Section 43CA

Section 43CA — the law in short

What the courts have decided on section 43CA, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Bhatia Propcon Pvt Ltd v DCIT (Delhi High Court) — citing section 50C when section 43CA was the right provision does not defeat the reassessment High CourtHelps departmentNo later treatment found
  The reopening notice says my sale below circle rate attracts section 50C, but I am a developer and the floor sold was stock in trade, so section 50C cannot apply. Does that error destroy the notice?
  No. The Delhi High Court held that sections 50C and 43CA both contain a deeming provision imputing to the asset transferred a value ascribable to it even where it is sold below the circle rate — the first for capital assets, the second for assets other than capital assets — so the Assessing Officer had sufficient reason to believe income had escaped assessment. A misapprehension as to which of the two applied was not a jurisdictional error invalidating the section 148 proceedings, and the writ petition was dismissed.
• Bansal Land Developers v ITO ITATHelps taxpayerNo later treatment found
  The stamp value rose between booking and registration and the AO added the difference under 43CA. Is that right?
  Not where sub-sections (3) and (4) of s.43CA are satisfied. The Pune Tribunal deleted the entire addition because the booking dates preceded registration, the agreement values at booking exceeded the stamp duty values then prevailing, and part of the consideration had come through banking channels, so the agreement-date value governed.
• Prithvi Developers v DCIT ITATHelps departmentNo later treatment found
  Section 43CA got a 5 per cent tolerance band in 2018 and 10 per cent in 2020. Does the band help an earlier year, as Maria Fernandes Cheryl says it does for s.50C?
  The Raipur bench said no. It held that the first proviso to s.43CA, inserted by the Finance Act 2018 with effect from 1 April 2019, applies prospectively from assessment year 2019-20, and it refused to read it as curative and retrospective. Its reasons were that before the 2018 amendment no tolerance limit was contemplated at all in s.43CA, that the explanatory notes state the amendment takes effect from 1 April 2019 and applies to assessment year 2019-20 and subsequent years, and, applying the distinction drawn by the Supreme Court in Shree Choudhary Transport Co., that this was a substantive change rather than a curative one. It followed a Mumbai coordinate bench decision in Welfare Properties P. Ltd. The addition was upheld. This entry is included precisely because it cuts against the assessee, and a practitioner should know the argument he is walking into.
• Alrameez Construction P Ltd v CIT/NFAC ITATHelps taxpayer
  The only addition is the gap between the stamp duty value and my price. Can that carry a s.270A penalty?
  No, on this Tribunal's reasoning, and note the facts it rests on. The Tribunal read s.270A as dealing with deemed income only where the addition is made under s.115JB or s.115JC, so an addition under s.43CA read with s.56(2)(x) falls outside the under-reporting scheme; where a deeming provision applies the assessee has no option but to accept the difference, so neither concealment nor under-reporting can be established. Two further grounds carried the result: the notice never said which limb of s.270A was charged, and the assessment order itself recorded that the assessee had accepted the addition to buy peace. The penalty of Rs. 20,843 was deleted; the addition of Rs. 1,34,100 stands.
• Joseph Mudaliar v DCIT (ITAT Mumbai) — the section 50C tolerance band read into the buyer's charge under section 56(2)(vii)(b), and applied to AY 2015-16 ITATHelps taxpayer
  I bought flats slightly below the stamp duty value and the Assessing Officer has added the difference in my hands under section 56(2)(vii)(b). There is no tolerance band in that clause. Can I still claim the section 50C margin?
  The Tribunal held that you can. It read the exception in the third proviso to section 50C(1), and the corresponding exception in section 56(2)(x)(b)(B) and the first proviso to section 43CA, into section 56(2)(vii)(b)(ii), on the reasoning that the buyer and the seller stand on the same footing and there cannot be two different fair market values for the same property. It then applied a ten per cent margin to AY 2015-16, holding the Finance Act 2018 amendments curative and beneficial and therefore retrospective, and deleted the whole addition of Rs.23,30,694.
• Statutory position — the inadequate-consideration margin in section 56(2)(x)(b): none before AY 2019-20, five per cent from AY 2019-20, ten per cent from AY 2021-22 CBDT Circulars & InstructionsCuts both ways
  The stamp duty value of the flat my client bought exceeds the price by about eight per cent. Is there a tolerance band, and what was it in the year of my assessment?
  There is, but only from AY 2019-20, and its size changed. Item (B) of section 56(2)(x)(b) was substituted by the Finance Act 2018 with effect from 1 April 2019 to charge the excess only where it is more than the higher of Rs 50,000 and five per cent of the consideration, and the word 'five' was substituted by 'ten' by the Finance Act 2020 (Act No. 12 of 2020) with effect from 1 April 2021. For AY 2018-19 and earlier there was no percentage band at all under this clause: any excess over Rs 50,000 was chargeable.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.