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Income Tax Appellate Tribunal, JAIPUR BENCH ‘B’, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1077/JP/2019
ORDER PER VIJAY PAL RAO, J.M. This appeal by the revenue is directed against the order dated 25th June, 2019 of ld. CIT (A)-1, Jaipur for the assessment year 2011-12. The revenue has raised the following grounds of appeal: - “
1. (i) Whether in the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in allowing the assessee’s claim of Rs. 1,12,750/- on account of expenses on commodity transaction on total turnover of Rs. 9,99,141/- which was held by the AO as unexplained cash credit u/s 68 of the IT Act, therefore, placing it under the head “Income from Business or Profession” and also deleting the addition made on account of commission paid to broker @ 2% i.e. Rs. 19,983/- for arranging the accommodation entry.”
2 ITO Vs Smt. Laxmi Gupta. (ii) Whether on the facts and circumstances of the case and in law the ld. CIT (A) was justified in deleting the additions made on the basis of corroborative information received from DGIT (Investigating)’s Wing, which is a law enforcement agency under the Ministry of Finance and accordingly the case falls under exception clause 10(e) of Circular 03 of 2018 dated 20.08.2018 ?”
The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. The ld. D/R has contended that this case falls in the exception provided in para 10(e) of the Circular No. 3/2018 as the addition is made by the AO on the basis of the information received from the Investigation Wing, Mumbai and therefore, the assessment was completed on the basis of the information of the Investigation Wing which is a law enforcement agency. Thus the ld. D/R has submitted that the appeal of the revenue is maintainable and shall be decided on merits of the issue.
3. The ld AR appearing on behalf of the assessee has submitted that the appeal of the revenue is not maintainable as admittedly the tax effect of the appeal is not exceeding the monetary limits as provided in Circular No. 03/2018 dated 20/08/2018. The ld AR has further contended that the exception in para 10(e) of Circular No. 03/2018 is not applicable. In the present case, as the information received by the A.O. is an internal information and not from external law enforcing agency as prescribed in Clause (e) of para 10 of the said circular.
We have considered the rival submissions as well as relevant material on record. There is no dispute that the addition made by the A.O. on account of treating the profit from commodity transactions as unexplained cash credit as well as the addition on account of commission paid for availing such accommodation entries from the brokers. The said finding of the A.O. is based on the information received from the Investigation Wing of the Department. Thus, the question arises whether the addition made by the A.O. based on the information received from the Investigation Wing of the Department would fall in the exception provided in Clause (e) in para 10 of the Circular No. 03/2018 or not. At the outset, we note that identical issue has been considered by this Tribunal vide order dated 13.03.2020 in the case of ITO vs. M/s. A.P. Gems in in para 2.4 as under :- “2.4 Having considered the rival submissions and carefully perusal of the record, at the outset, we note that identical issue has been considered by this Tribunal vide order dated 29-11-2019 in the case of DCIT vs Gehlot Motors Pvt. Ltd in ITA Nos.1165 and 1166/JP/2019 in para 4 as under:-
‘’4. We have considered the rival submissions and carefully perused the relevant record. There is no dispute about the fact that the tax effect in these two appeals of the revenue is not exceeding the limits provided in the Circular No. 3 of 2018 dated 11.07.2018. The question as raised by the ld. D/R is whether these cases fall in the exception as provided in para 10(e) of the Circular No. 3 of 2018. At the outset, we note that as per the original Circular No. 3 of 2018 these matters do not fall in the exception, however, the said circular was amended by the CBDT vide Notification dated 20.08.2018 and the amended para 10 of Circular No. 3 of 2018 reads as under :-
“ 10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect :
(a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or (b) Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been accepted by the Department, or (d) Where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/undisclosed foreign bank account. (e) Where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence (DGGI). (f) Cases where prosecution has been filed by the Department and is pending in the Court.” The relevant clause of para 10 is clause (e) which carves out the exception where the addition is based on the information received from external source as specified in the said clause. There is no dispute that the case of the assessees does not fall in the category of addition based on such information received from external source as provided under clause (e) of the amended para 10 of the Circular No. 3 of 2018. Further, the ld. D/R has relied upon the Circular No. 23 of 2019 which further provides some exception to the monetary limits as per para 2 and 3 as under :- “ 2. Several references have been received by the board that in large number of cases where organized tax-evasion scam is noticed through bogus Long-Term Capital Gain (LCG)/Short Term Capital Loss (STCL) on penny stocks and department is unable to pursue the cases in higher judicial for a on account of enhanced monetary limits. It has been reported that in large number of cases, ITATs and High Court have recognized the unique modus operandi involved in such scam and have passed judgements in favour of the revenue. However, in cases where some appellate for a have not given due consideration to position of law or facts 5 ITO Vs Smt. Laxmi Gupta. investigated by the department, there is no remedy available with the department for filing further appeal in view of the prescribed monetary limits.
In this context, Board has decided that notwithstanding anything contained in any circular issued u/s 268A specifying monetary limits for filing of departmental appeals before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court, appeals may be filed on merits as an exception to said circular, where Board, by way of special order direct filing of appeal on merit in cases involved in organized tax evasion activity.”
Therefore, even as per Circular No. 23 of 2019 dated 6th September, 2019 the exception is provided only in the cases where organized tax evasion is noticed through bogus long term capital/short term capital gain on penny stocks. Therefore, the said Circular cannot be applied in the cases when the addition is not in respect of capital gain on penny stocks. Accordingly, the said circular will not help the cases of the department. Thus we hold that the appeals filed by the revenue do not fall in the exception as provided in the amended para 10(e) of the Circular No. 3 of 2018. Accordingly, the appeal of the department is not maintainable being monetary limit is less than/not exceeding Rs. 50,00,000/-. ‘’ In the case in hand, the addition was made by the AO based on the information received from DIT (Investigation) of the Department which is not an external source in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Director General of GST Intelligence (DGGI) etc. Therefore, this case of the Revenue does not fall in the exception provided in clause (e) of para 10 of the Circular No. 3 of 2018. Accordingly, when the tax effect of Revenue’s appeal is not exceeding the monetary limit as prescribed in the Circular then the same is not maintainable. Hence, the appeal of the Revenue is dismissed.” Thus this Tribunal has taken a consistent view that the information received from Investigation Wing of the Department does not fall in the category of the information received from external source being law enforcement agencies such as CBI/ED/DRI/SFIO/DGGI etc. as provided in the exception 6 ITO Vs Smt. Laxmi Gupta. clause (e) of para 10 of the Circular No. 3/2018. Accordingly, the appeal of the revenue is not maintainable being the monetary limit is not exceeding as prescribed in the Circular No. 3/2018.
In the result, appeal of the revenue is dismissed.