2020 (3) TMI 1402 - AT - Income Tax

Maintainability of appeal - low tax effect - HELD THAT - 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. In any case both CBDT Circular no. 23 of 2019 and special order dated 16.09.2019 were not in existence and thus not part of the record at the time when the matter was heard on 20.08.2019 or at the time of passing of order by the Tribunal on 21.08.2019 and therefore non-consideration of such Circular and the special order so passed by the CBDT is not a mistake apparent from record which can be rectified within the narrow compass of section 254(2) - Miscellaneous application filed by the Revenue is dismissed.

Issues Involved:

1. Deletion of addition u/s 68 of the IT Act on account of bogus LTCG claimed as exempt income u/s 10(38).
2. Deletion of addition u/s 69C of the IT Act on account of unexplained commission expenditure for taking bogus accommodation entry in the form of LTCG.
3. Deletion of addition based on incriminating documents and statements u/s 132(4) and 131 regarding investment in shares made out of books.
4. Consideration of statements recorded u/s 132(4) and 131 as incriminating material found and seized during the search.
5. Justification of retraction of statements given u/s 132(4) during search and post-search proceedings.
6. Interference with completed assessment by the AO in the absence of incriminating material during the course of search.
7. Acceptance of the decision of the Hon’ble High Court regarding the retraction of statements recorded u/s 132(4) and 131.
8. Right to amend, modify, alter, add, or forego any ground(s) of appeal.

Issue-wise Detailed Analysis:

1. Deletion of Addition u/s 68 of the IT Act:
The Tribunal dismissed the Revenue's appeal concerning the deletion of addition of Rs. 73,03,996/- u/s 68 of the IT Act. The Revenue argued that the CIT(A) incorrectly deleted the addition related to bogus Long Term Capital Gains (LTCG) claimed as exempt income u/s 10(38). However, the Tribunal upheld the CIT(A)’s decision, noting that the tax effect was below the monetary limit set by the CBDT Circular No. 17/2019.

2. Deletion of Addition u/s 69C of the IT Act:
The Tribunal also dismissed the Revenue's appeal regarding the deletion of addition of Rs. 73,040/- u/s 69C of the IT Act. This addition was made by the AO on account of unexplained commission expenditure for taking bogus accommodation entry in the form of LTCG. The Tribunal found that the tax effect was below the threshold set by the CBDT Circular.

3. Deletion of Addition Based on Incriminating Documents:
The Tribunal considered the Revenue's contention that the CIT(A) wrongly deleted the addition of Rs. 73,03,996/- based on incriminating documents and statements u/s 132(4) and 131. The Tribunal upheld the CIT(A)’s decision, emphasizing that the tax effect was below the monetary limit specified by the CBDT.

4. Consideration of Statements Recorded u/s 132(4) and 131:
The Revenue argued that the CIT(A) was unjustified in holding that statements recorded u/s 132(4) and 131 could not be considered as incriminating material found and seized during the search. The Tribunal upheld the CIT(A)’s decision, noting the tax effect was below the CBDT’s monetary limit.

5. Justification of Retraction of Statements:
The Tribunal reviewed the Revenue's claim that the CIT(A) was unjustified in holding that the assessee's retraction of statements given u/s 132(4) during the search and post-search proceedings was valid despite being filed after 14 months without supporting evidence. The Tribunal upheld the CIT(A)’s decision, citing the low tax effect.

6. Interference with Completed Assessment:
The Revenue contended that the CIT(A) was incorrect in allowing the appeal of the assessee by holding that in the absence of incriminating material, the completed assessment could not be interfered with by the AO. The Tribunal upheld the CIT(A)’s decision, noting the tax effect was below the monetary limit set by the CBDT.

7. Acceptance of High Court Decision:
The Tribunal examined the Revenue's argument that the CIT(A) was wrong in not accepting the decision of the Hon’ble High Court, which held that statements recorded u/s 132(4) and later confirmed in statements recorded u/s 131 could not be discarded simply because the assessee retracted them. The Tribunal upheld the CIT(A)’s decision, emphasizing the low tax effect.

8. Right to Amend Grounds of Appeal:
The Tribunal acknowledged the Revenue's right to amend, modify, alter, add, or forego any grounds of appeal at any time before or during the hearing of this appeal but found no grounds to alter the decision based on the arguments presented.

Conclusion:
The Tribunal dismissed the Revenue’s miscellaneous application, stating that the CBDT Circular No. 23 of 2019 and the special order dated 16.09.2019, which allow appeals on merits in cases involving organized tax evasion through bogus LTCG/STCL, do not apply retrospectively to appeals already dismissed based on low tax effect as per the earlier CBDT Circular dated 8.8.2019. The Tribunal concluded that the non-consideration of these subsequent circulars and special orders does not constitute a mistake apparent from the record that can be rectified under section 254(2) of the Act.

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