THE PRINCIPAL COMMISSIONER OF INCOME TAX 3, AHMEDABAD vs. SUMITA DEVCHANDBHAI SAVALIYA

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SCA/369/2022HC GujaratGJHC24000419202211 January 2022Author: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MS. JUSTICE NISHA M. THAKORE4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the writ application filed by the Principal Commissioner of Income Tax is dismissed. The Court found no illegality or infirmity in the impugned order dated March 25, 2021, passed by the ITAT, which rejected the Revenue's Miscellaneous Application. The reasoning was that the ITAT's original order dated August 14, 2019, dismissing the appeal due to low tax effect, was passed before the issuance of CBDT Circular No. 23 of 2019 and the Office Memorandum dated September 16, 2019. These subsequent circulars did not have retrospective effect and did not contemplate application from the date of the earlier circular (August 8, 2019). The ITAT correctly observed that the subsequent circulars would not make the earlier order suffer from an apparent error. The Court relied on observations from a Coordinate Bench in similar matters, which held that the circulars dated September 6, 2019, and September 16, 2019, were not retrospective and that the ITAT had rightly held that the CBDT Circular No. 23/2019 should be read with the Office Memorandum dated 16.09.2019, applying to appeals filed on or after September 16, 2019, pursuant to special orders of the CBDT. Therefore, the ITAT had not committed any mistake apparent from the record requiring rectification under Section 254(2) of the Income Tax Act.

What were the facts?

The writ applicant, the Principal Commissioner of Income Tax 3, Ahmedabad, sought to quash an order dated March 25, 2021, passed by the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench. This order rejected the Revenue's Miscellaneous Application. The Revenue had filed this application seeking recall of the ITAT's earlier order dated August 14, 2019, which dismissed the Revenue's appeal for Assessment Year 2014-15 due to low tax effect, as per CBDT Circular No. 17/2019. The Revenue argued that the dismissal was erroneous because the case involved an addition of Rs. 1,35,05,050/- related to LTCG of penny stock, which fell under exceptions carved out in subsequent CBDT Circular No. 23/2019 and an Office Memorandum dated September 16, 2019.

What were the issues?

1. Whether the ITAT erred in rejecting the Revenue's Miscellaneous Application seeking recall of its order dismissing the appeal on grounds of low tax effect, when the Revenue contended that the subsequent CBDT Circular No. 23/2019 and Office Memorandum dated September 16, 2019, provided exceptions for cases involving LTCG of penny stocks, and these exceptions should apply retrospectively. Assessee's Contention (Revenue's argument in the lower proceedings): The ITAT's order dismissing the appeal due to low tax effect was erroneous. The case involved an addition of Rs. 1,35,05,050/- related to LTCG of penny stock, which falls under exceptions carved out in CBDT's Circular No. 23 of 2019 dated September 6, 2019, and the Office Memorandum dated September 16, 2019. These subsequent circulars should have been considered. Revenue's Contention (Court's observation based on the ITAT's reasoning and other High Court orders): The subsequent circulars (Circular No. 23/2019 and OM dated 16.09.2019) were not retrospective and did not contemplate application from August 8, 2019 (date of Circular No. 17/2019). The ITAT's original order dated August 14, 2019, was passed when no such exception was available. The ITAT correctly observed that the subsequent circulars do not make the earlier order suffer from an apparent error. The circulars themselves do not state they are applicable retrospectively. The ITAT rightly held that the CBDT Circular No. 23/2019 should be read with the Office Memorandum dated 16.09.2019, and they apply to appeals filed on or after September 16, 2019, pursuant to special orders of the CBDT.

Which sections of the Income-tax Act were involved?

Section 254(2),Section 268A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/SCA/369/2022 ORDER DATED: 11/01/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 369 of 2022 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX 3, AHMEDABAD Versus SUMITA DEVCHANDBHAI SAVALIYA ========================================================== Appearance: MR MR BHATT SENIOR COUNSEL WITH MR KARAN SANGHANI, ADVOCATE FOR M R BHATT & CO.(5953) for the Petitioner(s) No. 1 for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 11/01/2022

ORAL ORDER (PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE) 1 By way of this writ application, the writ applicant has prayed for quashing and setting aside the order dated 25th March 2021 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad in Miscellaneous

Application

No.402/AHD/2019

(in ITA No.1611/AHD/2017). 2 The brief facts which emerges from the record are as under:

2.

1 The writ applicant had preferred the aforesaid Miscellaneous Application seeking recall of the order dated 14th August 2019 in ITA No.1611/Ahd/2017 for A. Y. 2014 - 15, whereby the ITAT had dismissed

the appeal of the Revenue due to low tax effect as per CBDT’s circular No.17/2019 dated 8th August 2019. C/SCA/369/2022 ORDER DATED: 11/01/2022

2.

2 The Tribunal was pleased to dispose of the appeal on the ground of low tax effect being involved more particularly by referring the aforesaid circular.

2.

3 The department has thereafter preferred Miscellaneous Application by referring to circular No.23 of 2019 dated 6th September 2019 and the Office Memorandum F. No.279/Misc./M-93/2018-ITJ (PT.) dated 16th September 2019 and has contended that in the given case, addition of Rs.1,35,05,050/- related to LTCG of penny stock, which falls under exception carved out in CBDT’s circular No.23 of 2019 dated 6th September 2019 and O.M. dated 16th September 2019. 2.4 The ITAT, Ahmedabad Bench, Ahmedabad was pleased to reject the aforesaid Miscellaneous Applications vide impugned order dated 25th March 2021. The observations made in para 7 are as under: “We have duly considered the rival contentions and gone through the records carefully. The Tribunal has identified the appeals involving tax effect by virtue of relief given by the CIT(A) below Rs.50 Lakhs on 14/08/2019 and dismissed those appeals. On 14/08/2019, no such circular was available. The subsequent circular, in any case, would not make the order of the Tribunal suffering from an apparent error. The Circular No.23 of 2019 or Office Memorandum F. No.279/Misc./M- 93/2018-ITJ (PT.) nowhere contemplates that these will be applicable w.e.f. 08/08/2019, i.e. the date when circular No.17 of 2019 was issued.” 3 The department has thus preferred the present writ application. 4

We have heard learned Senior Counsel Mr. M. R. Bhatt assisted by C/SCA/369/2022 ORDER DATED: 11/01/2022 learned advocate Mr. Karan Sanghani for the Revenue. 5 The attention of this court is drawn to the order dated 24th June 2021 passed by the Coordinate Bench of this Court in Special Civil Application No.7520 of 2021 as well as the oral order dated 4th January 2022 passed in Special Civil Application No.13610 of 2021. We quote the relevant observations made in paras 7, 8 and 9 by the Coordinate Bench in the order dated 24th June 2021 as under:

“7. From the bare reading of the Circular dated 06.09.2019, it appears that the CBDT had decided that notwithstanding anything contained in any Circular issued under Section 268A specifying monetary limits for filing of departmental appeals before the Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/Appeals before the Supreme Court, appeals may be filed on merits as the exception to the said Circular, where the Board by way of special order direct filing of appeals on merits in cases involved in organized tax evasion activity. The Office Memorandum dated 16.09.2019 was issued pursuant to the said circular dated 06.09.2019 stating inter alia that by virtue of the powers of CBDT under Section 268A of the Income Tax Act, the monetary limits fixed for filing appeals before ITAT/High Court and SLPs/Appeals before Supreme Court shall not lie in case of assessees claiming bogus LTCG/STCL through penny stocks and appeals/ SLPs in such cases appeals shall be filed 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 said Circular dated 06.09.2019, it clearly transpires that the appeals may be filed on merits as an exception to the other Circulars issued earlier, where the Board by way of special order direct filing of Appeals on merits in 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 the monetary limits fixed in earlier cases, if the Board passes special order for filing appeals in cases involving tax evasion activity. The said Circular speaks about the Appeals that may be filed with the special order of the Board in future, and hence could not be construed to have retrospective effect. The Tribunal interpreting the said Circular/ Office Memorandum in the impugned order has rightly observed that in respect of each case or category of cases whether an appeal should be filed in view of the Circular dated 06.09.2019 or not shall be decided by the Board by way of special order, and thus a specific requirement of issuance of special order by CBDT is a must. The Tribunal therefore has rightly held that C/SCA/369/2022 ORDER DATED: 11/01/2022 the CBDT Circular No. 23/2019 dated 06.09.2019 should be read along with the Office Memorandum dated 16.09.2019, in respect of the appeals to be filed pursuant to such special orders of CBDT and shall apply to all the appeals filed on or after 16.09.2019 by the revenue, where the tax effect may be low but the appeal could still 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 order dated 14.08.2019 could not be said to have been filed pursuant to the special order of the CBDT in view of the Circular dated 06.09.2019 read with the Office Memorandum dated 16.09.2019, and therefore it could not be said that the Tribunal had committed any mistake apparent from the record, which would require rectification as envisaged in Section 254(2) of the said Act.

9.

In that view of the matter, the Court does not find any illegality or infirmity in the impugned order dated 09.09.2020 passed by the Tribunal dismissing the Miscellaneous Application filed by the petitioner. The petition being devoid of merits is dismissed in limine.” 6 In view of the aforesaid, the present writ application stands dismissed and is hereby rejected. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) CHANDRESH

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