Taxap/266/2021 Of The Principal Commissioenr Of Income Tax (Central), Ahmedabad v. Rajendra J Keshwani Huf

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 266 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MS. JUSTICE NISHA M. THAKORE ==========================================================1Whether Reporters of Local Papers may be allowedNOto see the judgment ?2To be referred to the Reporter or not ?NO3Whether their Lordships wish to see the fair copyNOof the judgment ?4Whether this case involves a substantial questionNOof law as to the interpretation of the Constitutionof India or any order made thereunder ?==========================================================THE PRINCIPAL COMMISSIOENR OF INCOME TAX (CENTRAL),AHMEDABAD VersusRAJENDRA J KESHWANI HUF ==========================================================Appearance:LD.SR.ADV.MR.M R BHATT (5953) ASSISTED BY MR.KARAN SANGHANIfor the Appellant(s) No. 1 for the Opponent(s) No. 1========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANIandHONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 22/11/2021 ORAL JUDGMENT (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1.Aggrieved by the order dated 14.08.2019 passed by the Income Tax Appellate Tribunal ‘the ITAT’ hereinafter) the appellant raises the following substantial question of law for the determination of this Court. “Whether the Appellate Tribunal is justified in law andon facts in disposing the appeal of the revenue onaccount of low tax effect without deciding the appealon merits even when the issue under appeal wasclaimed of bogus LTCG on penny stock for which nomonetary limits were applicable?” 2. The search and survey action was carried out at the residence and offices ofMr.S.C.Shah and at the residence of his keyemployees and associates on 09.04.2013. Itwas noticed that Mr.S.C.Shah was engaged inproviding accommodation entries of sharecapital, share premium, share applicationmoney, unsecured loans, long term capitalgain, etc. wherein the cash received by him from various persons. For providing accommodation entries, Shri S.C.Shahcreated an infrastructure of 212 companieswhich were used for layering of funds andpurchase and sale of shares. 2.1Mr.S.C.Shah admitted the factum of facilitating the conversion of unaccounted funds received in cash from the beneficiaries into long term capital gainby transacting in shares of various listedcompanies managed and controlled by him. 2.2 The Assessing Officer was of the view that the shares of Praneta Industries Limited were used for providing various types of accommodation entries i.e. long term capital gain, short term capital gainas well as the trading loss. Therefore, thetrading and the shares were considered as sham transactions and the additions were made of Rs.86,16,761/- on account of thebogus long term capital gain. 3.Aggrieved by the assessment order, theAssessee preferred an appeal before the CIT(Appeals) which deleted the additions byholding that these transactions cannot betreated as sham transactions and allowedthe appeal. 4.The Department challenged before theITAT the order of the CIT (Appeals). TheAppeal came to be dismissed by the Tribunalof the Department on the low tax effectsince the tax effect was to the tune ofRs.26,27,528/- and the prescribed monetarylimit is of Rs.50 Lakh for filing an appealbefore the Tribunal. The Tribunal at thesame time had given a liberty to the Department to seek recall of dismissal of appeal if the matter falls within theexceptions. 5. The appellant is before this Court seeking to question the Tribunal’s order 3.Aggrieved by the assessment order, theAssessee preferred an appeal before the CIT(Appeals) which deleted the additions byholding that these transactions cannot betreated as sham transactions and allowedthe appeal. 4.The Department challenged before theITAT the order of the CIT (Appeals). TheAppeal came to be dismissed by the Tribunalof the Department on the low tax effectsince the tax effect was to the tune ofRs.26,27,528/- and the prescribed monetarylimit is of Rs.50 Lakh for filing an appealbefore the Tribunal. The Tribunal at thesame time had given a liberty to the Department to seek recall of dismissal of appeal if the matter falls within theexceptions. 5. The appellant is before this Court seeking to question the Tribunal’s order which according to the appellant, hasoverlooked the fact that the Assessee hadclaimed the bogus LTCG through penny stockand hence, it falls under the exceptioncarved out in Circular No.23 of 2019 dated06.09.2019 and OM dated 16.09.2019 whichprovided that the monetary limit for filingan appeal shall not apply to the caseswhere Assessee claimed bogus LTCG/LTCLthrough penny stock. Therefore, theaforementioned question of law before thisCourt. 6. We have heard the learned senior advocate, Mr.Manish Bhatt assisted by the learned advocate, Mr.Karan Sanghani. 7.This Court in Special Civil Application No.7520 of 2021 has dealt with the veryissue in detail and dismissed the saidpetition on 26.06.2021, which has not beenthereafter challenged further. Yet anotherpetition being Special Civil ApplicationNo.8621 of 2021 has also been along theline of Special Civil Application No.7520of 2021 concluded. 7.1 Apt would be to refer to the relevant findings and observations of theCourt. “4. In order to appreciate the submissions made bythe learned Senior Advocate, Mr. M.R.Bhatt it wouldbe beneficial to reproduce the circular dated06.09.2019 and Office Memorandum dated 16.09.2019:Circular No. 23 of 2019. F. No. 279/Misc./ M-93/2018-ITJ(Pt.) Government of India Ministry of Finance Department of Revenue Central Board of DirectTaxes Judicial Section New Delhi, 6th September 2019 Subject: Exception to monetary limits for filingappeals specified in any Circular issued under Section268A of the Income Tax Act, 1961-reg. Reference is invited to the Circulars issued from timeto time by Central Board of Direct Taxes (the Board)under Section 268A of the Income Tax Act, 1961( theAct), for laying down monetary limits and otherconditions for filing of departmental appeals beforeIncome Tax Appellate Tribunal (ITAT), High Courtsand SLPs/appeals before Supreme Court. 2. Several references have been received by the Boardthat in large number of cases where organised taxevasion scam is noticed through bogus Long TermCapital Gain (LTCG)/Short Term Capital Loss (STCL)on penny stocks and department is unable to pursuethe cases in higher judicial fora on account of enhanced monetary limits. It has been reported thatin large number of cases, ITATs and High Court haverecognized the unique modus operandi involved insuch scam and have passed judgements in favour ofthe revenue. However, in cases where some appellatefora have not given due considerations to position oflaw or facts investigated by the department there isno remedy available with the department for filingfurther appeal in view of the prescribed monetarylimits. 3.In this context, Board has decided thatnotwithstanding anything contained in any circularissued u/s 268A specifying monetary limits for filingof departmental appeals before Income Tax AppellateTribunal (ITAT), High Courts and SLPs/appeals beforeSupreme Court, appeals may be filed on merits as anexception to said circular, where Board, by way ofspecial order direct filing of appeal on merit in casesinvolved in organised tax evasion activity. (Neetika Bansal) Director (ITJ) CBDT, New Delhi. 3.In this context, Board has decided thatnotwithstanding anything contained in any circularissued u/s 268A specifying monetary limits for filingof departmental appeals before Income Tax AppellateTribunal (ITAT), High Courts and SLPs/appeals beforeSupreme Court, appeals may be filed on merits as anexception to said circular, where Board, by way ofspecial order direct filing of appeal on merit in casesinvolved in organised tax evasion activity. (Neetika Bansal) Director (ITJ) CBDT, New Delhi. OFFICE MEMORANDUM F.No. 279/Misc./M-93/ 2018-ITJ(Pt.) Government of India Ministry of Finance Department of RevenueCentral Board of Direct Taxes New Delhi, Dated:101’ September, 2019 OFFICE MEMORANDUM Subject:- Special order of Board exempting casesinvolving bogus Long Term Capital Gains (LTCG)/Short Term Capital Loss (STCL) through penny stocksfrom monetary limits specified in any Circular issuedunder Section 268A of the Income Tax Act, 1961-reg. The undersigned is directed to refer to Circular No.23 of 2019 dated 6th September, 2019 and to say thatby virtue of powers of the Central Board of DirectTaxes u/s. 268A of Income Tax Act, 1961, themonetary limits fixed for filing appeals beforeITAT/HC and SLPs/ appeals before Supreme Courtshall not apply in case of assesses claiming bogusLTCG/STCL through penny stocks and appeals/ SLPs insuch cases shall be filed on merits. (Abhishek Gautam) DCIT(OSD)(ITJ-1), CBDT, New Delhi. “ 5.The petitioner-original applicant having filed theMiscellaneous Application before the Tribunal underSection 254(2) of the said Act for rectifying themistake apparent from the record, it would be alsobeneficial to reproduce the relevant part of Section254(2) of the said Act. “254. Orders of Appellate Tribunal (1) *** (2)The Appellate Tribunal may, at any timewithin six years from the date of the order,with a view to rectifying any mistakeapparent from the record, amend any orderpassed by it under sub-section (1), and shallmake such amendment if the mistake isbrought to its notice by the assessee or theAssessing Officer” 6. So far as the facts of the case are concerned, theAppeal filed by the petitioner before the Tribunalagainst the order passed by the CIT(Appeals) wasdismissed by the Appellate Tribunal by a commonorder passed on 14.08.2019, in view of the CBDTcircular dated 08.08.2019. Admittedly, at the relevanttime when the Tribunal passed the order dated14.08.2019, neither the Circular No. 23 of 2019dated 06.09.2019 nor the Office Memorandum No. 279 dated 16.09.2019 was in existence. Apart fromthe fact that the said circular and the OfficeMemorandum being not in existence and thereforenot taken into consideration by the Tribunal whiledisposing all the Appeals could not be said to be amistake apparent from the record as contemplatedunder sub-section (2) of Section 254 of the said Act,the Court also does not find any substance in thesubmission of Mr. Bhatt that the Tribunal shouldhave recalled the order dated 14.08.2019 in view ofthe said Circular dated 06.09.2019 and the OfficeMemorandum dated 16.09.2019, which hadretrospective effect. The Court at this juncture doesnot think it appropriate to deal with the facts of thecase, as the main issue that falls for considerationbefore this Court in the present petition would be, asto whether the Circular dated 06.09.2019 and theOffice Memorandum dated 16.09.2019 had anyretrospective effect as sought to be submitted bylearned Advocate Mr. Bhatt. 7. From the bare reading of the Circular dated06.09.2019, it appears that the CBDT had decided thatnotwithstanding anything contained in any Circularissued under Section 268A specifying monetary limitsfor filing of departmental appeals before the Income 7. From the bare reading of the Circular dated06.09.2019, it appears that the CBDT had decided thatnotwithstanding anything contained in any Circularissued under Section 268A specifying monetary limitsfor filing of departmental appeals before the Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/Appeals before the Supreme Court, appeals may befiled on merits as the exception to the said Circular,where the Board by way of special order direct filingof appeals on merits in cases involved in organizedtax evasion activity. The Office Memorandum dated16.09.2019 was issued pursuant to the said circulardated 06.09.2019 stating inter alia that by virtue ofthe powers of CBDT under Section 268A of theIncome Tax Act, the monetary limits fixed for filingappeals before ITAT/High Court and SLPs/Appealsbefore Supreme Court shall not lie in case of assesseesclaiming bogus LTCG/STCL through penny stocks andappeals/ SLPs in such cases appeals shall be filed onmerits. There is nothing to suggest in the saidCircular/ Office Memorandum that they shall haveretrospective effect. On the contrary, from thelanguage employed in the said Circular dated06.09.2019, it clearly transpires that the appeals maybe filed on merits as an exception to the otherCirculars issued earlier, where the Board by way ofspecial order direct filing of Appeals on merits in thecases involved in organized tax evasion activity.Therefore, by virtue of the said Circular dated06.09.2019, the appeals could be filed on merits,irrespective of the monetary limits fixed in earlier cases, if the Board passes special order for filingappeals in cases involving tax evasion activity. Thesaid Circular speaks about the Appeals that may befiled with the special order of the Board in future,and hence could not be construed to haveretrospective effect. The Tribunal interpreting the saidCircular/ Office Memorandum in the impugned orderhas rightly observed that in respect of each case orcategory of cases whether an appeal should be filed inview of the Circular dated 06.09.2019 or not shall bedecided by the Board by way of special order, andthus a specific requirement of issuance of specialorder by CBDT is a must. The Tribunal therefore hasrightly held that the CBDT Circular No. 23/2019 dated06.09.2019 should be read along with the OfficeMemorandum dated 16.09.2019, in respect of theappeals to be filed pursuant to such special orders ofCBDT and shall apply to all the appeals filed on orafter 16.09.2019 by the revenue, where the tax effectmay be low but the appeal could still be filed by therevenue on merits. 8. The appeals including the appeal in case of therespondent, which were disposed of by the Tribunalvide the common order dated 14.08.2019 could not besaid to have been filed pursuant to the special order of the CBDT in view of the Circular dated 06.09.2019read with the Office Memorandum dated 16.09.2019,and therefore it could not be said that the Tribunalhad committed any mistake apparent from the record,which would require rectification as envisaged inSection 254(2) of the said Act. 9. In that view of the matter, the Court does not findany illegality or infirmity in the impugned order dated09.09.2020 passed by the Tribunal dismissing theMiscellaneous Application filed by the petitioner. Thepetition being devoid of merits is dismissed in limine.” 8.Here also the issue being identical,this appeal merits no consideration and isdismissed accordingly. Here also the issue being identical, (SONIA GOKANI, J) M.M.MIRZA (NISHA M. THAKORE,J)