2019 (8) TMI 1192 - AT - Income Tax

Addition u/s 50C - sale consideration received as a result of the transfer of a capital asset is less than the market value as per stamp duty valuation - third proviso to Section 50C inserted w.e.f 1-4-2019 is retrospective or prospective - HELD THAT - Coordinate Bench of ITAT Mumbai, in the case of M/s John Flower ( India) Pvt. Ltd 2019 (8) TMI 1086 - ITAT BANGALORE held that if the difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee is less than 10%, the same should be ignored and no adjustments shall be made. Accordingly, we hold that the insertion of third proviso (noted above) to Section 50C is declaratory and curative in nature. That is, the third proviso to Section 50C of the Act relates to computation of value of property as explained by us above, hence it is not a substantive amendment, it is only a procedural amendment therefore the Coordinate Benches of the ITAT used to ignore the variation up to 10%, therefore, the said amendment should be retrospective. Quite clearly therefore, even when the statute does not specifically state so, such amendments, in the light of the detailed discussions above, can only be treated as retrospective and effective from the date related statutory provisions was introduced. Viewed thus, the third proviso to Section 50C should be treated as curative in nature and with retrospective effect from 1st April 2003, i.e. the date effective from which Section 50C was introduced. We note that Finance Act, 2018, w.e.f. 01.04.2019 provided that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than 5% of the sale consideration. In the assessee s case under consideration, the stamp duty valuation is ₹ 3,27,01,950/- and sale consideration is ₹ 3,15,00,000/-. The difference of ₹ 12,01,950/- is not more than 5% of the sale consideration. That is, it is at 3.81% 12,01,950 / 3,15,00,000 x 100 of sale consideration, therefore, we delete the addition Bogus loss incurred in share trading - HELD THAT - Assessee s case is covered by the judgment of Co-ordinate Bench of ITAT Kolkata in the case of Sanjib Kumar Patwari(HUF) 2019 (5) TMI 1670 - ITAT KOLKATA . Revenue has failed to controvert the findings of the Coordinate Bench (supra) therefore, respectfully following the judgment of the Co-ordinate Bench of ITAT, Kolkata (supra), we deleted the addition .

Summary

Issues Involved:
1. Addition of ?12,01,950/- under Section 50C of the Income Tax Act, 1961.
2. Addition of ?31,46,527/- on account of loss incurred in share trading by holding it to be bogus.

Detailed Analysis:

1. Addition of ?12,01,950/- under Section 50C of the Income Tax Act, 1961:
The first issue pertains to the addition made by the Assessing Officer (AO) of ?12,01,950/- under Section 50C of the Income Tax Act, 1961. The AO noticed that the assessee sold a property for ?3,15,00,000/- while the market value as per the stamp duty authority was ?3,27,01,950/-. The AO invoked Section 50C, which deems the stamp duty valuation as the full value of consideration if it exceeds the actual sale consideration. The assessee objected to this valuation and requested a reference to the District Valuation Officer (DVO). However, no report was received from the DVO in time, leading the AO to adopt the stamp duty value, resulting in an addition of ?12,01,950/-.

The Tribunal noted that the Finance Act, 2018 introduced a third proviso to Section 50C, effective from April 1, 2019, which allows no adjustments if the variation between the stamp duty value and the sale consideration does not exceed 5% of the sale consideration. Although this amendment was prospective, the Tribunal held that it should be treated as retrospective because it was curative in nature, intended to remove undue hardship. The Tribunal concluded that since the difference of ?12,01,950/- was only 3.81% of the sale consideration, the addition should be deleted.

2. Addition of ?31,46,527/- on Account of Loss Incurred in Share Trading by Holding it to be Bogus:
The second issue involves the addition of ?31,46,527/- on account of loss incurred in share trading, which the AO held to be bogus. The AO observed that the assessee incurred a short-term capital loss on the sale of shares of Shree Shaleen Textile Ltd. and Luminaire Technologies Ltd., which were considered penny stocks. The AO inferred that the transactions were pre-arranged to book losses for setting off taxable profits.

The Tribunal noted that the assessee provided substantial evidence, including broker's ledger accounts, contract notes, DMAT holding statements, and bank statements, to support the genuineness of the transactions. The Tribunal referred to a similar case decided by the Coordinate Bench of ITAT Kolkata in Sanjib Kumar Patwari (HUF), where similar additions were deleted based on identical facts and circumstances. The Tribunal emphasized that the AO's conclusions were based on suspicion without concrete evidence. The Tribunal also highlighted that the SEBI had revoked its interim order against the companies involved, indicating no adverse findings against the assessee.

The Tribunal concluded that the assessee's transactions were genuine, supported by documentary evidence, and the AO's addition based on suspicion and presumption was unjustified. Consequently, the addition of ?31,46,527/- was deleted.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, deleting both the additions made by the AO under Section 50C and on account of alleged bogus share trading losses. The Tribunal's decision was based on the interpretation of curative amendments, substantial documentary evidence, and the absence of concrete evidence from the AO to support the allegations.