Amendment to section 50C w.e.f. 01.04.2019 to apply retrospectively w.e.f. 01.04.2003

Amendment to section 50C w.e.f. 01.04.2019 was to apply retrospectively w.e.f. 01.04.2003, when the section 50C was brought into statute – ITAT

In a recent judgment, ITAT Agra deleted addition made u/s 56(2)(viib) holding that amendment to section 50C brought into the Act by finance Act, 2018 w.e.f. 01.04.2019 was to apply retrospectively w.e.f. 01.04.2003, when the section 50C was brought into statute

ABCAUS Case Law Citation:
4808 (2025) (10) abcaus.in ITAT

The case was reopened u/s 147of notice u/s 148 of the Act on the ground that the assessee had purchased 1/3^rd share in an immovable property, at a consideration significantly lower than the circle rate, thereby attracting the provision of section 56(2)(viib) of the Act. 

The Assessee further requested for valuation of the property by Valuation Officer, contesting that the Circle Rate did not reflect the Fair Market Value (FMV). As per valuation report, FMV was much higher than the assessee’s 1/3 share in the sale consideration paid.

In reply to show cause notice, the assessee relied upon various case laws to submit that the amendment to Section 50C by Finance Act, 2018 w.e.f. 01.04.2019, which provided that where the difference between the stamp duty valuation and the fair market value was less than 10% then the said difference was to be ignored, was to apply retrospectively w.e.f. 01.04.2003 the date of introduction of Section 50C of the Act and, therefore, her case was also covered by the said amendments as the difference between the stamp duty valuation and the FMV determined by the DVO was less than 10%.

The AO thereafter, considering the amendment to section 50C of the Act and CBDT Circular no. 8/2018 in line with pronouncements of various Courts and Tribunals noted that the said difference is liable to be ignored, for the purpose of Assessment.

Thereafter, the case was examined by the PCIT under the provision of section 263 of the Act.  The PCIT issued showcause by observing that CBDT Circular no. 8/2018 stated that the amendments to Section 50C takes effect from 1st April 2019 and will accordingly apply in relation to A.Y. 2019-20 and subsequent years and will not apply for the relevant Assessment Year i.e. AY 2016-17.

The PCIT did not agree with the submission of the assessee that the amendment to sections 43CA, 50C and 56(2)(vii) & 50C of the Act and explained vide circular no. 8/2028 of CBDT was declaratory and curative in nature and applies retrospectively.

The PCIT relied upon the decision of the Hon’ble Apex Court to hold that for an amendment of a statute to be construed as being retrospective, the amended provisions itself should indicate either in terms or by necessary implication that it was to operate retrospectively.

Accordingly, the PCIT held that the assessment order passed under section 147 r.w.s. 144B of the Act by the Assessing Officer was erroneous in so far as it was prejudicial to the interest of the revenue and had been issued without making enquiries which should have been made by the AO. The PCIT cancelled assessment order with directions to the Assessing Officer to pass a fresh order, denovo.

The Tribunal observed that PCIT did not comment or give any contrary decision to the case laws relied by the assessee in reply to the showcause issued to the assessee that the circular no. 8/2018 was to operate retrospectively which was considered by the AO in accepting the total income declared by the assessee relying upon the said decisions.

The Tribunal observed that the assessee had relied upon the orders of the Coordinate Bench of Mumbai and of the Kolkata Tribunal which held that the amendment to section 50C brought into the Act by finance Act, 2018 w.e.f. 01.04.2019 was to apply retrospectively w.e.f. 01.04.2003, when the section 50C was brought into statute.

The Tribunal opined that Section 56(2)(vii) being pari- materia to section 50C of the Act, and the said Circular no. 8/2018 also amending the provisions of Section 56 of the Act, will be applicable to the case of the assessee also and will accordingly the benefit of the said amendment will apply retrospectively in the case of the assessee also and the difference between the actual consideration paid and the FMV being less than 10% will have to be ignored for applying the provisions of Section 50(2)(vii) in the case of the assessee.

As a result, the Tribunal quashed the PCIT order as merely a change of opinion and not sustainable.

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