2020 (11) TMI 130 - AT - Income Tax

Rectification u/s 254 - non-consideration of Circular and the special order so passed by the CBDT - monetary limits for not filing/pursuing appeals in terms of any circular already issued under section 268A - HELD THAT - 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. 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. 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) of the Act.Miscellaneous application filed by the Revenue is dismissed.

Summary

Issues Involved:
1. Whether the CIT(A) was right in deleting the addition of ?1,36,63,228/- u/s 68 of the IT Act, 1961.
2. Whether the CIT(A) was right in deleting the addition of ?1,36,632/- u/s 69C of the IT Act, 1961.
3. Whether the CIT(A) was right in deleting the addition based on incriminating documents and statements u/s 132(4) and 131.
4. Whether the CIT(A) was justified in holding that statements recorded u/s 132(4) & 131 cannot be considered as incriminating material.
5. Whether the CIT(A) was justified in holding that the assessee's retraction against the statement given u/s 132(4) was valid despite being filed after 14 months.
6. Whether the CIT(A) is justified in allowing the appeal on the basis that completed assessments cannot be interfered with by the AO without incriminating material.
7. Whether the CIT(A) is right in not accepting the decision of the Hon'ble High Court in the case of Shri Roshan Lal Sancheti.
8. The right to amend, modify, alter, add or forego any grounds of appeal.

Detailed Analysis:

1. Deletion of Addition u/s 68:
The CIT(A) deleted the addition of ?1,36,63,228/- made by the AO on account of bogus Long Term Capital Gain (LTCG) claimed as exempt income u/s 10(38). The Revenue argued that this deletion was incorrect, but the Tribunal noted that the tax effect was below the monetary limit set by the CBDT, which was ?50,00,000/- for appeals before the Appellate Tribunal. The Tribunal dismissed the Revenue's appeal based on the low tax effect.

2. Deletion of Addition u/s 69C:
The CIT(A) also deleted the addition of ?1,36,632/- made by the AO on account of unexplained commission expenditure for taking bogus accommodation entries in the form of LTCG. Similar to the first issue, the Tribunal dismissed the appeal due to the tax effect being below the CBDT's prescribed limit.

3. Incriminating Documents and Statements:
The Revenue contended that the CIT(A) wrongly deleted the addition based on incriminating documents and statements recorded u/s 132(4) and 131. However, the Tribunal found that the appeal was dismissed due to the low tax effect and did not delve into the merits of the case.

4. Statements Recorded u/s 132(4) & 131:
The CIT(A) held that statements recorded during the search could not be considered as incriminating material. The Tribunal did not address this issue in depth, as the appeal was dismissed on monetary grounds.

5. Retraction of Statement:
The CIT(A) accepted the assessee's retraction of the statement given u/s 132(4), despite it being filed after 14 months. The Tribunal did not specifically address this point, focusing instead on the monetary limit for appeals.

6. Completed Assessments and Incriminating Material:
The CIT(A) ruled that in the absence of incriminating material, completed assessments could not be interfered with by the AO. The Tribunal upheld the dismissal of the appeal due to the low tax effect.

7. High Court Decision in Shri Roshan Lal Sancheti:
The Revenue argued that the CIT(A) did not accept the High Court's decision in the case of Shri Roshan Lal Sancheti, which stated that statements recorded u/s 132(4) and later confirmed u/s 131 cannot be discarded simply due to retraction. The Tribunal did not address this argument, as the appeal was dismissed based on the monetary limit.

8. Amendment of Grounds:
The Revenue reserved the right to amend, modify, alter, add, or forego any grounds of appeal. The Tribunal's decision to dismiss the appeal due to the low tax effect rendered this point moot.

Conclusion:
The Tribunal dismissed the Revenue's miscellaneous application to rectify the order under section 254(2) of the Act, as the tax effect in the case was below the monetary limit set by the CBDT. The Tribunal concluded that the special order from the CBDT dated 16.09.2019, which allowed appeals on merits in cases involving bogus LTCG through penny stocks, did not apply retroactively to appeals already dismissed. Therefore, the Revenue's application was dismissed.