Tribunal allows appeal on stamp duty valuation difference, deems Section 50C inapplicable. Retrospective third proviso justified.

The Tribunal allowed the appeal, determining that the 6.55% difference between the sale consideration and stamp duty valuation fell within the permissible 10% limit. Consequently, Section 50C was deemed inapplicable, rejecting the AO's capital gains enhancement. The Tribunal held that the retrospective application of the third proviso to Section 50C(1) was justified from April 1, 2003, to address genuine variations. Other issues raised in the appeal were considered moot.

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Issues Involved:
1. Correctness of the order passed by CIT(A) regarding the assessment under section 143(3) read with section 147 of the Income Tax Act, 1961.
2. Applicability of Section 50C of the Income Tax Act concerning the difference between sale consideration and stamp duty valuation.
3. Retrospective applicability of the third proviso to Section 50C(1) introduced by Finance Act 2018 and its amendment by Finance Act 2020.

Detailed Analysis:

1. Correctness of the order passed by CIT(A):
The appeal questions the correctness of the CIT(A)'s order dated 28th May 2019, which upheld the assessment under section 143(3) read with section 147 for the assessment year 2011-12. The core issue is whether the CIT(A) erred in not appreciating that the difference between sale consideration and the stamp duty valuation was only 6.55%, thus challenging the addition under section 50C of the Act.

2. Applicability of Section 50C:
The assessee sold a flat for Rs. 75,00,000, while the stamp duty valuation was Rs. 79,91,500. The Assessing Officer (AO) adopted the stamp duty valuation for computing capital gains, leading to the reopening of the completed assessment. The CIT(A) upheld the AO's decision, prompting the assessee to appeal further. The Tribunal noted that the variation between the sale consideration and the stamp duty valuation was only 6.55%, which is less than the permissible variation of 10% introduced by the Finance Act 2020.

3. Retrospective Applicability of the Third Proviso to Section 50C(1):
The Tribunal examined whether the amendments introduced by the Finance Act 2018 and Finance Act 2020, which provided a tolerance band of 5% and later 10%, could be applied retrospectively. The Departmental Representative argued that these amendments are prospective, effective from 1st April 2019 and 1st April 2021, respectively. However, the Tribunal, referencing various judicial precedents, held that the third proviso to Section 50C(1) is curative in nature, addressing unintended consequences of the main provision. Therefore, the Tribunal concluded that these amendments should be retrospective, effective from 1st April 2003, when Section 50C was initially introduced.

The Tribunal emphasized that the insertion of the third proviso was to address genuine variations between sale consideration and stamp duty valuation due to factors like the shape of the plot or location. Hence, the anti-avoidance provisions of Section 50C should not apply to such bonafide variations. The Tribunal rejected the Departmental Representative's plea to treat the relief as a special case, underscoring the principle of "equality before the law."

Conclusion:
The Tribunal allowed the appeal, concluding that the difference of 6.55% between the sale consideration and the stamp duty valuation falls within the permissible limit of 10%. Consequently, Section 50C does not apply, and the enhancement in capital gains computation by the AO was disapproved. The Tribunal did not address other issues raised in the appeal, deeming them infructuous.

Pronouncement:
The judgment was pronounced in the open court on 15th January 2021.

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