-16. Determination of the correct year of assessment in which the transfer of property took place for taxation purposes. Applicability of section 2(47)(v) read with section 53A of the Transfer of Property Act, 1882, in recognizing the date of transfer based on possession and receipt of consideration. Whether the valuation adopted by the Departmental Valuation Officer (DVO) as on 3rd May 2015 is relevant and can be used for addition under section 43CA for AY 2015-16. Whether the same income can be taxed twice in two different assessment years on the same transaction. Interpretation and applicability of sub-sections (3) and (4) of section 43CA concerning the timing of stamp duty valuation when consideration is received prior to agreement date. 2. Issue-wise Detailed Analysis Issue 1: Justification of Addition under Section 43CA for AY 2015-16 Relevant Legal Framework and Precedents: Section 43CA mandates that where the consideration received or accruing as a result of transfer of land or building is less than the stamp duty value adopted or assessed by the stamp valuation authority, the stamp duty value shall be deemed to be the full value of consideration for computing income from business or profession. Court's Interpretation and Reasoning: The Assessing Officer (AO) invoked section 43CA for AY 2015-16 based on the date of registration of the agreement (3rd March 2015) and compared the stated consideration with the DVO's stamp duty valuation as on 3rd May 2015. This resulted in an addition of Rs. 3,56,85,000. Key Evidence and Findings: The transaction was completed on 13th July 2013 when full consideration was received and possession handed over. The agreement to sell was executed and registered much later due to buyer's delay. The income was offered in AY 2014-15. The DVO valuation date did not coincide with either the date of agreement or actual transfer. Application of Law to Facts: Since the transaction was completed in FY 2013-14 (AY 2014-15), the provisions of section 43CA cannot be applied for AY 2015-16 based on registration date. The timing of the transaction for tax purposes is the date possession was delivered and consideration received, not the date of registration. Treatment of Competing Arguments: Revenue relied on registration date; assessee relied on possession and receipt of consideration date. The Court found the assessee's argument consistent with statutory provisions and factual matrix. Conclusion: Addition under section 43CA for AY 2015-16 is unsustainable as the transaction was completed earlier and income was already offered in AY 2014-15. Issue 2: Correct Year of Assessment for Taxation of Transfer Relevant Legal Framework and Precedents: Section 2(47)(v) of the Income-tax Act defines 'transfer' to include allowing possession of immovable property in part performance of a contract as per section 53A of the Transfer of Property Act, 1882. Court's Interpretation and Reasoning: The Court emphasized that once possession is handed over under a written agreement with full consideration received, the transaction qualifies as a transfer. The formal registration is a procedural formality and does not determine the year of assessment. Key Evidence and Findings: Possession was delivered and full payment received on 13.07.2013. The assessee offered income in AY 2014-15 accordingly. The AO himself initiated reassessment for AY 2014-15 acknowledging the transaction date. Application of Law to Facts: The transaction must be taxed in AY 2014-15, the year in which transfer took place in terms of possession and receipt of consideration. Treatment of Competing Arguments: Revenue argued for AY 2015-16 based on registration date; assessee argued for AY 2014-15 based on possession and payment. The Court found the latter consistent with statutory provisions and principles of taxation. Conclusion: The correct year of assessment is AY 2014-15; the transaction cannot be taxed in AY 2015-16. Issue 3: Applicability of Section 2(47)(v) and Section 53A of Transfer of Property Act Relevant Legal Framework and Precedents: Section 2(47)(v) incorporates part performance of contract under section 53A of Transfer of Property Act as constituting transfer for income tax purposes. Court's Interpretation and Reasoning: The Court held that all conditions under section 53A were fulfilled: written agreement, signed by parties, full consideration paid, and possession delivered. Hence, the transaction was complete on 13.07.2013. Key Evidence and Findings: The buyer took possession and paid full consideration on 13.07.2013. The delay in registration was at buyer's volition and did not affect transfer. Application of Law to Facts: The transaction qualifies as 'transfer' under section 2(47)(v) on the date of possession and payment, not on registration. Treatment of Competing Arguments: Revenue's reliance on registration date is inconsistent with statutory definition and principle of part performance. Conclusion: The transaction date for tax purposes is the date possession was delivered and consideration received, i.e., 13.07.2013. Issue 4: Relevance and Legality of DVO Valuation as on 3rd May 2015 Relevant Legal Framework and Precedents: Section 43CA requires adoption of stamp duty valuation as on date of agreement when part or whole consideration is received prior to agreement date. Court's Interpretation and Reasoning: The DVO valuation was on 3rd May 2015, which neither coincided with date of agreement (31.12.2014) nor date of transfer (13.07.2013). The valuation was thus irrelevant and lacked legal foundation. Key Evidence and Findings: The DVO report was not even referred to in the reassessment order for AY 2014-15, indicating its questionable evidentiary value. Application of Law to Facts: Since entire consideration was received before agreement date, stamp duty valuation must be as on agreement date, not on a later date. Treatment of Competing Arguments: Revenue relied on DVO valuation for addition; assessee challenged its relevance and timing. Conclusion: DVO valuation as on 3rd May 2015 is irrelevant and cannot be basis for addition under section 43CA for AY 2015-16. Issue 5: Double Taxation of Same Income in Two Different Assessment Years Relevant Legal Framework and Precedents: Doctrine of consistency and finality of proceedings prohibits taxing the same income twice. Court's Interpretation and Reasoning: The AO made identical additions under section 43CA in AY 2014-15 (reassessment) and AY 2015-16 (original assessment). The appellate authority deleted addition for AY 2014-15 but confirmed it for AY 2015-16. Revenue did not appeal deletion for AY 2014-15, which attained finality. Key Evidence and Findings: Income was offered and assessed in AY 2014-15. No appeal against deletion in AY 2014-15. Application of Law to Facts: The same income cannot be taxed twice in different years. Revenue's attempt to tax in AY 2015-16 is inconsistent and contrary to settled principles. Treatment of Competing Arguments: Revenue's stand was inconsistent; assessee relied on principle of non-double taxation. Conclusion: Addition in AY 2015-16 is barred as income was already assessed in AY 2014-15. Issue 6: Interpretation of Sub-sections (3) and (4) of Section 43CA Relevant Legal Framework and Precedents: Sub-sections (3) and (4) provide that where consideration is received prior to agreement date through banking channels, stamp duty valuation as on agreement date shall be adopted. Court's Interpretation and Reasoning: Entire consideration was received on 13.07.2013, prior to agreement date (31.12.2014). Therefore, stamp duty valuation as on agreement date should be used if section 43CA applies. Key Evidence and Findings: No part consideration received after agreement date; full payment was made earlier. Application of Law to Facts: The valuation date used by AO (3rd May 2015) does not comply with statutory mandate. Treatment of Competing Arguments: Revenue ignored statutory requirement; assessee correctly invoked sub-sections (3) and (4). Conclusion: Even if section 43CA applied, valuation date must be agreement date, not a later date.