2020 (2) TMI 1145 - AT - Income Tax

Rectification u/s 254 - Maintainability of appeal on low tax effect - non-consideration of Circular and the special order so passed by the CBDT - HELD THAT - 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. 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. 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 16.04.2019 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 23.08.2019 or at the time of passing of order by the Tribunal on 2.09.2019 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) of the Act.

Summary

Issues:
1. Rectification of mistake under section 254(2) of the Act based on CBDT Circular no. 23 of 2019 and special order dated 16.09.2019.
2. Applicability of the circular and special order to an appeal already disposed of by the Tribunal.
3. Interpretation of the CBDT Circular and special order in cases involving organized tax evasion activity through penny stocks.
4. Consideration of the circular and special order post-disposal of the appeal by the Tribunal.
5. Whether non-consideration of the circular and special order constitutes a mistake apparent from the record.

Analysis:

The case involved a miscellaneous application filed by the Revenue against an order passed by the Bench in ITA No. 535/JP/2019 dated 02.09.2019. The Revenue sought rectification of the order under section 254(2) of the Act based on CBDT Circular no. 23 of 2019 and a special order dated 16.09.2019. The Revenue claimed that the matter fell under the exception of penny stock as per the circular and special order, allowing for the appeal to be heard on merits. The Departmental Representative (DR) relied on the circular and special order, arguing that the case should be reconsidered based on the exceptions outlined.

On the other hand, the Assessee's Representative (AR) contended that the circular was issued after the Tribunal's order and should apply to future appeals. The AR highlighted the requirement for a special order by the CBDT for appeals involving organized tax evasion activity through penny stocks. The Tribunal considered the contentions of both parties and examined the applicability of the circular and special order to the appeal in question.

The Tribunal referred to the CBDT Circular no. 23 of 2019 and the subsequent special order exempting cases involving bogus LTCG/STCL through penny stocks from monetary limits for filing appeals. It noted that the special order specified that appeals in such cases should be filed on merits. However, the Tribunal emphasized that the special order applied to appeals filed after its issuance on 16.09.2019. Since the Revenue's appeal was filed before this date, the Tribunal concluded that the exceptions outlined in the circular and special order did not apply to the case at hand.

Furthermore, the Tribunal highlighted that the circular and special order were not part of the record during the earlier proceedings and, therefore, could not be considered as a mistake apparent from the record for rectification under section 254(2) of the Act. Consequently, the Tribunal dismissed the miscellaneous application filed by the Revenue, affirming the previous order's dismissal based on low tax effect in accordance with the CBDT's circular dated 8.8.2019.

In conclusion, the Tribunal's decision was based on the timing of the circular and special order, their applicability to the appeal in question, and the absence of these documents during the initial proceedings, leading to the dismissal of the Revenue's application for rectification.