ITAT upholds CIT(A)'s decision on section 50C addition, cites 3rd proviso & dismisses Revenue appeal

The ITAT upheld the CIT(A)'s decision to delete the addition under section 50C of the Act, amounting to Rs. 85,36,200, based on the 3rd proviso to section 50C(1) where the difference between the guideline value and sale consideration was less than 10%. The ITAT considered the amendment in section 50C(1) as curative and dismissed the Revenue's appeal, citing precedents and holding that no addition should be made in such cases.

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Issues:
- Disallowance of interest expenses
- Addition under section 50C of the Act

Disallowance of Interest Expenses:
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of interest expenses. The Revenue contended that the CIT(A) erred in deleting the disallowance of interest expenses of Rs. 6,29,504, based on a previous decision in favor of the assessee. The Revenue argued that the CIT(A) failed to acknowledge the pending appeal before the High Court and erred in allowing interest under section 37 of the Act. The issue revolved around diversion of borrowed funds and the applicability of section 37. The Revenue sought to set aside the CIT(A) order and restore that of the Assessing Officer.

Addition under Section 50C of the Act:
The dispute centered on the addition under section 50C of the Act amounting to Rs. 85,36,200. The CIT(A) deleted this addition based on a decision in favor of the assessee by the Chennai Bench of the Tribunal. The Revenue argued that the CIT(A) failed to appreciate the facts of the case and erred in applying section 55A(b)(1) when no reference was made to the DVO. The Revenue sought to set aside the CIT(A) order and restore that of the Assessing Officer. The crux of the matter was the difference between the guideline value of the property and the sale consideration, with the CIT(A) invoking the 3rd proviso to section 50C(1) to justify the deletion of the addition.

The ITAT, after hearing both parties and examining the case, found that the difference between the stated consideration and the guideline value was less than 10%. The ITAT referred to a series of Tribunal decisions and held that the amendment in section 50C(1) was curative in nature and related back to the date of introduction of section 50C. Citing precedents, including the case of Doraisamy Suresh (HUF) vs ACIT, the ITAT concluded that if the difference is less than 10% as per the 3rd proviso to section 50C(1), no addition should be made. Therefore, the ITAT upheld the CIT(A)'s decision to delete the addition under section 50C of the Act. Consequently, the appeal filed by the Revenue was dismissed.

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