2019 (11) TMI 1413 - AT - Income Tax

Maintainability of Appeal - low tax effect - Addition of unexplained cash credits (accommodation entries in the shape of share capital) - whether these cases fall in the exception as provided in para 10(e) of the Circular No. 3 of 2018? - HELD 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 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 ₹ 50,00,000/-. - Decided against revenue.

Issues:
1. Whether the deletion of additions on unexplained cash credits by the ld. CIT (A) was justified.
2. Whether the deletions based on corroborative information from Investigating Wing, Mumbai fall under exception clause 10(e) of Circular 03 of 2018.
3. Maintainability of the appeals by the revenue in view of Circular No. 3 of 2018 and subsequent Circular No. 23 of 2019.

Analysis:

Issue 1:
The appeals by the revenue challenged the deletion of additions on unexplained cash credits by the ld. CIT (A). The ld. CIT (A) justified the deletions, leading to the first issue. The revenue argued against the deletions, questioning their validity under the facts and circumstances of the case and in law. The additions were related to accommodation entries in the form of share capital. The Tribunal examined whether the ld. CIT (A) was justified in deleting the additions amounting to specific sums in each case.

Issue 2:
Another aspect of the appeals was the deletions made based on corroborative information from the Investigating Wing, Mumbai. The question arose whether these deletions fell under exception clause 10(e) of Circular 03 of 2018. The Tribunal analyzed whether the ld. CIT (A) was justified in deleting these additions considering the basis of the deletions and the nature of the information received.

Issue 3:
The third issue revolved around the maintainability of the appeals by the revenue in light of Circular No. 3 of 2018 and subsequent Circular No. 23 of 2019. The tax effect in the appeals was below specified limits. The revenue contended that the appeals fell within the exception clarified in Circular No. 23 of 2019 dated 6th September, 2019. However, the assessee argued against this, citing the specific provisions of the Circulars and the nature of the cases involved.

The Tribunal carefully considered the arguments presented by both parties. It noted the amendments to Circular No. 3 of 2018, particularly para 10(e), which outlined exceptions for contesting adverse judgments. The Tribunal analyzed the applicability of the Circulars to the present appeals, focusing on the nature of the additions and the information sources. It was observed that the cases did not fall within the exception provided in the Circulars, as the additions were not based on information from specified external sources. The Tribunal also examined the provisions of Circular No. 23 of 2019 and concluded that the exception it provided did not apply to the cases at hand. Consequently, the Tribunal held that the appeals filed by the revenue were not maintainable due to the monetary limits specified in the Circulars.

In conclusion, the appeals of the revenue were dismissed based on the Tribunal's analysis and interpretation of the relevant Circulars and the specifics of the cases under consideration.

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