ITAT Removes Addition as Sale Agreement Before 1.4.2014 is Not Covered by U/S 43CA

The addition holding that Section 43CA of the Income Tax Act 1961 would not be applicable to the sale agreement entered prior to 1.4.2014 would have been removed by the Kolkata Bench of Income Tax Appellate Tribunal (ITAT).

The taxpayer, Regal Construction has the business of promoting/developing/constructing and sale of residential/commercial buildings. The Assessing Officer (AO) at the time of assessment proceedings, witnessed that beneath the audited accounts, the assessee would have shown the sale of 12 flats, one office room, and four shops (total of 17).

According to the details received via the sub-Registrar office, the taxpayer would have sold a total of 18 properties vide separate 18 registered sale deeds. The Assessing Officer witnessed that the taxpayer do not disclose the sale value of one property registered dated 21.07.2014.

As per that the assessing officer would have applied on the provision of Section 43CA of the Income Tax Act and computed the sale consideration difference along with that it adds that into the taxpayer’s income under 43CA of the Income Tax Act.

On behalf of the petitioner Sunil Surana has appeared argued, the provisions to section 43CA of the Income Tax Act had been inserted wef the date 1.4.2014, while the taxpayers would have agreed to sell the flats with the buyers in the year 2012-13 itself as a result, the assessee was not capable of anticipating the provisions of Section 43CA of the Income Tax Act and the requirement to accept the part of the selling consideration through cheque/banking mode/electronic mode cannot have been secured on the taxpayer in a retrospective way applying the provisions of section 43CA of the Income Tax Act.

On behalf of the respondent P. P. Barman appeared laid on the findings of the lower authorities.

The two-member Bench of Sanjay Garg (Judicial Member) and Manish Borad (Accountant Member) laid on the decision of the Bombay High Court in PCIT vs. Swananda Properties (P) Ltd.

The Bench ruled that because the provisions of Section 43CA of the Income Tax Act were introduced with effect from April 1, 2014, and because the agreement to sell was entered into prior to that date, the requirement that the consideration be paid in full or in part on or before the agreement date could not be applied retroactively because the assessee could not have anticipated the passage of Section 43CA of the Income Tax Act of 1961.