The Principal Commissioner Of Income Tax 1, Ahmedabad v. Rajendra Jethabhai Keshwani

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 19271 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE SONIA GOKANI andHONOURABLE MS. JUSTICE NISHA M. THAKORE ========================================================== 1Whether Reporters of Local Papers may be allowedto see the judgment ?2To be referred to the Reporter or not ?3Whether their Lordships wish to see the fair copyof the judgment ?4Whether this case involves a substantial questionof law as to the interpretation of the Constitutionof India or any order made thereunder ? ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX 1, AHMEDABAD Versus RAJENDRA JETHABHAI KESHWANI ==========================================================Appearance: M R BHATT & CO.(5953) for the Petitioner(s) No. 1 for the Respondent(s) No. 1========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI andHONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 21/12/2021 ORAL JUDGMENT (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1. The petitioner - The Principal Commissioner of Income Tax(Central) Ahmedabad, has filed the present petition underArticle 226/227 of the Constitution of India challenging theorder dated 25.03.2021 passed by the Income Tax AppellateTribunal, Ahmedabad Bench, Ahmedabad (hereinafter referredto as “the Tribunal”) in M.A. No. 334/AHD/2019 in ITA No.1116/AHD/2019 (Annexure A) filed by the petitioner underSections 254(2) of the Income Tax Act, 1961 (hereinafterreferred to as “the said Act”), seeking prayer to recall theorder dated 14.08.2019 passed by the Tribunal in ITA No.1398/Ahd/2004. The Tribunal vide the impugned order dated25.03.2021 has dismissed the said M.A. No. 334/AHD/2019filed in ITA No. 1116/AHD/2019 along with the otherMiscellaneous Applications filed by the petitioner (originalapplicant) holding that there was no mistake apparent on theface of record which could be rectified within the narrowcompass of Sections 254(2) of the said Act. 2. The petitioner had filed the appeal being CIT(A) –10/10369/2017-18 challenging the order dated 26.12.2017passed by the DCIT, Central Circle – 1(4), Ahmedabad,(Annexure – D) by which the DCIT had allowed the Appeal filedby the respondent - assessee challenging the assessmentorder dated 26.12.2017 passed by the Assessing Officer. TheTribunal vide the order dated 14.08.2019 dismissed the saidAppeal along with other 627 Appeals on the ground that theTax Effect involved in all the said appeals did not exceedRs.50,00,000/- in each of the Appeals, in view of the circularissued by the CBDT on 08.08.2019, with clarification that theappellant (i.e. the petitioner herein) shall be at liberty to pointout the cases which were wrongly included in the Appeals so summarily dismissed, either owing to wrong computation oftax effect or owing to such cases being covered by thepermissible exceptions or for any other reason. The petitionerfiled Miscellaneous Applications including M.A. No. 401 of 2019in case of the respondent, under Section 254(2) of the said Act,on the ground 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 alongwith the other Miscellaneous Applications. summarily dismissed, either owing to wrong computation oftax effect or owing to such cases being covered by thepermissible exceptions or for any other reason. The petitionerfiled Miscellaneous Applications including M.A. No. 401 of 2019in case of the respondent, under Section 254(2) of the said Act,on the ground 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 alongwith the other Miscellaneous Applications. 3. The learned Senior Advocate Mr. M.R.Bhatt appearing withlearned advocate Mr.Karan Sanghani for the petitionervehemently submitted that the Tribunal had committed grosserror by not entertaining the Miscellaneous Application filed bythe petitioner under Section 254(2) of the said Act in view ofthe subsequent circular No. 23/2019 dated 06.09.2019(Annexure-H) as well as the Office Memorandum No. 279 dated16.09.2019 (Annexure-I). According to Mr.Bhatt, the CBDT hadin supersession of the earlier circular dated 11.07.2018prescribed minimum monetary limit at Rs. 20,00,000/- for filingAppeal before the Appellate Tribunal, providing certainexceptions. The said Circular was made retrospectivelyapplicable to all the pending appeals. The said circular dated11.07.2018 came to be modified by Circular No. 17/2019 dated08.08.2019, whereby the monetary limit for filing the appealbefore the Appellate Tribunal was revised to Rs. 50,00,000/-.Thereafter the CBDT issued the Circular No. 23/2019 dated06.09.2019 under Section 268A of the said Act which providedthat the cases involving organized tax evasion scam throughbogus long term capital gain/ short term capital loss on penny stocks were not feasible to be pursued due to the monetarylimits prescribed for filing the Appeals. Thus, according toMr.Bhatt, the said circular dated 06.09.2019 being clarificatoryin nature would relate back to the circular dated 11.07.2018 asmodified by the circular dated 08.08.2019. He further drew theattention of the Court to the Office Memorandum No. 279dated 16.09.2019 issued by the CBDT and submitted that themonetary limits fixed for filing appeals before the Tribunals/High Court/ Supreme Court would not apply in case of assesseeclaiming LTCG/STCL through penny stocks. The said OfficeMemorandum also being clarificatory in nature would applyretrospectively to all the pending appeals and hence, thepetitioner had filed Miscellaneous Application in case of therespondent and others, falling under the exception carved outin Circular dated 06.09.2019 and Office Memorandum dated16.09.2019 seeking recall of the common order passed by theTribunal on 14.08.2019. According to him, the Tribunal withoutappreciating the submissions made on behalf of the petitioner-Department in the right perspective, has dismissed theMiscellaneous Application. 4. In order to appreciate the submissions made by the learnedSenior Advocate Mr.M.R.Bhatt it would be beneficial toreproduce the circular dated 06.09.2019 and OfficeMemorandum dated 16.09.2019: New Delhi, 6th September 2019 Subject: Exception to monetary limitsfor filing appeals specified in anyCircular issued under Section 268A ofthe Income Tax Act, 1961-reg. Reference is invited to the Circularsissued from time to time by CentralBoard of Direct Taxes (the Board) underSection 268A of the Income Tax Act,1961( the Act), for laying down monetarylimits and other conditions for filingof departmental appeals before IncomeTax Appellate Tribunal (ITAT), HighCourts and SLPs/appeals before SupremeCourt. 4. In order to appreciate the submissions made by the learnedSenior Advocate Mr.M.R.Bhatt it would be beneficial toreproduce the circular dated 06.09.2019 and OfficeMemorandum dated 16.09.2019: New Delhi, 6th September 2019 Subject: Exception to monetary limitsfor filing appeals specified in anyCircular issued under Section 268A ofthe Income Tax Act, 1961-reg. Reference is invited to the Circularsissued from time to time by CentralBoard of Direct Taxes (the Board) underSection 268A of the Income Tax Act,1961( the Act), for laying down monetarylimits and other conditions for filingof departmental appeals before IncomeTax Appellate Tribunal (ITAT), HighCourts and SLPs/appeals before SupremeCourt. 2. Several references have been receivedby the Board that in large number ofcases where organised tax evasion scamis noticed through bogus Long TermCapital Gain (LTCG)/Short Term CapitalLoss (STCL) on penny stocks anddepartment is unable to pursue the casesin higher judicial fora on account ofenhanced monetary limits. It has beenreported that in large number of cases,ITATs and High Court have recognized theunique modus operandi involved in suchscam and have passed judgements infavour of the revenue. However, in cases where some appellate fora have not givendue considerations to position of law orfacts investigated by the departmentthere is no remedy available with thedepartment for filing further appeal inview of the prescribed monetary limits. 3. In this context, Board has decidedthat notwithstanding anything containedin any circular issued u/s 268Aspecifying monetary limits for filing ofdepartmental appeals before Income TaxAppellate Tribunal (ITAT), High Courtsand SLPs/appeals before Supreme Court,appeals may be filed on merits as anexception to said circular, where Board,by way of special order direct filing ofappeal on merit in cases involved inorganised 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 Revenue Central Board of Direct Taxes New Delhi, Dated:101’ September, 2019 OFFICE MEMORANDUM Subject:- Special order of Boardexempting cases involving bogus LongTerm Capital Gains (LTCG)/ Short TermCapital Loss (STCL) through pennystocks from monetary limits specifiedin any Circular issued under Section268A of the Income Tax Act, 1961-reg.The undersigned is directed to refer toCircular No. 23 of 2019 dated 6thSeptember, 2019 and to say that byvirtue of powers of the Central Boardof Direct Taxes u/s. 268A of Income TaxAct, 1961, the monetary limits fixedfor filing appeals before ITAT/HC andSLPs/ appeals before Supreme Courtshall not apply in case of assessesclaiming bogus LTCG/STCL through pennystocks and appeals/ SLPs in such casesshall be filed on merits. (AbhishekGautam) DCIT(OSD)(ITJ-1), CBDT, NewDelhi. “ 5. The petitioner-original applicant having filed theMiscellaneous Application before the Tribunal under Section254(2) of the said Act for rectifying the mistake apparent fromthe record, it would be also beneficial to reproduce therelevant part of Section 254(2) of the said Act: 5. The petitioner-original applicant having filed theMiscellaneous Application before the Tribunal under Section254(2) of the said Act for rectifying the mistake apparent fromthe record, it would be also beneficial to reproduce therelevant part of Section 254(2) of the said Act: 6. So far as the facts of the case are concerned, the Appealfiled by the petitioner before the Tribunal against the orderpassed by the CIT(Appeals) was dismissed by the AppellateTribunal by a common order passed on 14.08.2019, in view ofthe CBDT circular dated 08.08.2019. Admittedly, at therelevant time when the Tribunal passed the order dated14.08.2019, neither the Circular No. 23/2019 dated 06.09.2019nor the Office Memorandum No. 279 dated 16.09.2019 was inexistence. Apart from the fact that the said circular and theOffice Memorandum being not in existence and therefore couldnot have 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 the Tribunalshould have recalled the order dated 14.08.2019 in view of thesaid Circular dated 06.09.2019 and the Office Memorandumdated 16.09.2019, which had retrospective effect. The Court atthis juncture does not think it appropriate to deal with the facts of the case, as the main issue that falls for considerationbefore this Court in the present petition would be, as towhether the Circular dated 06.09.2019 and the OfficeMemorandum dated 16.09.2019 had any retrospective effectas sought to be submitted by learned Advocate Mr. Bhatt. 7. From the bare reading of the Circular dated 06.09.2019, itappears that the CBDT had decided that notwithstandinganything contained in any Circular issued under Section 268Aspecifying monetary limits for filing of departmental appealsbefore the Income Tax Appellate Tribunal (ITAT), High Courtsand SLPs/ Appeals before the Supreme Court, appeals may befiled on merits as the exception to the said Circular, where theBoard by way of special order direct filing of appeals on meritsin cases involved in organized tax evasion activity. The OfficeMemorandum dated 16.09.2019 was issued pursuant to thesaid circular dated 06.09.2019 stating inter alia that by virtueof the powers of CBDT under Section 268A of the Income TaxAct, the monetary limits fixed for filing appeals beforeITAT/High Court and SLPs/Appeals before Supreme Court shallnot lie in case of assessees claiming bogus LTCG/STCL throughpenny stocks and appeals/ SLPs in such cases appeals shall befiled on merits. There is nothing to suggest in the said Circular/Office Memorandum that they shall have retrospective effect.On the 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 the otherCirculars issued earlier, where the Board by way of specialorder is needed to direct filing of Appeals on merits in thecases involved in organized tax evasion activity. Therefore, byvirtue of the said Circular dated 06.09.2019, the appeals could be filed on merits, irrespective of the monetary limits fixed inearlier cases, if the Board passes special order for filingappeals in cases involving tax evasion activity. In other words,the said Circular clearly contemplates the Appeals to be filedwith the special order of the Board in future on meritsregardless of monitory limits arranged once tax evasion isnoticed. This could not be construed to have retrospectiveeffect surely. The while Tribunal interpreting the said Circular /Office Memorandum in the impugned order has rightlyobserved that in respect of each case or category of caseswhether an appeal should be filed in view of the Circular dated06.09.2019 or not shall need to be necessarily decided by theBoard by way of special order, and thus a specific requirementof issuance of special order by CBDT is a must. The Tribunal,therefore, has rightly held that the CBDT Circular No. 23/2019dated 06.09.2019 should be read along with the OfficeMemorandum dated 16.09.2019, in respect of the appeals tobe filed pursuant to such special orders of CBDT and shallapply to all the appeals filed on or after 16.09.2019 by therevenue, where the tax effect may be low but the appeal couldstill be filed by the revenue on merits. 8. The appeals including the appeal in case of the respondent,which were disposed of by the Tribunal vide the common orderdated 14.08.2019 could not be said to have been filedpursuant to the special order of the CBDT in view of theCircular dated 06.09.2019 read with the Office Memorandumdated 16.09.2019, and therefore, it could not be said that theTribunal had committed any mistake apparent from the record,which would require rectification as envisaged in Section254(2) of the said Act. 9. In that view of the matter, the Court does not find anyillegality or infirmity in the impugned order dated 25.03.2021passed by the Tribunal dismissing the MiscellaneousApplication filed by the petitioner. The petition being devoid ofmerits is dismissed in limine. (SONIA GOKANI, J) SHRIJIT PILLAI (NISHA M. THAKORE,J)