The Principal Commissioner Of Income Tax 1 Ahmedabad v. Dhiren H Vora

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 15304 of 2021 FOR APPROVAL AND SIGNATURE: Sd/- HONOURABLE MS. JUSTICE SONIA GOKANI andHONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK ================================================================ ================================================================ THE PRINCIPAL COMMISSIONER OF INCOME TAX 1 AHMEDABAD Versus DHIREN H VORA ================================================================Appearance:MRMR BHATT, SENIOR ADVOCATE WITH MR KARAN SANGHANI for the Petitioner(s) No. 1 for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI andHONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK Date : 26/10/2021 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK) 1.The petitioner - The Principal Commissioner ofIncome Tax (Central) Ahmedabad, has filed the presentpetition under Article 226/227 of the Constitution of Indiachallenging the order dated 09.09.2020 passed by theIncome Tax Appellate Tribunal, Ahmedabad Bench,Ahmedabad (hereinafter referred to as “the Tribunal”) inM.A. No. 401/AHD/2019 in IT(SS) No. 178/AHD/2018(Annexure A) filed by the petitioner under Sections 254(2)of the Income Tax Act, 1961 (hereinafter referred to as“the said Act”), seeking prayer to recall the order dated14.08.2019 passed by the Tribunal in ITA No.1398/Ahd/2004. The Tribunal vide the impugned orderdated 09.09.2020 has dismissed the said M.A. No.401/AHD/2019 filed in IT(SS)A No. 178/AHD/2019 alongwith the other Miscellaneous Applications filed by thepetitioner (original applicant) holding that there was nomistake apparent on the face of record which could berectified within the narrow compass of Sections 254(2) ofthe said Act. 2.The petitioner had filed the appeal being CIT(A) –11C.C-1(4) / Abd / 644-A / 2015-16 challenging the orderdated 30.03.2016 passed by the DCIT, Central Circle –1(4), Ahmedabad, (Annexure – D) by which the DCIT hadallowed the Appeal filed by the respondent - assesseechallenging the assessment order dated 16.03.2018passed by the Assessing Officer. The Tribunal vide theorder dated 14.08.2019 dismissed the said Appeal along with other 627 Appeals on the ground that the Tax Effectinvolved in all the said appeals did not exceedRs.50,00,000/- in each of the Appeals, in view of thecircular issued by the CBDT on 08.08.2019, withclarification that the appellant (i.e. the petitioner herein)shall be at liberty to point out the cases which werewrongly included in the Appeals so summarily dismissed,either owing to wrong computation of tax effect or owingto such cases being covered by the permissible exceptionsor for any other reason. The petitioner filed MiscellaneousApplications including M.A. No. 77 of 2020 in case of therespondent, under Section 254(2) of the said Act, on theground that the case was covered under the exceptioncarved out under the CBDT Circular No. 23/2019 dated06.09.2019 (Annexure-H). The Tribunal vide the impugnedorder dated 09.09.2020 dismissed the said Miscellaneousapplication alongwiththeotherMiscellaneousApplications. 3.The learned Senior Advocate Mr. M.R.Bhatt appearingwith learned advocate Mr.Karan Sanghani for thepetitioner vehemently submitted that the Tribunal hadcommitted gross error by not entertaining theMiscellaneous Application filed by the petitioner underSection 254(2) of the said Act in view of the subsequentcircular No. 23/2019 dated 06.09.2019 (Annexure-H) aswell as the Office Memorandum No. 279 dated 16.09.2019(Annexure-I). According to Mr.Bhatt, the CBDT had in 3.The learned Senior Advocate Mr. M.R.Bhatt appearingwith learned advocate Mr.Karan Sanghani for thepetitioner vehemently submitted that the Tribunal hadcommitted gross error by not entertaining theMiscellaneous Application filed by the petitioner underSection 254(2) of the said Act in view of the subsequentcircular No. 23/2019 dated 06.09.2019 (Annexure-H) aswell as the Office Memorandum No. 279 dated 16.09.2019(Annexure-I). According to Mr.Bhatt, the CBDT had in supersession of the earlier circular dated 11.07.2018prescribed minimum monetary limit at Rs. 20,00,000/- forfiling Appeal before the Appellate Tribunal, providingcertain exceptions. The said Circular was maderetrospectively applicable to all the pending appeals. Thesaid circular dated 11.07.2018 came to be modified byCircular No. 17/2019 dated 08.08.2019, whereby themonetary limit for filing the appeal before the AppellateTribunal was revised to Rs. 50,00,000/-. Thereafter theCBDT issued the Circular No. 23/2019 dated 06.09.2019under Section 268A of the said Act which provided thatthe cases involving organized tax evasion scam throughbogus long term capital gain/ short term capital loss onpenny stocks were not feasible to be pursued due to themonetary limits prescribed for filing the Appeals. Thus,according to Mr.Bhatt, the said circular dated 06.09.2019being clarificatory in nature would relate back to thecircular dated 11.07.2018 as modified by the circulardated 08.08.2019. He further drew the attention of theCourt to the Office Memorandum No. 279 dated16.09.2019 issued by the CBDT and submitted that themonetary limits fixed for filing appeals before theTribunals/ High Court/ Supreme Court would not apply incase of assessee claiming LTCG/STCL through pennystocks. The said Office Memorandum also beingclarificatory in nature would apply retrospectively to allthe pending appeals and hence, the petitioner had filedMiscellaneous Application in case of the respondent and others, falling under the exception carved out in Circulardated 06.09.2019 and Office Memorandum dated16.09.2019 seeking recall of the common order passed bythe Tribunal on 14.08.2019. According to him, the Tribunalwithout appreciating the submissions made on behalf ofthe petitioner-Department in the right perspective, hasdismissed the Miscellaneous Application. 4.In order to appreciate the submissions made by thelearned Senior Advocate Mr.M.R.Bhatt it would bebeneficial to reproduce the circular dated 06.09.2019 andOffice 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 Direct Taxes Judicial SectionNew Delhi, 6th September 2019 Subject: Exception to monetary limits for filingappeals specified in any Circular issued underSection 268A 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 theBoard that in large number of cases where organisedtax evasion scam is noticed through bogus LongTerm Capital Gain (LTCG)/Short Term Capital Loss(STCL) on penny stocks and department is unable topursue the cases in higher judicial fora on account ofenhanced monetary limits. It has been reported that 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 theBoard that in large number of cases where organisedtax evasion scam is noticed through bogus LongTerm Capital Gain (LTCG)/Short Term Capital Loss(STCL) on penny stocks and department is unable topursue the cases in higher judicial fora on account ofenhanced monetary limits. It has been reported that in 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 someappellate fora have not given due considerations toposition of law or facts investigated by thedepartment there is no remedy available with thedepartment for filing further appeal in view of theprescribed monetary limits. 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 TaxAppellate Tribunal (ITAT), High Courts andSLPs/appeals before Supreme Court, appeals may befiled on merits as an exception to said circular,where Board, by way of special order direct filing ofappeal on merit in cases involved in organised taxevasion 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 Revenue Central 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 saythat by virtue of powers of the Central Board ofDirect Taxes 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 in such cases shall be filed on merits. (AbhishekGautam) 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 the mistakeapparent from the record, it would be also beneficial toreproduce the relevant part of Section 254(2) of the saidAct: “254. Orders of Appellate Tribunal (1) *** (2) TheAppellate Tribunal may, at any time within six yearsfrom the date of the order, with a view to rectifyingany mistake apparent from the record, amend anyorder passed by it under sub-section (1), and shallmake such amendment if the mistake is brought toits notice by the assessee or the Assessing Officer” in such cases shall be filed on merits. (AbhishekGautam) 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 the mistakeapparent from the record, it would be also beneficial toreproduce the relevant part of Section 254(2) of the saidAct: “254. Orders of Appellate Tribunal (1) *** (2) TheAppellate Tribunal may, at any time within six yearsfrom the date of the order, with a view to rectifyingany mistake apparent from the record, amend anyorder passed by it under sub-section (1), and shallmake such amendment if the mistake is brought toits notice by the assessee or the Assessing Officer” 6.So far as the facts of the case are concerned, theAppeal filed by the petitioner before the Tribunal againstthe order passed by the CIT(Appeals) was dismissed bythe Appellate Tribunal by a common order passed on14.08.2019, in view of the CBDT circular dated08.08.2019. Admittedly, at the relevant time when theTribunal passed the order dated 14.08.2019, neither theCircular No. 23/2019 dated 06.09.2019 nor the OfficeMemorandum No. 279 dated 16.09.2019 was in existence.Apart from the fact that the said circular and the OfficeMemorandum being not in existence and therefore could nothave been taken into consideration by the Tribunal whiledisposing all the Appeals could not be said to be a mistakeapparent from the record as contemplated under sub-section (2) of Section 254 of the said Act, the Court also does not findany substance in the submission of Mr. Bhatt that theTribunal should have recalled the order dated 14.08.2019in view of the said Circular dated 06.09.2019 and theOffice Memorandum dated 16.09.2019, which hadretrospective effect. The Court at this juncture does notthink it appropriate to deal with the facts of the case, asthe main issue that falls for consideration before this Courtin the present petition would be, as to whether theCircular dated 06.09.2019 and the Office Memorandumdated 16.09.2019 had any retrospective effect as soughtto be submitted by learned 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 Circular issuedunder Section 268A specifying monetary limits for filing ofdepartmental appeals before the Income Tax AppellateTribunal (ITAT), High Courts and SLPs/ Appeals before theSupreme Court, appeals may be filed on merits as theexception to the said Circular, where the Board by way ofspecial order direct filing of appeals on merits in casesinvolved in organized tax evasion activity. The OfficeMemorandum dated 16.09.2019 was issued pursuant tothe said circular dated 06.09.2019 stating inter alia thatby virtue of the powers of CBDT under Section 268A of theIncome Tax Act, the monetary limits fixed for filingappeals before ITAT/High Court and SLPs/Appeals before Supreme Court shall not lie in case of assessees claimingbogus LTCG/STCL through penny stocks and appeals/ SLPsin such cases appeals shall be filed on merits. There isnothing to suggest in the said Circular/ OfficeMemorandum that they shall have retrospective effect. Onthe contrary, from the language employed in the saidCircular dated 06.09.2019, it clearly transpires that theappeals may be filed on merits as an exception to theother Circulars issued earlier, where the Board by way ofspecial order is needed to direct filing of Appeals on meritsin the cases involved in organized tax evasion activity.Therefore, by virtue of the said Circular dated 06.09.2019,the appeals could be filed on merits, irrespective of themonetary limits fixed in earlier cases, if the Board passesspecial order for filing appeals in cases involving taxevasion activity. In other words, the said Circular clearlycontemplates the Appeals to be filed with the special orderof the Board in future on merits regardless of monitorylimits arranged once tax evasion is noticed. This could notbe construed to have retrospective effect surely. The whileTribunal interpreting the said Circular / OfficeMemorandum in the impugned order has rightly observedthat in respect of each case or category of cases whetheran appeal should be filed in view of the Circular dated06.09.2019 or not shall need to be necessarily decided bythe Board by way of special order, and thus a specificrequirement of issuance of special order by CBDT is amust. The Tribunal, therefore, has rightly held that the CBDT Circular No. 23/2019 dated 06.09.2019 should be read along with the Office Memorandum dated16.09.2019, in respect of the appeals to be filed pursuantto such special orders of CBDT and shall apply to all theappeals filed on or after 16.09.2019 by the revenue,where the tax effect may be low but the appeal could stillbe filed by the revenue on merits. 8.The appeals including the appeal in case of therespondent, which were disposed of by the Tribunal videthe common order dated 14.08.2019 could not be said tohave been filed pursuant to the special order of the CBDTin view of the Circular dated 06.09.2019 read with theOffice Memorandum dated 16.09.2019, and therefore itcould not be said that the Tribunal had committed anymistake apparent from the record, which would requirerectification as envisaged in Section 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. Sd/- (SONIA GOKANI, J) Sd/- (HEMANT M. PRACHCHHAK,J) V.R. PANCHAL