2019 (11) TMI 1662 - AT - Income Tax

Maintainability of appeal - Monetary limit - Low tax effect - DR submitted that the appeal is protected under the exception provided in paragraph 10(e) of Circular No. 3/2018 dated 11.07.2018 as amended by the Central Board of Direct Taxes vide letter dated 20.08.2018 - HELD THAT - It appears that the tax effect being contested by the revenue is less than prescribed limit of ₹ 50 Lacs and the same is covered by recently issued low tax effect Circular No.17/2019 dated 08/08/2019 issued by Central Board of Direct Taxes CBDT . This recent circular further enhances the monetary limit fixed in earlier Circular No.3 of 2018 dated 11/07/2018 issued by CBDT as amended on 20/08/2018. Undisputedly, the factual matrix is not covered by any of the exceptions as provided in para-10 of Circular no. 3 of 2018 dated 11/07/2018. So far as the exceptions as provided in subsequent CBDT Circular No. 23 of 2019 dated 06/09/2019 read with office memorandum dated 16/09/2019 is concerned, upon perusal of the same, we find that the same applies only to cases involving bogus long term capital gains (LTCG) / Short Term Capital Loss (STCL) through penny stocks and not applicable to the cases of unexplained share application money. Thus as per para 13 of the Circular no. 3 of 2018 dated 11/07/2018, applies to pending appeals also. In view of the admitted position, we dismiss the revenue s appeal.

Summary

Issues:
Appeal by revenue contesting deletion of addition of ?100 Lacs u/s 68 as unexplained share application money for AY 2010-11.

Analysis:
The appeal by the revenue contested the deletion of addition of ?100 Lacs u/s 68 as unexplained share application money for Assessment Year 2010-11. The Authorized Representative for the Assessee argued that the tax effect of the quantum under dispute was less than the monetary limit of ?50 Lacs as per Circular No.17/2019 issued by the Central Board of Direct Taxes. On the contrary, the Revenue argued that the additions were made due to unexplained share application money following a search action by DGIT (Investigation) in a specific case, covered by exceptions in CBDT Circular No. 23 of 2019. Upon reviewing the case records, it was observed that the tax effect contested by the revenue was indeed less than the prescribed limit of ?50 Lacs, as per Circular No.17/2019. The exceptions provided in subsequent Circular No. 23 of 2019 were found to be applicable only to cases involving bogus LTCG/STCL through penny stocks, not to unexplained share application money cases.

The Circulars issued by the CBDT set the monetary limits for filing appeals before various appellate authorities, with the limit before the Appellate Tribunal being ?50,00,000. The judgment highlighted that the tax effect in dispute was below the prescribed limit, and the assessee benefited from the Circular. Therefore, the appeal by the revenue was dismissed based on the admitted position. However, the revenue was given the liberty to seek a recall of the appeal if it was later found that the matter fell under exceptions provided in any circular or if the tax effect exceeded the prescribed monetary limit. The order was pronounced in the open court on 28th November 2019.