GOODWILL CONSTRUCTIONS, MUMBAI V. DCIT, CIRCLE-1, , THANE

ITA 3233/MUM/2022

AI Insights

Goodwill Constructions appealed against the order of the CIT(A) which confirmed the addition of Rs. 24,47,250 to their income for the Assessment Year 2015-16 under section 43CA of the IT Act, 1961. This addition was based on the difference between the actual sale consideration and the fair market value determined by the Valuation Officer for twelve flats sold during the year. The assessee argued that section 43CA was not applicable as they had not transferred any land or building in the year under appeal, and that the differences in sale rates were due to genuine reasons. The Tribunal found that the Valuation Officer had considered relevant factors in determining the fair market value and upheld the addition for ten flats. However, for two flats where the difference was less than 110% of the consideration amount, the Tribunal restored the matter to the A.O for verification.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130183 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Next Hearing Date: 14-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 05-01-2023
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value
• Section: 43CA; 50C; 143(2)

Judgement Text

P a g e | 1 ITA No.3233/Mum/2022 Goodwill Constructions Vs. DCIT, Circle-1 IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No. 3233/Mum/2022 (A.Y.2015-16) Goodwill Constructions Room No. 304, Mayuresh Apartment, Khopat, Near Pratap Cinema, Thane (W), Maharashtra 400601 Vs. DCIT, Circle-1 Room No. 22, 6 th Floor, ‘B’ Wing, Ashar IT Park, Road No. 16Z, Wagle Estate, Thane (W) 4006504 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAIFG7581J Appellant .. Respondent Appellant by : None Respondent by : Krishna Kumar Date of Hearing 15.03.2023 Date of Pronouncement 26.04.2023 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the assesse is directed against the order passed by NFAC, Delhi dated 1011.2022 for A.Y. 2015-16. The assesse has raised the following grounds before us: “1. The Hon. CIT (A) erred in confirming the addition of Rs. 24,47,250/- u/s 43CA of the IT Act 1961, on account of difference between the actual sale consideration and the fair market value determined by the Valuation officer in respect of 12 flats for which agreements for sale were executed with customers during the year under appeal, not appreciating that the provisions of section 43CA are attracted on transfer of land or building or both and as the appellant had not transferred any land or building in the year under appeal the provisions of section 43CA were not attracted and therefore the addition of Rs. 24,47,250/- was required to be deleted 2. The Hon CIT (A) erred in confirming the addition of Rs.24,47,250/- u/s 43CA of the IT Act 1961, on account of difference between the actual sale consideration and the fair market value determined by the Valuation officer in respect of 12 flats for which agreements for sale were executed with customers during the year under appeal, not appreciating that the P a g e | 2 ITA No.3233/Mum/2022 Goodwill Constructions Vs. DCIT, Circle-1 differences in sale rates were on account of several genuine reasons and therefore no adverse inference was called for. The addition of Rs.24,47,250/- being unwarranted by facts and in law may please be deleted. 3. Without prejudice, the Hon CIT (A) erred in confirming the addition of Rs.24,47,250/- u/s 43CA of the 17 Act 1961, on account of difference between the actual sale consideration and the fair market value determined by the Valuation officer in respect of 12 flats for which agreements for sale were executed with customers during the year under appeal, not appreciating that in respect of 2 of the 12 flats for which agreements for sale were entered into in the year under appeal, such difference was lower than 110% of consideration amount and therefore as per first proviso to sec 43CA, the addition to the extent of Rs.3,93,750/-was not justified. 4. The appellant craves leave to add, alter, amend, delete and/or vary the grounds of appeal at any time before the decision of the appeal.” 2. Brief fact of the case is that return of income declaring total income at Rs.44,60,550/- was filed on 9.10.2015. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 12.08.2016. 3. During the course of assessment the A.O noticed that assesse had sold flats during the year under consideration for which consideration received was less than the stamp duty price/market price adopted by the stamp duty authorities, as under: - P a g e | 3 ITA No.3233/Mum/2022 Goodwill Constructions Vs. DCIT, Circle-1 Therefore, the assessee was show caused to explain why the provision of Sec. 43CA of the Income Tax Act should not be attracted in the case of the assessee. 4. The asesssee was engaged in the development and construction of building and explained that constructed project was located at Nadivali Village near Dombivli which was excluded from Kalyan Dombivli municipal corporation (KDMC) in the year 2001, however the same was included in the KDMC in the year 2012. These villages were again excluded from KDMC in the year 2015. The assessee further submitted that in view of the aforesaid reasons the provision of Sec. 43CA were not applicable in the case of the assessee. However, the A.O has not agreed with the submission of the assessee and stated that the provisions of Sec. 43CA are applicable even if any area was out of municipal limited. 5. Thereafter, the assessee has further submitted vide letter dated 07.12.2017 that the assessable value u/s 43CA will not be fair without considering the relevant factors like fair market value, demand and supply ratio for the flats, quality of product, commercial and economical feasibility of location as well as adequacy of infrastructural facilities, consumers needs and competition faced from other builders etc. 6. After taking into consideration the detailed objection raised by the assesse, the A.O has referred the case of the assesse to the departmental valuation officer u/s 142A(1) of the Act to determine the fair market value of those properties as per the provisions of Sec. 43CA r.w.s 50C of the Act. Thereafter the departmental valuation officer determined the fair market value of the said property as under: P a g e | 4 ITA No.3233/Mum/2022 Goodwill Constructions Vs. DCIT, Circle-1 The AO after taking into consideration the report of the valuation officer made an addition of Rs.24,47,250/- (being the difference of actual sale consideration and value as determined by the valuation officer) to the total income of the assessee as per the provision of Sec.43CA of the Act. 7. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 8. Heard the ld. D.R and perused the material on record. Without reiterating the facts as elaborated above during the course of assessment the A.O noticed that assessee had sold flats for which consideration received was less than the stamp duty price/market price adopted by the stamp duty authorities thereby contravening the provision of Sec. 43CA of the Act. Since, the assessee has raised objections regarding the valuation as per stamp duty value of the said property, therefore, the A.O has referred the matter to the valuation officer u/s 142A(1) of the Act to determine the fair market value of those properties as per the provision of Sec. 43CA r.w.s 50C of the Act. As per the value of the sold property computed by the stamp duty authorities there was a difference of Rs.1,73,82,500/-. However, on the basis of valuation of the sold property determined by the DVO the difference in the proposed addition amount was reduced to Rs.24,47,250/-. After perusal of the material on record it is observed that DVO has valued the P a g e | 5 ITA No.3233/Mum/2022 Goodwill Constructions Vs. DCIT, Circle-1 property after taking into consideration the relevant factors such as physical, legal, social and economical as well as affecting factors like location, size, amenities etc. on the basis of objections raised by the assesse. The provisions of subsection 2 and subsection 3 of Sec. 50C are to be applied for the purpose of Sec. 43CA wherein the assessee has disputed the fair market value determined by the AO as per the stamp duty value. Therefore, we don’t find any infirmity in the decision of ld. CIT(A) in confirming the addition of Rs.24,47,250/- u/s 43CA of IT Act on account of difference between the actual sale consideration and the fair market value determined by the valuation officer in respect of 12 flats. Therefore, ground no. 1 & 2 of the appeal filed by the assessee are dismissed. 9. In respect of alternative ground of appeal of the assesse that the difference between the actual sale consideration and the fair market value determined by the valuation officer in respect of 2 of the 12 flats for which agreement for sale were entered into in the year under appeal the difference was lower than 110% of the consideration, we consider that this plea of the assessee is required to be verified as per the provision of Sec. 43CA, therefore, we restore the alternative claim of the assessee to the file of the A.O for deciding after verification of the relevant claim. Therefore, ground no. 3 is partly allowed for statistical purpose. 10. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 26.04.2023 Sd/- Sd/- (Aby T. Varkey) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 26.04.2023 P a g e | 6 ITA No.3233/Mum/2022 Goodwill Constructions Vs. DCIT, Circle-1 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.