ITAT Rules No Deemed Income Under Section 43CA Where Booking Date Valuation Supports Sale Price:

ITAT Rules No Deemed Income Under Section 43CA Where Booking Date Valuation Supports Sale Price The ITAT Mumbai deletes the entire Rs 2.19 crore addition under Section 43CA(3) of the Income Tax Act, noting that the stamp duty value on the booking/allotment dates was lower than the agreed sale price in all cases. The assessee, S. Siddharth Construction Co., is involved in the business of real estate development. During the year under consideration, i.e., Assessment Year 2015-16, the assessee had sold some flats. During the assessment of the return, the tax authorities noticed that the stamp duty value determined by the Stamp Valuation Authority was higher than the agreement value. This type of difference was observed in regard to 12 flats. The estimated total difference was about Rs 2.19 crore.

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Accordingly, a show cause notice (SCN) was delivered to the assessee, asking why the said difference should be treated as deemed sale consideration and added to its income; also, furnish relevant documents in support of its claims. However, the assessee did not furnish any explanation in response to the SCN; consequently, the entire difference was added to the assessee's income under section 43CA of the Act. When the case was taken before the First Appellate Authority, the CIT(A) noted that the tax authorities had rightly applied section 43CA(1) of the Act in the present case and also "in certain instances difference between the agreement value and value determined by the Stamp Valuation Authority is less than 10%." Hence, instead of deleting the entire addition, the CIT(A) decided to reduce it from Rs 2.19 crore to Rs 1.97 crore.

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Thereafter, the assessee filed an appeal before the ITAT Mumbai, demonstrating that the flats were allotted long before registration and that booking payments had been received at that time. When the tribunal examined the documents and bank records, it discovered that the agreements with buyers had indeed been entered into years before registration. The Tribunal noted that under Section 43CA(3), where the agreement date and registration date are different, the stamp duty value on the agreement date must be considered if part of the consideration was received through banking channels before registration. Since, in the present case, the stamp duty value on the booking/allotment dates was lower than the agreed sale price in all cases, no addition could be sustainable under Section 43CA. Accordingly, the tribunal deleted the entire impugned addition and allowed the assessee’s appeal.