CBDT CIRCULARS- MUST BE ISSUED AFTER PROPER GROUND WORK AND WITH MORE CARE- CASUAL APPRAOCH MAKES CIRCULARS UNCERTAIN.

[CA DEV KUMAR KOTHARI]

Circulars about not filing departmental appeals

Following are main circulars about decision of the Board for fixing monetary limits for filing of appeals before Tribunals (ITAT) , High Courts and the Supreme Court of India. In those circulars exceptional circumstances in which monitory limit shall not apply were also prescribed. Yet we find that in some circulars  additional exceptions to which such limits shall not apply are carved out. For example, recently vide Circular dt. 11.07.18 limits were revised and that circular also contained exceptions. We find that within a month on 08.08.19 another circular has been issued to prescribe additional exceptional circumstances in which revised limits laid down by circular dated 11.07.2018 will not apply. List of some important circulars is as follows:

Circular No. 17/2019   8th August 2019

Circular No. 3 of 2018 dated 11.07.2018

Circular No. 21 of 2015 dated 10.12.2015

instruction No 5/2014 dated 10.07.2014

instruction No 3/2011 dated 09/02/2011

instruction No 3/2011 dated 09/02/2011

INSTRUCTION NO. 5/2008, DATED 15-5-2008  -

instructions No. 1979 dated 27-3-2000,

No. 1985 dated 29-6-2000,

No. 6 of 2003 dated 17-7-2003,

No. 19 of 2003 dated 23-12-2003,

No. 5/2004 dated 27-5-2004,

No. 2/2005 dated 24-10-2005 and

No. 5/2007 dated 16-7-2007, wherein monetary limits for filing departmental appeals (in Income-tax matters) and other conditions were specified, for filing appeals before Appellate Tribunals, High Courts and Supreme Court.

The above list may not be exhaustive as some more circulars on the issue can be found which are not reported or referred to in above circulars.

Recent Circular for additional exceptions:

Recent Circular  dated 06.09.19 is issued prescribing additional exceptions where appeals can be filed by revenue even if tax effect is less than revised amount of tax effect. This is in spite of fact that less than one month recent circular dt. 08.08.19 also prescribed exceptions and in almost all earlier circulars also such exceptions were specifically provided or adopted as per earlier circulars.

Therefore, it is not a case that authority had no experience and therefore, there was mistake or omission while issuing circular dated. 08.08.19.

This is also worthwhile to mention that, on the issue provided in additional exceptions vide circular dt. 06.09.19  there are several judgments of various High Courts in favour of taxpayers and in some cases departmental SLP’s  have also been  dismissed by the Supreme Court of India.

Furthermore, the issue involved are decided in favour of taxpayers based on facts found and because tax authorities had, as usual practices acted merely on suspicion, doubt and presumption that taxpayer is chor, this may be because “ choro ko sare najar aaten hain ichor”. Dishonesty amongst tax authorities is now well recognized in public even by some ministers including the Prime Minister and Finance Minister.

Circular dated 06.09.2019 is reproduced below with highlights added for analysis and understanding intricacies:

 

Circular - Income Tax

Circular No. 23 of 2019

F. No. 279/Misc./M-93/2018-ITJ(Pt.)

Government of India

Ministry of Finance

Department of Revenue

Central Board Direct Taxes

Judicial Section

New Delhi, 6th September 2019

Subject: -Exception to monetary limits for filing appeals specified in any Circular issued under Section 268A of the Income-tax Act, 1961-reg.

Reference is invited to the Circulars issued from time to time by Central Board of Direct Taxes (the Board) under section 268A of the Income-tax Act, 1961 (the Act), for laying down monetary limits and other conditions for filing of departmental appeals before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court.

2.  Several references have been received by the Board that in large number of cases where organised tax-evasion scam is noticed through bogus Long-Term Capital Gain (LTCG)/Short Term Capital Loss (STCL) on penny stocks and department is unable to pursue the cases in higher judicial fora on account of enhanced monetary limits. It has been reported that in large number of cases, ITATs and High Court have recognized the unique modus operandi involved in such scam and have passed judgements in favour of the revenue. However, in cases where some appellate fora have not given due consideration to position of law or facts investigated by the department, there is no remedy available with the department for filing further appeal in view of the prescribed monetary limits.

3.  In this context, Board has decided that notwithstanding anything contained in any circular issued u/s 268A specifying monetary limits for filing of departmental appeals before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court, appeals may be filed on merits as an exception to said circular, where Board, by way of special order direct filing of appeal on merit in cases involved in organised tax evasion activity,

4.  Hindi version follows.

(Neetika Bansal)

Director (ITJ)

CBDT, New Delhi

From above circular with highlighted portion we find that:

1. Additional exception is provided in respect of any of Circulars issued so far. S.268A was  Inserted by Finance Act, 2008, w.e.f. 1.4.1999 on the issue and thereafter Circulars have been issued from time to time.  The first such Circular seems to be instructions No. 1979 dated 27-3-2000. It is also likely  that some cases of 2000 are also pending at different forum and therefore, attempt is being made to prefer appeal by revising exceptions.
2. Paragraph  2  of the circular says that  several references have been received by the Board… but there is no mention from whom references were received, that too within short period of 29 days from date of issue of circular dt. 08.08.19  and how  such representations have  prompted the Board to issue additional exceptions.
3.  The Circular speaks about alleged bogus  LTCG and  STC loss. From reading of several  judgments on these issues it is found that majority of cases are decided in favor of taxpayers and there are a few cases in favor of revenue. The ratio may be around 98% in favour of taxpayers and hardly 2% may be  in favor of revenue. Cases in favor of revenue are because of   peculiar facts of those cases and  lack of proper representations on behalf of taxpayers. Some cases are such in which there was no representation at all on behalf of taxpayer.

What is being ignored by tax authorities and the Board?

On reading of judgments author can briefly describe that due to doubts, presumption and  bias, tax authorities, some benches of  Tribunals and one  High Court has decided in favour of revenue ignoring the facts that:

1. Share price fluctuate in most of cases. Many of today’s  Navratna companies of Governments   were penny stock some time. Even after they have stabilized we find fluctuations in share prices. 
2. Price movements is closely monitored by authorities like Stock Exchanges and SEBI. Stock Exchanges prescribe several mechanism.
3. That a small investor having small stake in companies   cannot influence market price of shares.
4. That parties buying and  selling stock  through S/E are not known to each other. The bids and offers are provided by Stock Exchange.  There are no transactions with related parties.
5. That payments are made and received through banking channels by A/c payee cheques, RTGS, NEFT etc. Cheques are  received, held , deposited and  collected as holder of  cheque in due course and bank pays the cheque as payment in due course. In such circumstances S. 68 should not be invoked.
6. That when shares are purchased and sold at stock exchange at prevailing market rate, there is no reason to doubt the same.
7. That when Security Transaction tax is levied, the result of transactions are already taxed under simplified taxation scheme for income arising in security transactions. Taxing again the same will amount to double taxation and second time taxation of income which had already been taxed.

About some recorded statements relied on by tax authorities:

Tax authorities are relying on some of recorded statements of some alleged entry operators due to which doubt and suspicion is extended to all cases. Grape wine is that :

1. statements are recorded at very short notice without providing any opportunity and time to concerned person. There are cases in which a notice is issued, served, and concerned person is called and his statement is recorded on the same day or within few days.
2. Statements are recorded involving matters spanning a long period of time without allowing reasonable time and access to books of account.
3. Statements are recorded under threat.
4. Some persons have given false statements just to avoid harassment and tax demand on them. This is evident that some of such people who admitted themselves have gone in appeals to reduce their demand of income tax in activity now admitted by them as that of  entry operators and unfortunately appellate authorities have allowed them relief determining meager income. The reality may be that so called entry operators had saved their skins, reduced their tax liabilities and bought peace from tax departments.  Real fact may be that entry operators had undisclosed income which was taxable but by calling themselves entry operators they had fooled tax authorities.  And tax authorities HAATH DO KE HONEST TAXPAYERS KE PICHHE PAR GAYI.
5. Statements of such persons are not reliable as against statements of reputed persons who pay regular taxes.

In conclusion author feels that additional exception provided is only a result of doubt and suspicion ingrained in minds of tax authorities that tax payer is chor and because most of  tax authorities have hardly any regard or respect for honest tax payers who are regularly paying direct and indirect tax, providing employment to people, making investment all such contributions are ignored .

 

Circular - Income Tax

Circular No. 17/2019

F. No. 279/Mise. 142/2007-ITJ(Pt.)

Government of India

Ministry of Finance

Department of Revenue

Central Board Direct Taxes Judicial Section

New Delhi, 8th August 2019

Subject: - Further Enhancement of Monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court - Amendment to Circular 3 of 2018 - Measures for reducing litigation.

Reference is invited to the Circular No. 3 of 2018 dated 11.07.2018 (the Circular) of Central Board of Direct Taxes (the Board) and its amendment dated 20th August, 2018 vide which monetary limits for filing of income tax appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court have been specified. Representation has also been received that an anomaly in the said circular at para 5 may be removed.

2.  As a step towards further management of litigation, it has been decided by the Board that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly, the table for monetary limits specified in Para 3 of the Circular shall read as follows:

S. No.	Appeals/SLPs in Income-tax matters	Monetary Limit (Rs.)
1.	Before Appellate Tribunal	50,00,000
2.	Before High Court	1,00,00,000
3.	Before Supreme Court	2,00,00,000

3.  Further, with a view to provide parity in filing of appeals in scenarios where separate order is passed by higher appellate authorities for each assessment year vis-a-vis where composite order for more than one assessment years is passed, para 5 of the circular is substituted by the following para:

"5. The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. Further, even in the case of composite order of any High Court or appellate authority which involves more than one assessment year and common issues in more than one assessment year, no appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In case where a composite order/ judgement involves more than one assessee, each assessee shall be dealt with separately."

4.  The said modifications shall come into effect from the date of issue of this Circular.

5.  The same may be brought to the notice of all concerned.

6.  This issues under section 268A of the Income-tax Act, 1961.

7.   Hindi version will follow.

(Neetika Bansal)

Director, (ITJ)

CBDT New Delhi

Tax Management India .com	https://www.taxmanagementindia.com

Statutory Provisions

Income-tax Act, 1961

¹[Filing of appeal or application for reference by income-tax authority.      

268A. (1) The Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing of appeal or application for reference by any income-tax authority under the provisions of this Chapter.

(2) Where, in pursuance of the orders, instructions or directions issued under sub-section (1), an income-tax authority has not filed any appeal or application for reference on any issue in the case of an assessee for any assessment year, it shall not preclude such authority from filing an appeal or application for reference on the same issue in the case of

(a) the same assessee for any other assessment year; or

(b) any other assessee for the same or any other assessment year.

(3) Notwithstanding that no appeal or application for reference has been filed by an income-tax authority pursuant to the orders or instructions or directions issued under sub-section (1), it shall not be lawful for an assessee, being a party in any appeal or reference, to contend that the income-tax authority has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case.

(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under sub-section (1) and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case.

(5) Every order, instruction or direction which has been issued by the Board fixing monetary limits for filing an appeal or application for reference shall be deemed to have been issued under sub-section (1) and the provisions of sub-sections (2), (3) and (4) shall apply accordingly.]

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Notes:

1. Inserted by Finance Act, 2008, w.e.f. 1.4.1999

Discussions to this article

[Ganeshan Kalyani]

Sir, such a deep study of the notifications. Hats off to your hard work. It is really required constant effort and patience to read and keep track of the changes and bring out the findings from comparison.