CIT v. Surendra Shantilal Peety (2022) 445 ITR 590 (Bom)(HC)

S. 268A : Appeal – Application –Reference – Instructions – Monetary Limits- Exceptions —Circular No. 23 of 2019 providing that monetary limits would not apply where CBDT by special order directed filing of appeals — The legislative intent is clear that circular dated September 6, 2019 would not apply with retrospective effect-Though the Revenue had alleged organized tax evasion activity on the part of the assessee in those pending appeals as on the date of Circular No. 23 of 2019, the Revenue could not be allowed to pursue these appeals. Since the tax effect involved in this batch of appeals was less than the monetary limit prescribed in the earlier circulars of the Central Board of Direct Taxes -, The Revenue was not allowed to proceed the appeals on the merits – Appeals of the revenue was dismissed .[ S. 119, 260A ]

Dismissing the appeals of the Revenue the Court held that a  perusal of section 268A of the Income-tax Act, 1961 clearly provides that the Central Board of Direct Taxes is empowered to issue orders, instructions or directions to the Income-tax authorities fixing such monetary limits as it may deem fit for the purpose of filing of appeals or applications for reference by any Income-tax authority under the provisions of Chapter XX.

By Circular No. 3 of 2018 ([2018] 405 ITR (St.) 29), in supersession of Circular No. 21 of 2015, dated December 10, 2015 ([2015] 379 ITR (St.) 107), the Board decided that Departmental appeals may be filed on the merits before the Appellate Tribunal and High Courts and special leave petitions and appeals before the Supreme Court keeping in view the monetary limits and conditions specified therein. For appeals before the High Courts, the monetary limit is prescribed as Rs. 50 lakhs. By Circular No. 17 of 2019, dated August 8, 2019 ([2019] 416 ITR (St.) 106), the Board enhanced the monetary limit from Rs. 50 lakhs to Rs. one crore. In Circular No. 23 of 2019, dated September 6, 2019 ([2019] 417 ITR (St.) 4), the Board noticed that several references had been received by the Board in a large number of cases where organised tax evasion came through bogus long-term capital gains and short-term capital loss on penny stocks and the Department was unable to pursue these cases before higher judicial fora on account of enhanced monetary limits. The Board further noticed that in a large number of cases the Tribunal and the High Court had recognized the unique modus operandi involved in such scam and had passed judgments in favour of the Revenue. However, in cases where appellate fora had not given due consideration to position of law or facts investigated by the Department, there was no remedy available with the Department for filing further appeals in view of the prescribed monetary limits. The Board accordingly clarified that notwithstanding anything contained in any circular issued under section 268A specifying monetary limits for filing of Departmental appeals before the Tribunal and High Courts and special leave petitions and appeals before the Supreme Court, appeals may be filed on the merits as an exception to the circular where the Board, by way of special order directed the filing of appeals on the merits in cases involved in organised tax evasion activity. Circular No. 23 of 2019 was clarified by Office Memorandum dated September 16, 2019 ([2019] 417 ITR (St.) 53) that by virtue of powers of the Board under section 268A of the Act, the monetary limits fixed for filing appeals before the Tribunal, the High Court and special leave petitions, and appeals before the Supreme Court shall not apply in cases of assessees claiming bogus long-term capital gains and short-term capital loss through penny stocks and appeals and special leave petitions in such cases shall be filed on the merits. It is, thus, clear beyond reasonable doubt that the exception is carved out by Circular No. 23 of 2019 to file appeals on the merits in cases involved in organized tax evasion activity notwithstanding anything contained in any circular issued under section 268A of the Act, specifying monetary limits for filing of Departmental appeals. However, on a plain reading of Circular No. 23 of 2019 read with Office Memorandum dated September 16, 2019, it is clear that appeals are directed to be filed on the merits as exception to the earlier circulars issued under section 268A of the Act in cases involving organized tax evasion activity from the date of Circular No.23 of 2019, dated September 6, 2019 and not to appeals already filed and were pending involving organized tax evasion activity on the part of an assessee prior to the date of circular dated September 16, 2019. Circular No.23 of 2019 read with Office Memorandum dated September 16, 2019 would not apply to pending appeals though involving an organized tax evasion activity on the date of the circular. Circular No. 23 of 2019 does not provide that it would apply even to pending cases lodged on the date of the circular. Appeals pending on the date of Circular No. 23 of 2019 thus would not be covered by Circular No. 23 of 2019 even with the special order of the Board. Circular No. 23 of 2019, dated September 6, 2019 read with Office Memorandum dated September 16, 2019 do not empower the Board to pass any special order directing the Income-tax Department to file an appeal on the merits in pending cases even if alleging organized tax evasion activity on the part of the assessee. Paragraph 13 of Circular No. 3 of 2018, dated July 11, 2018 specifically prescribes that the circular would apply to special leave petitions, appeals, cross objections and references to be filed from the date of the circular in the Supreme Court, High Courts and Tribunals and it shall also apply retrospectively to pending special leave petitions, appeals, cross objections and references. The Income-tax Department was directed to withdraw or not press pending appeals below the specified tax limits set out in para 3 of the circular. However, no such specific direction was given in Circular No. 23 of 2019, dated September 6, 2019, thereby to apply the conditions set out therein to pending special leave petitions, appeals, cross objections and references before the Supreme Court, High Courts and Tribunal involving organized tax evasion activity. Circular No. 3 of 2018, dated July 11, 2018 cannot be read with Circular No. 23 of 2019, dated September 6, 2019 read with Office Memorandum dated September 16, 2019. The legislative intent is clear that circular dated September 6, 2019 would not apply with retrospective effect. Accordingly, dismissing the appeals, the Court held that  in view of the fact that Circular No. 23 of 2019, dated September 6, 2019 read with Office Memorandum dated September 16, 2019 is not applicable with retrospective effect, though the Revenue had alleged organized tax evasion activity on the part of the assessee in those pending appeals as on the date of Circular No. 23 of 2019, the Revenue could not be allowed to pursue these appeals. Since the tax effect involved in this batch of appeals was less than the monetary limit prescribed in the earlier circulars of the Central Board of Direct Taxes, the Revenue  was  not allowed to proceed with these appeals on the merits.( AY.2005-06)

Leave a Reply

Your email address will not be published. Required fields are marked *

*