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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
This appeal by the Asst. Commissioner of Income-tax, Central Circle-5(4), Mumbai (in short ‘the Ld. Assessing Officer’) has been preferred against order dated 17.09.2021 passed by the Ld. Commissioner of Income-tax-53, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2018-19, raising following grounds:
1. On the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in allowing Capital loss
Shri Nitan Chhatwal 2 AY 2018-19 arising out by the written off of investment of Rs. arising out by the written off of investment of Rs. arising out by the written off of investment of Rs. 1,51,56, 771/ 1,51,56, 771/- in the penny stock company M/s. in the penny stock company M/s. Surabhi Chemi Surabhi Chemicals & Investment Limited, though the cals & Investment Limited, though the Long Term Capital gain or Loss accrues only on transfer Long Term Capital gain or Loss accrues only on transfer Long Term Capital gain or Loss accrues only on transfer of assets as per section 2(47) of the IT. Act, which in of assets as per section 2(47) of the IT. Act, which in of assets as per section 2(47) of the IT. Act, which in this case has not taken place. this case has not taken place.
2. At the outset, the Ld. Counsel of the assessee submitted that At the outset, the Ld. Counsel of the assessee submitted that At the outset, the Ld. Counsel of the assessee submitted that as per the Form No. 36, the total tax effect involved is only as per the Form No. 36, the total tax effect involved is only as per the Form No. 36, the total tax effect involved is only Rs.35,90,638/- which is less than the monetary limit prescribed for which is less than the monetary limit prescribed for which is less than the monetary limit prescribed for filing appeal by the Income filing appeal by the Income-tax Department as notified by the tax Department as notified by the Central Board of Direct Taxes (CBDT) in Circular No. 3/2018 dated ntral Board of Direct Taxes (CBDT) in Circular No. 3/2018 dated ntral Board of Direct Taxes (CBDT) in Circular No. 3/2018 dated 11.07.2018.
3. On the other hand, the Ld. Departmental Representative (DR) On the other hand, the Ld. Departmental Representative (DR) On the other hand, the Ld. Departmental Representative (DR) submitted that issue submitted that issue-in-dispute in the case involved is of penny dispute in the case involved is of penny stocks and therefore, appeals involving long term capital gain stocks and therefore, appeals involving long term c stocks and therefore, appeals involving long term c (LTCG)/short term cap (LTCG)/short term capital loss (STCL) on penny stock, ital loss (STCL) on penny stock, the CBDT (i.e. Board) has direct to decide the issue on merit as exception has direct to decide the issue on merit as exception to has direct to decide the issue on merit as exception said Circular No. 3/2018. said Circular No. 3/2018. The Ld. DR also filed a copy of the letter The Ld. DR also filed a copy of the letter of Circular No. 23 of 2019 of the CBDT, ular No. 23 of 2019 of the CBDT, wherein exception of the rein exception of the monetary limit for filing appeals before the ITAT, High Court, monetary limit for filing appeals before the ITAT, High Court, monetary limit for filing appeals before the ITAT, High Court, Hon’ble Supreme Court has been ca on’ble Supreme Court has been carved out.
We have heard both the parties on the issue We have heard both the parties on the issue We have heard both the parties on the issue-in-dispute whether the instant appeal is covered by the monetary limit for whether the instant appeal is covered by the monetary limit for whether the instant appeal is covered by the monetary limit for filing appeal before the ITAT or g appeal before the ITAT or falling under the exceptions under the exceptions
Shri Nitan Chhatwal 3 AY 2018-19 provided in Circular No. 23 of 2019 issued by the CBDT. For ready provided in Circular No. 23 of 2019 issued by the CBDT. For ready provided in Circular No. 23 of 2019 issued by the CBDT. For ready reference that relevant Circular is reproduced as under: reference that relevant Circular is reproduced as under: reference that relevant Circular is reproduced as under:
Circular No. 23 of 2019 Circular No. 23 of 2019 “F. No. 279/Misc.lM-93/20l8-ITJ(Pt.) ITJ(Pt.) Government of India Ministry of Finance Government of India Ministry of Finance Department of Revenue Central Board Direct Taxes Judicial Section Central Board Direct Taxes Judicial Section Central Board Direct Taxes Judicial Section New Delhi, 6th September 2019 September 2019 Subject: -Exception to monetary limits for filing appeals Exception to monetary limits for filing appeals Exception to monetary limits for filing appeals specified in any Circular issued under Section 268A of specified in any Circular issued under Section 268A of specified in any Circular issued under Section 268A of the Income- -tax Act, 1961-reg Reference is invited to the Circulars issued from time to time by Reference is invited to the Circulars issued from time to time by Reference is invited to the Circulars issued from time to time by Central Board of Direct Taxes (the Board) under section 268A of Central Board of Direct Taxes (the Board) under section 268A of Central Board of Direct Taxes (the Board) under section 268A of the Income-tax Act,1961 (the Act), for laying down monetary tax Act,1961 (the Act), for laying down monetary tax Act,1961 (the Act), for laying down monetary limits and other conditions for filing of departmental ap limits and other conditions for filing of departmental ap limits and other conditions for filing of departmental appeals before Income Tax Appellate Tribunal (ITA T), High Courts and before Income Tax Appellate Tribunal (ITA T), High Courts and before Income Tax Appellate Tribunal (ITA T), High Courts and SLPs/appeals before Supreme Court. SLPs/appeals before Supreme Court.
Several references have been received by the Board that in 2. Several references have been received by the Board that in 2. Several references have been received by the Board that in large number of cases where organised tax large number of cases where organised tax-evasion scam is evasion scam is noticed through bogus Long noticed through bogus Long-Term Capital Gain (LTCG)/Short Capital Gain (LTCG)/Short Term Capital Loss (STCL) on penny stocks and department is Term Capital Loss (STCL) on penny stocks and department is Term Capital Loss (STCL) on penny stocks and department is unable to pursue the cases in higher judicial fora on account of unable to pursue the cases in higher judicial fora on account of unable to pursue the cases in higher judicial fora on account of enhanced monetary limits. It has been reported that in large enhanced monetary limits. It has been reported that in large enhanced monetary limits. It has been reported that in large number of cases, ITA Ts and High Court have r number of cases, ITA Ts and High Court have r number of cases, ITA Ts and High Court have recognized the unique modus operandi involved in such scam and have unique modus operandi involved in such scam and have unique modus operandi involved in such scam and have passed judgements in favour of the revenue. However, in cases passed judgements in favour of the revenue. However, in cases passed judgements in favour of the revenue. However, in cases where some appellate fora have not given due consideration to where some appellate fora have not given due consideration to where some appellate fora have not given due consideration to position of law or facts investigated by the department, there is position of law or facts investigated by the department, there is position of law or facts investigated by the department, there is no remedy available with the department for filing further no remedy available with the department for filing further no remedy available with the department for filing further appeal in view of the prescribed monetary limits. appeal in view of the prescribed monetary limits.
In this context, Board has decided that notwithstanding 3. In this context, Board has decided that notwithstanding 3. In this context, Board has decided that notwithstanding anything contained in any circular issued U/S 268A specifying anything contained in any circular issued U/S 268A specifying anything contained in any circular issued U/S 268A specifying monetary limits for fili monetary limits for filing of departmental appeals before Income ng of departmental appeals before Income Tax Appellate Tribunal (IT AT), High Courts and SLPs/appeals Tax Appellate Tribunal (IT AT), High Courts and SLPs/appeals Tax Appellate Tribunal (IT AT), High Courts and SLPs/appeals
Shri Nitan Chhatwal 4 AY 2018-19 before Supreme Court, appeals may be filed on merits as an before Supreme Court, appeals may be filed on merits as an before Supreme Court, appeals may be filed on merits as an exception to said circular, where Board, by way of special order exception to said circular, where Board, by way of special order exception to said circular, where Board, by way of special order direct filing of appeal on mer direct filing of appeal on merit in cases involved in organised it in cases involved in organised tax evasion activity. tax evasion activity.
4. Hindi version follows.
4. Hindi version follows.” 4.1 On perusal of the above Circular it is evident that wherever On perusal of the above Circular it is evident that wherever On perusal of the above Circular it is evident that wherever assessee has claimed bogus long term capital gain/short term assessee has claimed bogus long term capital gain/short term assessee has claimed bogus long term capital gain/short term capital loss on penny stock in such cases, the capital loss on penny stock in such cases, the Board has directed to Board has directed to consider the filing of the appeal on merit. Before us, the Ld. consider the filing of the appeal on merit. Before us, the Ld. consider the filing of the appeal on merit. Before us, the Ld. Counsel of the assessee has however submitted that the loss in the Counsel of the assessee has however submitted that the loss in Counsel of the assessee has however submitted that the loss in case is arising from investment arising from investment written off and not on account of and not on account of long term capital gain or short term long term capital gain or short term capital loss arising from the capital loss arising from the penny stock and therefore said Circular No. 23 of 2019 is not penny stock and therefore said Circular No. 23 of 2019 is not penny stock and therefore said Circular No. 23 of 2019 is not applicable in the case of the assessee. applicable in the case of the assessee.
4.2 From the grounds raised by the Revenue also we find that the From the grounds raised by the Revenue also we find that the From the grounds raised by the Revenue also we find that the Ld. CIT(A) has allowed Ld. CIT(A) has allowed claim of loss on investment written off. The Revenue has also accepted in the ground that long term capital gain also accepted in the ground that long term capital gain also accepted in the ground that long term capital gain or loss has not taken place in this case. or loss has not taken place in this case.
4.3 In view of the above facts and circumstances, we are of the In view of the above facts and circumstances, we are of the In view of the above facts and circumstances, we are of the opinion that the case of the assessee is not filing under the opinion that the case of the assessee is not filing under the opinion that the case of the assessee is not filing under the exceptions as provided under Circular No. 23 of 2019. Accordingly, provided under Circular No. 23 of 2019. Accordingly, provided under Circular No. 23 of 2019. Accordingly, the appeal filed by the Revenue being covered by the monetary tax the appeal filed by the Revenue being covered by the monetary tax the appeal filed by the Revenue being covered by the monetary tax limit of Rs.50 lakhs for filing appeal before the ITAT as prescribed limit of Rs.50 lakhs for filing appeal before the ITAT as prescribed limit of Rs.50 lakhs for filing appeal before the ITAT as prescribed
Shri Nitan Chhatwal 5 AY 2018-19 under CBDT Circular No. 3/2019 and therefore, appeal of the under CBDT Circular No. 3/2019 and therefore, appeal of under CBDT Circular No. 3/2019 and therefore, appeal of Revenue is liable to be dismissed as infructuous. Revenue is liable to be dismissed as infructuous.
In the result, the appeal filed by the Revenue is dismissed. In the result, the appeal filed by the Revenue is dismissed. In the result, the appeal filed by the Revenue is dismissed.