2025 (5) TMI 752 - AT - Income Tax

Deemed sales consideration u/s. 43CA - Whether the provisions of sub-sections (3) and (4) of section 43CA apply to the facts of the case thereby entitling the assessee to relief from the addition made? HELD THAT - CIT(A) had allowed relief in respect of the flats and considered the difference of 10% for giving relief AO is directed to consider the registration deeds and delete the addition in respect of all the flats which has been upheld by the CIT(A) wherever the difference between the valuation for the purpose of stamp duty on the date of registration and the actual sale consideration received is less than 10% as the conditions of sub-section (4) of section 43CA of the Act are found to be fulfilled as part of the consideration has been received by way of account payee cheque or through such other mode as specified in sub-section (4) of section 43CA of the Act on or before the date of transfer of the asset and therefore the value referred to in sub-section (1) of section 43CA of the Act may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement and the addition may be made only where the difference is more than 10% of such value. The assessee shall produce the required details before the AO who shall allow the requisite relief as per the direction given above. Hence Ground nos. 1 2 raised by the assessee are allowed.

Summary

The core legal questions considered in this appeal relate primarily to the applicability and interpretation of section 43CA of the Income Tax Act, 1961, specifically:

1. Whether the addition of Rs. 99,02,100/- on account of deemed sales consideration under section 43CA was justified.

2. Whether the provisions of sub-sections (3) and (4) of section 43CA apply to the facts of the case, thereby entitling the assessee to relief from the addition made.

3. The extent to which the variation between the stamp duty value and the actual sale consideration can be allowed without triggering the addition under section 43CA.

Regarding the first issue, the legal framework centers on section 43CA(1) of the Income Tax Act, which mandates that where the consideration received or accruing from the transfer of an asset (land or building) is less than the value adopted or assessed by any State Government authority for stamp duty purposes, the latter value shall be deemed to be the full value of consideration for computing profits and gains. This provision aims to curb undervaluation of property transactions for tax evasion.

The Court examined the facts that the Assessing Officer (AO) had made an addition of Rs. 99,02,100/- by applying section 43CA, as the sale consideration declared by the assessee was less than the stamp duty value adopted by the State Government authority. The AO found the assessee's submissions inadequate due to lack of supporting evidence such as payment details and registration of transfer. The AO also noted that the curative amendment introduced by the Finance Act, 2018, effective from 01.04.2019, was not applicable to the assessment year in question.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the addition but allowed relief where the variation between sale consideration and stamp duty value was within 10%, following an analysis of the memorandum explaining the Finance Bill, 2018, and relevant case laws. The CIT(A) rejected the assessee's claim under section 43CA(3) and (4) due to insufficient evidence that the conditions for applying the stamp duty value as on the agreement date were met.

On the second issue, the Court focused on the provisions of sub-sections (3) and (4) of section 43CA, which provide that where the date of agreement fixing the value and the date of registration differ, the stamp duty value on the date of the agreement may be taken if part or whole of the consideration has been received by non-cash modes (account payee cheque, bank draft, electronic clearing system, or prescribed electronic modes) on or before the date of the agreement. This provision is intended to prevent manipulation of sale consideration by delaying registration or payment.

The assessee produced extensive documentary evidence including agreements, payment schedules, ledger accounts, and bank statements demonstrating that payments were received by cheque before the date of agreement for various flats. The Court examined these evidences, noting that the conditions of sub-section (4) were fulfilled for these transactions.

Applying the law to facts, the Court held that where the conditions of sub-section (4) are satisfied, the stamp duty value as on the date of agreement, rather than the date of registration, should be considered for the purpose of section 43CA. This interpretation aligns with the legislative intent to tax the true consideration received or accruing, avoiding penal consequences where payment is made timely but registration is delayed.

Regarding the third issue, the Court considered the permissible variation between the stamp duty value and the actual sale consideration. The CIT(A) had allowed relief up to a 10% variation, based on the Finance Bill memorandum and judicial precedents. The Court concurred with this approach, directing the AO to delete additions where the difference was less than 10% and confirm additions only where the difference exceeded this threshold.

The Court also emphasized that the AO should verify registration deeds and payment details to ensure compliance with sub-section (4) conditions before making any addition. This approach balances the need to prevent undervaluation with fairness to taxpayers who have complied with payment norms.

In addressing competing arguments, the Court rejected the AO's rigid application of section 43CA without considering the timing and mode of payment, which are crucial under sub-sections (3) and (4). The Court also noted that the curative amendment cited by the AO was inapplicable to the assessment year under consideration, confirming the principle that retrospective application of amendments is not permissible unless expressly provided.

Consequently, the Court allowed the appeal on grounds 1 and 2, subject to the AO verifying the evidence of payment and registration and applying the 10% variation relief. Ground 3, being general, was not adjudicated separately.

Significant holdings include the following verbatim excerpt from the judgment:

"...the Ld. AO is directed to consider the registration deeds and delete the addition in respect of all the flats which has been upheld by the Ld. CIT(A) wherever the difference between the valuation for the purpose of stamp duty on the date of registration and the actual sale consideration received is less than 10% as the conditions of sub-section (4) of section 43CA of the Act are found to be fulfilled as part of the consideration has been received by way of account payee cheque or through such other mode as specified in sub-section (4) of section 43CA of the Act on or before the date of transfer of the asset and, therefore, the value referred to in sub-section (1) of section 43CA of the Act may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement and the addition may be made only where the difference is more than 10% of such value."

This establishes the core principle that the stamp duty value as on the agreement date is relevant for section 43CA valuation if payment conditions are met, and that a tolerance of 10% variation is permissible before additions are made.

In conclusion, the Court determined that the addition under section 43CA should be restricted to cases where the difference between stamp duty value and actual sale consideration exceeds 10%, provided the payment was made by prescribed non-cash modes on or before the date of agreement, thereby entitling the assessee to relief on the facts presented.