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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. 1165/JP/2019
PER VIJAY PAL RAO, J.M. These two appeals by the revenue are directed against two separate orders of the ld. CIT (A)-I, Jaipur both dated 04.07.2019 in respect of two related assessees M/s. Gehlot Motors P. Ltd. & M/s. Gehlot Tractors P. Ltd. Jaipur.
for the assessment year 2009-10. The revenue has raised the following grounds in these appeals :-
ITA No. 1165/JP/2019 :
Whether on the facts and circumstances of the case and in law the ld. CIT (A) was justified in deleting the addition of Rs. 13,65,000/- on accounts of unexplained cash credits (accommodation entries in the shape of share capital) ?
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 Investigating Wing, Mumbai 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 ?
ITA No. 1166/JP/2019 :
Whether on the facts and circumstances of the case and in law the ld. CIT (A) was justified in deleting the addition of Rs. 12,25,000/- on accounts of unexplained cash credits (accommodation entries in the shape of share capital) ?
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 Investigating Wing, Mumbai 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 ?
As it is clear from the grounds of appeals that the tax effect in the appeals is Rs. 4,21,785/- and Rs. 3,78,525/- respectively. Thus question of maintainability of the appeals of the revenue in view of the Circular No. 3 of 2018 arises. The ld. D/R has submitted that as per the subsequent Circular dated 6th September, 2019, the CBDT has clarified exception to the monetary limits for filing of the appeals by the M/s. Gehlot Motors P. Ltd. & M/s. Gehlot Tractors P. Ltd. Jaipur.
revenue and, therefore, the case in the present appeals falls in the exception as clarified by the CBDT in Circular No. 23 of 2019 dated 6th September, 2019. 3. On the other hand, the ld. A/R of the assessee has submitted that the Circular of the CBDT dated 6th September, 2019 is only in respect of Long Term Capital
Gain/Short Term Capital Gain on penny stocks and, therefore, the said circular is not applicable on the issue involved in the present appeals which is regarding capital received by the assessee. He has also relied upon the CBDT Circular dated 20th
August, 2018 whereby amendment to para 10 of the Circular No. 3 of 2018 is provided. The ld. A/R has submitted that as per the amended para 10 of the Circular No. 3 of 2018 the exception under clause (e) is provided only in respect of the addition based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/DG of GST Intelligence.
Therefore, when the addition made in the case of assessees is not based on the information received from these external agencies specified in the amended para 10
of the Circular No. 3 of 2018, then these cases do not fall in the exception.
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
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 :- M/s. Gehlot Motors P. Ltd. & M/s. Gehlot Tractors P. Ltd. Jaipur.
“ 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 M/s. Gehlot Motors P. Ltd. & M/s. Gehlot Tractors P. Ltd. Jaipur.
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 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 result, appeals of the department are dismissed. Order pronounced in the open court on 29/11/2019. ¼ fot; iky jkWo ½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 29/11/2019. das/ M/s. Gehlot Motors P. Ltd. & M/s. Gehlot Tractors P. Ltd. Jaipur.
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- The DCIT, Circle-2, Jaipur. 2. izR;FkhZ@ The Respondent-M/s. Gehlot Motors Pvt. Ltd. & M/s. Gehlot Tractors Pvt. Ltd., Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA Nos. 1165 & 1166/JP/2019} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत