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2020 (9) TMI 1252 - AT - Income TaxNon maintainability of appeal on low tax effect before ITAT - Addition u/s 68 - bogus LTCG on penny stock - HELD THAT - 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. In cases involving long term capital gains and short term capital gains exemption through penny stocks we find that the CBDT has since come out with a special order communicated vide office memorandum dated 16.09.2019 stating that monetary limits fixed for filing appeals in these cases before the Tribunal High Court and Supreme Court shall not apply in case of assessee claiming bogus LTCG/STCG through penny stock and appeal shall be filed on merits. The special order thus talks about filing of appeal in such cases and therefore it relates to any appeal in such cases which can be filed pursuant to such an order on and after the date of such special order and therefore doesn t contemplate a situation where the appeal which has already been filed prior to issuance of such a special order by the Revenue which shall be read and understood as filed pursuant to such special order. CBDT low tax effect circulars issued from time to time wherein the tax effect have been progressively increased by the -Revenue with a view to minimize the litigation has been read by the Courts and the Tribunal and even the CBDT has also clarified latter that these CBDT Circulars shall apply not just to future appeals but also to pending appeals and therefore where the appeal has already been filed by the Revenue and is pending such appeal has been held to be covered by a subsequent low tax effect circular and dismissed on account of low tax effect. However in the instant case the issue is regarding carving out an exception from such low tax effect limits and that too not just by a general order but by way of a special order where such appeals can be filed therefore unless the special order has been passed by the CBDT and an appeal is filed pursuant to such a special order the exception cannot be read and understood to apply to existing appeals which have already been filed prior to issuance of the special order. Therefore we are of the considered view that the CBDT Circular no. 23 of 2019 should be read along with special order of the CBDT dated 16.09.2019 in respect of appeals filed pursuant to such special order and shall thus apply to all appeals filed on or after 16.09.2019 by the Revenue where the tax effect may be low but the appeal can still be filed by the Revenue on merits. In the instant case the appeal of the Revenue was filed on 22.05.2019 and therefore the present appeal was not filed pursuant to such a special order of the CBDT dated 16.09.2019 and thus the matter doesn t fall in any exception as so prescribed by the CBDT in its earlier circular dated 8.8.2019 and the special order doesn t apply in the instant case and the appeal has thus rightly been dismissed by the Bench on account of low tax effect in light of CBDT s circular dated 8.8.2019. Miscellaneous Applications filed by the Revenue are dismissed.
Issues Involved:
1. Apparent error in the Tribunal's order dated 14/08/2019. 2. Applicability of CBDT Circular No. 17 of 2019 and Circular No. 23 of 2019. 3. Consideration of Office Memorandum dated 16/09/2019. 4. Recall of earlier Tribunal orders based on subsequent circulars. Detailed Analysis: 1. Apparent error in the Tribunal's order dated 14/08/2019: The Revenue filed miscellaneous applications pointing out an apparent error in the Tribunal's order dated 14/08/2019. The Tribunal had dismissed appeals where the tax effect was less than Rs. 50 lakhs based on CBDT Circular No. 17 of 2019. The Revenue contended that subsequent Circular No. 23 of 2019 and an Office Memorandum dated 16/09/2019 should be considered, which provide exceptions to the monetary limits for cases involving bogus Long-Term Capital Gain (LTCG) and Short Term Capital Loss (STCL) through penny stocks. 2. Applicability of CBDT Circular No. 17 of 2019 and Circular No. 23 of 2019: CBDT Circular No. 17 of 2019, issued on 08/08/2019, stated that appeals with a tax effect of less than Rs. 50 lakhs would not be maintainable before the Tribunal. The Tribunal identified and dismissed 628 appeals based on this circular. However, the Revenue argued that Circular No. 23 of 2019, issued on 06/09/2019, provided exceptions for cases involving organized tax evasion through bogus LTCG/STCL, allowing appeals to be filed on merits despite the monetary limits. 3. Consideration of Office Memorandum dated 16/09/2019: The Office Memorandum dated 16/09/2019 reiterated the exceptions provided in Circular No. 23 of 2019, stating that the monetary limits for filing appeals would not apply in cases involving bogus LTCG/STCL through penny stocks. The Revenue contended that based on these circulars and the memorandum, the dismissed appeals should be reconsidered. 4. Recall of earlier Tribunal orders based on subsequent circulars: The Tribunal examined whether Circular No. 23 of 2019 and the Office Memorandum dated 16/09/2019 could warrant the recall of its earlier order. The Tribunal noted that these circulars did not provide for the recall of earlier orders but only for future appeals to be filed on merits. The Tribunal referred to a decision by the ITAT Jaipur Benches, which held that subsequent circulars do not apply retrospectively to appeals dismissed based on earlier circulars. The Tribunal concluded that since Circular No. 23 of 2019 and the Office Memorandum were not in existence when the order was passed on 14/08/2019, there was no apparent error in the order. The Tribunal emphasized that the subsequent circulars could not be considered a mistake apparent from the record under section 254(2) of the Income-tax Act. Conclusion: The Tribunal dismissed all the miscellaneous applications filed by the Revenue, holding that the subsequent circulars and office memorandum did not warrant the recall of the earlier order dismissing the appeals based on the monetary limits specified in Circular No. 17 of 2019. The Tribunal's decision was pronounced in open court on 09/09/2020.
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