DCIT, CIR. 13(1), KOLKATA vs. M/S SAGA MEDIHYGIENCE (P) LTD, KOLKATA

At the outset, the Ld. AR of the assessee drew our attention the fact that the department’s appeal is hit by tax effect circular and since the amount involved in the appeal falls in the ken of the CBDT circular, the AO ought not to have filed this appeal and in any case, now the DR should withdraw the appeal.

M/s. Saga Medihygiene Pvt. Ltd. AY 2010-11 out that this circular was intended for Long Term Capital Gain (LTCG) and Short Term Capital Loss (STCL) of penny stock companies which may involve multiple players like stock exchanges, buyers and sellers supposed to be not known to each other etc, where purported rigging is supposed to take place. So, according to him, this circular (supra) cannot be extended to normal sale of investment/shares by a Private Limited Company to another company which did not take place in the stock exchange company and when the transaction happened through banking channel. The Ld. CIT(A) has deleted the addition on merits as well as on the legal issue against reopening u/s 147 of the Act. Therefore, according to the Ld. counsel, the contention of the Ld. DR that this revenue appeal is maintainable and not hit by Tax effect is incorrect due to wrong interpretation of circular No. 23 of 2019 and, therefore, this appeal of revenue since it falls below Rs. 50 Lakhs prescribed by the CBDT for filing appeal in Tribunal, the department ought not to have filed the appeal or it should withdraw the appeal.

Heard the rival submissions and gone through the facts and circumstances of the case. It is noted that the CBDT Circular No. 23/2019 dated 06.09.2019 cannot be construed to say that the intention of the CBDT is to carve out an exemption was in respect of normal sale of investment/shares. The CBDT ibid Circular when considered in its entirety shows that it is intended for transaction which results in LTCG/STCL wherein stock exchanges and other stake holders in different parts of the country supposedly not knowing about each other purportedly/allegedly rigs the price of scrips listed in the Electronic Exchanges. In such cases (artificial/alleged rigging where multiple players are involved) the CBDT has carved out an exemption for filing of appeals by the revenue before the Tribunal/ High Court/Hon’ble Supreme Court. Therefore, we are of the view, the present appeal/case cannot be termed as “Organized Tax Evasion Scam” because the assessee a Private Limited company has sold of investment it held in another company to two other Private Limited companies, and the Ld. CIT(A) had allowed the appeal on merits as well as on the legal issue and deleted Rs.10 lacs addition made by AO. Therefore, we are not inclined to accept the contention raised by the Ld. DR as discussed supra, and therefore, since the tax effect in M/s. Saga Medihygiene Pvt. Ltd. AY 2010-11 this case is less than Rs. 50 lacs it is hit by the tax effect prescribed by the CBDT. Hence, revenue appeal stands dismissed

In the result, the appeal of revenue is dismissed.