M/S. RAVI DEVELOPMENTS, MUMBAI V. DCIT CENTRAL CIRCLE -2, MUMBAI

ITA 1932/MUM/2022

AI Insights

M/s. Ravi Developments appealed against the order of the Learned Commissioner of Income Tax (Appeals), Pune-11, which upheld the additions made by the Assessing Officer under section 43CA of the Income Tax Act. The additions were based on the difference between the sale consideration and the stamp duty valuation of flats sold by the firm. The Tribunal examined whether the provisions of section 43CA, as amended, were applicable retrospectively and whether the differences in valuation justified the additions made by the Assessing Officer. The Tribunal found that the amendment to section 43CA was indeed retrospective and applied the tolerance limit of 10% to the differences in valuation for certain flats, leading to a partial allowance of the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123361 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 27-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 03-08-2022
• Other Referred Cases: K. P Varghese vs ITO, Chanderprakash Jhunjhunwala vs DCIT, Buttepatil Properties vs ITO, Sunil Kumar Agarwal vs CIT, Telmos Electronics vs ACIT, ITO vs Smt. Surekha Vilas Soudagar, Maria Fernandez Cheryl vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Business income; Retrospective amendment; Fair market value
• Section: 43CA; 50C; 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D”, MUMBAI BEFORE SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments 76, Laxmi Palace Mathuradas Road, Kandivali (w) Mumbai – 400067 PAN: AAAFR2516G v. DCIT – Central Circle – 2 Ashar I.T. Park, 6 th Floor Road No. 16Z Wagle Industrial Estate Thane, Mumbai - 400604 (Appellant) (Respondent) Assessee Represented by : Shri Akshay Jain Department Represented by : Shri Ashish Kumar Date of Hearing : 28.12.2022 Date of Pronouncement : 15.03.2023 O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), Pune-11 [hereinafter in short “Ld.CIT(A)”] dated 10.06.2022 for the A.Y.2014-15. 2. Brief facts of the case are, assessee has filed its return of income for the A.Y. 2014-15 on 30.11.2014 declaring total income at 2 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments ₹.11,71,00,100/-. The case was selected for scrutiny and notices u/s.143(2) and 142(1) of Income-tax Act, 1961 (in short “Act”) were issued and served on the assessee. In response Authorised Representative of the assessee attended and submitted the relevant information as called for. 3. The assessee is a firm engaged in the business of Builders & Developers under the name of M/s. Ravi Development. The firm is engaged in the construction of residential and commercial properties in Mumbai. The Assessing Officer during the assessment proceedings called for the hard copy of the Return of Income, Tax Audit Report u/s. 44AB, Form 3CD, audited financial statements and relevant details and the same was verified and placed on record. During the course of assessment proceedings, Assessing Officer observed that assessee has sold immovable properties (flats) for consideration lower than the market price of the said flats adopted for stamp duty purposes. Accordingly, show cause notice was issued to the assessee to explain the above difference along with supporting documents. The Assessing Officer issued the show cause notice dated 16.12.2016 with the table, for the sake of clarity it is reproduced below: - 3 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments Sr. No Flat Project name Market Value (1) Sale Price (2) Difference (1 – 2) 1. 702 Gaurau Paradise 69,16,000 56,78,500 12,37,500 2. 602 Gaurav Paradise 69,16,000 48,47,500 20,68,500 3. 701 Gaurau I Paradise 48,75,000 34,47,500 14,27,500 4 804 Gaurav Excellency 45,79,000 45,77,370 1,630 5 904 Gaurav Excellency 45,79,000 45,77,370 1,630 6 1204 Gaurav Excellency 18,73,000 14,55,500 4,17,500 7 1204 A Gaurav Excellency 29,24,000 22,72,000 6,52,000 8 1304 Gaurav Excellency 18,73,000 17,72,150 1,00,850 9 1304 A Gaurav Excellency 29,24,000 27,74,850 1,49,150 10 1001 Gaurav Excellency 45,36,000 42,40,000 2,96,000 11 1102 Gaurav Excellency 46,86,000 46,84,735 1,265 12 1103 Gaurav Excellency 46,86,000 46,84,735 1,265 13 1202 Gaurav Excellency 20,42,500 17,46,290 2,96,210 14 1202 A Gaurav Excellency 26,43,000 22,64,710 3, 78,290 15 1401 Gaurav Excellency 47,58,000 40,000 18,000 16 1404 Gaurav Excellency 47,58,000 45,60,000 1,98,000 17 1003 Gaurav Uster 36,50,500 36,49,050 1,450 18 302 Gaurav Samruddhi 29,23,000 26,55,900 2,67,100 19 1004 Gaurav Samruddhi 27,91,000 27,90,000 1,000 TOTAL 7,49,33,000 6,74,18,160 75,14,840 4. In response, to the above show cause notice assessee has submitted that the section 43CA came into effect from 01.04.2013 and it is applicable for flats sold and documents registered on or after 01.04.2013. The assessee has submitted that the properties were already allotted to the parties prior to 01.04.2013. Therefore, provisions of section 43CA is not applicable and it has given a detailed submissions in this regard. 4 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments 5. After considering the submissions made by the assessee Assessing Officer by relying on the provisions of section 43CA and he observed that on further verification of additional details and evidence submitted by the assessee, he observed that provisions of section 43CA of the Income Tax Act are not applicable to the flats mentioned at Serial No. 1 to 3 of the show cause notice, however, he observed that flats mentioned at Serial No. 4 to 19 of the above said show cause notice the provisions of section 43CA are applicable on these flats and the difference in the sale consideration and stamp duty valuation, the amount of ₹.27,81,340/- is treated as income of the assessee for the current Assessment Year. 6. Aggrieved with the above order assessee preferred an appeal before the Ld.CIT(A) and before Ld.CIT(A), assessee has raised various contentions and Ld.CIT(A) has summarized the same as under: - (i). The appellant has not received any cash consideration out of the books. The Ld. Assessing Officer has failed to discharge its onus by neither bringing on record any evidence that the assessee has received any cash nor proving the under statement of income. Therefore, the assessing officer cannot make any addition u/s 43CA of the Act. For this proposition, the appellant has relied on the decision of Hon. Supreme Court in the case of K. P Varghese vs ITO 1981 (9) TMI 1- Supreme Court. (ii). The Ld. Assessing Officer failed to appreciate that in most cases, the difference was less than 10% of the stamp duty value and as such no addition should have been made. For 5 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments this proposition the appellant has relied on following case laws: a. Chanderprakash Jhunjhunwala vs DCIT ITA No. 2351/Kol/2017 (Kolkata) b. Buttepatil Properties vs ITO ITA No. 682/Pun/2018 (ITAT Pune) (iii). Sub Sec. 2 of sec. 43CA, mandates that where assessee claims that value adopted or assessed by the stamp duty authority exceeds the fair market value of the property, then, Assessing Officer is duty bound to refer the valuation of the concerned asset to the valuation officer. For this proposition the appellant has relied on following decisions: a. Sunil Kumar Agarwal vs CIT 47 Taxmann.com 158 (Calcutta HC) b. Telmos Electronics vs ACIT 2017 (12) TMI 736- ITAT Delhi c) ITO vs Smt. Surekha Vilas Soudagar 2018 (6) TMI 1184-ITAT Mumbai (iv). Without prejudice to above, the appellant had opted for Income Disclosure Scheme, 2016 (IDS-2016) wherein an amount of Rs. 11,75,00,000/ was offered as business income and all the discrepancies stand covered in the same. 7. After considering the submissions of the assessee Ld.CIT(A) decided the issue against the assessee with the following observations: - “7.1 The second argument of the appellant is that the Assessing Officer is bound to refer the property for valuation before invoking the provisions of sec. 43CA of the Act. In this connection, it may be mentioned that the provisions of sec. 43CA(2) of the Act provides that the provisions of sec. 50C(2) and (3) of the Act shall apply in relation to the determination of the value adopted or assessable u/s 43CA(1) of the Act. The provisions of sec. 50C(2) of the Act provides that where the assessee claims before the Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property, the Assessing Officer may refer the matter to the valuation officer. In the present case, the submissions filed before the Assessing Officer as reproduced in the assessment order, nowhere suggests that the 6 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments appellant made a claim before the Assessing Officer that the flats sold had market value lower than the value adopted by the stamp valuation authority. In fact, the claim of the appellant before the Assessing Officer was that in order to generate cash flow, it sold the flats by taking immediate/one stroke payment which had led to agreement value lower than the market value. Thus, before the Assessing Officer the appellant has agreed that market value of flats was not lower than the value adopted by the stamp valuation authorities but the contention was that it sold flats at a lower value in order to generate cash flow 7.2 Moreover, a perusal of chart reproduced in the assessment order clearly suggests that almost all flats are situated in the project namely 'Gaurav Excellency. These flats were newly constructed by the developer and therefore the claim that the flats situated in same building are having difference market value, cannot be accepted. The table reproduced in the assessment order clearly suggests that many flats situated in Gaurav Excellency are sold at a value almost matching with the stamp duty valuation but for some flats, the difference was almost 30%. For example, for flat no. 904, the difference in stamp duty valuation and the consideration was only Rs. 1,630/- however, on the other hand for flat no. 1204, the difference in the stamp duty valuation and the consideration comes to Rs. 4,17,510/- which comes to 28.68% of the consideration shown in the books of accounts. Such huge variation is not justifiable. The appellant has relied upon certain case laws wherein the Hon. Judicial Authorities have held that the Assessing Officer should have referred the properties for valuation to DVO however, the facts of the case in hand are completely different because in the present case because firstly, the appellant itself is not claiming that the market value of flats is lower than the stamp duty valuation and secondly, in the same building the appellant itself has sold some of the flats at a value almost similar to the stamp duty valuation. In view of peculiar facts of this case, I am of the opinion. the reference to DVO is not necessary before applying the provision of sec. 43CA of the Act. The ground No. 2 raised by the appellant is therefore, DISMISSED. 8.1 The next argument of the appellant is that the difference between the stamp duty valuation and the consideration shown in the books of accounts in less than 10% and therefore no addition should be made. The appellant has also contended that various benches of Hon. ITAT have held that the third proviso to sec. 50C inserted w.e.f. 01/04/2019 is retrospective and therefore the benefit provided under third proviso should be given to the tax payers for earlier assessment years as well The appellant has also relied upon the decision of Hon, ITAT in the case of Buttepatil Properties (supra) wherein it has been held that valuation is always a matter of 7 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments estimation where some difference is bound to occur. Observing this, the Hon. ITAT Pune held that the difference between the sale consideration shown by the assessee and the FMV determined by the DVO was less than 10% and should be ignored. 8.2 I have considered this argument of the appellant and the provisions of the Act. It is seen that w.e.f. 01/04/2019, proviso to sec. 43CA(1) was inserted which provided that where the value adopted for the purpose of stamp duty does not exceed 105 percent of the consideration received, the considerations so received shall be deemed to be full value of the consideration. The appellant has argued that the provisions of sec. 50C and the provisions of sec. 43CA are parimateria and in the context of sec, 50C of the Act, various benches of Hon. Tribunal have held that the said proviso is retrospective. In this connection, the appellant has relied on the decision of Hon'ble ITAT Kolkata bench in the case of Chanderprakash Jhunjhunwala vs DCIT ITA No. 2351/Kol/2017. A perusal of said decision suggests that the Hon'ble ITAT has held that the third proviso to section 50C of the Act is declaratory and curative in nature and the said amendment should be retrospective in nature. However, it may be mentioned that at the time of introduction of the said proviso, the tolerance limit provided in the statute was 5% which was later enhanced to 10%. The enhanced tolerance limit of 10% is applicable w.e.f. AY 2021-22 as provided in the statute. In this situation, the benefit of tolerance limit to the extent of 5% only can be given to the appellant and not to the extent of 10% as claimed by the appellant. The limit of 10% was revised by the legislature only w.e.f. AY 2021-22 as provided in the statute and explained in the Explanatory Circular to the Finance Act 2020 and certainly this tolerance limit of 10% cannot be given a retrospective effect. In none of the case laws relied upon by the appellant, it is held that the tolerance limit of 10% is to be given a retrospective effect. 8.3 A perusal of the table reproduced in para 4 above suggest that the difference in the sale consideration shown by the appellant and the valuation adopted by the stamp valuation authority for flat no. 804, 904, 1102, 1103, 1401, 1003 and 1004 is Rs. 1,630, Rs.1,630/-, Rs. 1,265/-, Rs. 1,265/-, Rs. 18,000/-, Rs. 1,450/- and Rs. 1,000/-. The difference between the sale consideration shown by the appellant and the valuation as per stamp valuation authority is nominal and, in my opinion, should be ignored while applying the provisions of sec. 43CA of the Act. Therefore, the addition made by the Assessing Officer w.r.t flat no. 804, 904, 1102, 1103 and 1401 of Gaurav Excellency, flat no. 1003 of Gaurav Uster and flat no. 1004 of Gaurav Samruddhi amounting to Rs. 26,240/- is directed to be deleted. 8 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments 8.4. The difference in terms of percentage of consideration received for the remaining 9 flats is worked out as under: No Flat No. Project name Market Value (1) Sale Price (2) Difference 3= (1-2) Difference as % of (2) 1 1204 Gaurav Excellency 18,73,000 14,55,500 4,17,500 28.68 2 1204 A Gaurav Excellency 29,24,000 22,72,000 6,52,000 28.70 3 1304 Gaurav Excellency 18,73,000 17,72,150 1,00,850 5.69 4 1304 A Gaurav Excellency 29,24,000 27,74,850 1,49,150 5.37 5 1001 Gaurav Excellency 45,36,000 42,40,000 2,96,000 6.98 6 1202 Gaurav Excellency 20,42,500 17,46,290 2,96,210 16.96 7 1202 A Gaurav Excellency 26,43,000 22,64,710 3,78,290 16.70 8 1404 Gaurav Excellency 47,58,000 45,60,000 1,98,000 4.34 9 302 Gaurav Samruddhi 29,23,000 26,55,900 2,67,100 10.06 Thus, out of above 9 flats, only in one case i.e. flat no. 1404, Gaurav Excellency, the difference as percentage of sale consideration received is less than 5% and therefore, by following the proposition that the proviso to sec. 43CA(1) should be applied retrospectively, only this flat can be excluded. Therefore, the addition made by the Assessing Officer for all remaining 8 flats is upheld. In this manner the appellant gets a relief of Rs. 2,24,240/- (1,98,000+ 26,240). The remaining addition of Rs. 25,57,100/- is upheld. The ground No. 1 raised by the appellant is PARTLY ALLOWED. 8. Aggrieved assessee preferred appeal before us raising following grounds in its appeal: -. “1. On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the addition of the Ld. A.O. to the extent of Rs. 2,32,000/- on the ground of violation of provision of section 40A(3) being aggregate of payment made to the labour contractors. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Ld.A.O. by making an addition of Rs. 25,57,100/- under section 43CA and in adding the same to the total income of appellant-assessee. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the Ld. A.O.'s action in rejecting the valuation of property as adopted by the appellant as per the circumstances and further in not referring the matter to the valuation officer u/s 50C, before confirming the addition of Rs. 25,57,100/- under section 43CA. 9 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments 3. Without prejudice to the above, the appellant had made a declaration under the IDS scheme 2016, amounting to Rs.11,75,00,000/- which covers all the discrepancies over the period. 4. Appellant craves leave to add, alter, modify or delete any of the grounds of appeal.” 9. At the time of hearing, Ld. AR of the assessee has not pressed Ground No. 1, accordingly, same is dismissed as such. 10. With regard to Ground No. 2, Ld. AR of the assessee submitted that the Finance Act, 2018 w.e.f. A.Y. 2019-20 onwards has amended provisions of section 43CA and accordingly, difference of allowance is increased from 5% to 10%, the difference amount between stamp duty and reported sale consideration to the extent of 10% is allowable. He submitted that the above amendment is retrospective in nature. In this regard he relied on the decision of the Coordinate Bench in the case of Shri Harish H. Gandhi v. ACIT [(2022) (6) TMI 1277 – ITAT Mumbai] as per which the Coordinate Bench has adjudicated that the amendment made to section 43CA is retrospective in nature in consonance with the amendments made to section 51C of the Act. He filed the copy of the above decision at the bar. By relying on the above said decision, Ld. AR submitted that the chart disclosed in the order of the Ld.CIT(A) at Page No. 7 which Ld.CIT(A) has calculated the difference in terms of 10 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments percentage of the various flats for the sake of clarity it is reproduced below: - No Flat No. Project name Market Value (1) Sale Price (2) Difference 3= (1-2) Difference as % of (2) 1 1204 Gaurav Excellency 18,73,000 14,55,500 4,17,500 28.68 2 1204 A Gaurav Excellency 29,24,000 22,72,000 6,52,000 28.70 3 1304 Gaurav Excellency 18,73,000 17,72,150 1,00,850 5.69 4 1304 A Gaurav Excellency 29,24,000 27,74,850 1,49,150 5.37 5 1001 Gaurav Excellency 45,36,000 42,40,000 2,96,000 6.98 6 1202 Gaurav Excellency 20,42,500 17,46,290 2,96,210 16.96 7 1202 A Gaurav Excellency 26,43,000 22,64,710 3,78,290 16.70 8 1404 Gaurav Excellency 47,58,000 45,60,000 1,98,000 4.34 9 302 Gaurav Samruddhi 29,23,000 26,55,900 2,67,100 10.06 Ld. AR submitted that before us that Sl.No. 3, 4, 5, 8 & 9 are within the 10% range as per the amendment to provisions of section 43CA to that extent assessee should be given relief. 11. On the other hand, Ld.DR relied on the orders of the lower authorities. 12. Considered the rival submissions and material placed on record, we observe from the submissions made by the Ld. AR that assessee has sold various flats and the sale consideration declared by them and registered stamp duty are different having a difference between 5.37% to 28.7%. The same is disclosed in the chart at Page No. 7 of the Ld.CIT(A) order. Ld.AR made a submissions that the amendment made to section 43CA are 11 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments retrospective in nature and in this regard he relied on the decision of the Shri Harish H Gandhi v. ACIT (supra) for the sake of clarity it is reproduced below:- “3.3. ......... But we find that there is a proviso introduced by the Finance Act 2018 w.e.f. A.Y.2019-20 onwards and which was later amended by the Finance Act 2020 applicable from A.Y.2021-22, which states that if the difference between the stamp duty value and the reported sale consideration is not more than 10% then, the reported sale consideration shall have to be accepted and no addition in terms of 43CA is required to be made. We find that this amendment has been held to be retrospective in operation by the Co-ordinate Bench decision of this Tribunal in the case of Maria Fernandez Cheryl vs. ITO reported in 123 taxmann.com 252 wherein it was held that amendment made in scheme to Section 50C(1) of the Act by inserting the proviso thereto and by enhancing tolerance band for variations between sale consideration vis a vis stamp duty valuation from 5% to 10% are effective from date on which section 50C itself was introduced i.e. from 01/04/2003 and therefore, having retrospective applicability thereon. The language of provisions of Section 50C are exactly pari materia with provisions of Section 43CA of the Act. Hence, though the aforesaid decision was rendered in the context of Section 50C of the Act, the same analogy would apply for provisions of Section 43CA of the Act also as similar proviso is available in Section 43CA of the Act also. Hence, respectively following the aforesaid decision of this Tribunal, we hold that the difference of Rs.4,42,460/- added by the ld. AO in the assessment falls below the tolerance band of 10% and hence, by applying the proviso to Section 43CA of the Act, no addition is required to be made in the instant case u/s.43CA of the Act. Accordingly, the ld. AO is hereby directed to delete the addition of Rs.4,42,460/- made by him in the assessment. Accordingly, the grounds raised by the assessee are allowed.” 13. Respectfully following the above said decision, and in the above decision the amendment made to section 43CA is retrospective in nature. 12 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments Accordingly, as per the proviso the percentage range up to 10% are outside the provisions of section 40CA of the Act . Accordingly, Sl.No. 3, 4 5 & 8 are outside the provisions of this section considering the fact the difference is less than 10%. In Sl.No. 9 for Flat No. 302 the difference is 10.06% which is near to the specified limit fixed at 10%, since the difference is very meager we direct the Assessing Officer to exclude Sl.No.9 also. Considering the above discussion, we are inclined to partly allow the ground raised by the assessee. 14. With regard to Ground No. 3, Ld. AR has not made any submissions in this regard, accordingly, the above said ground also dismissed as not pressed. 15. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open court on 15 th March, 2023 Sd/- Sd/- (AMIT SHUKLA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 15/03/2023 Giridhar, Sr.PS 13 ITA NO.1932/MUM/2022 (A.Y: 2014-15) M/s. Ravi Developments Copy of the Order forwarded to: 1. The Assessee 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum