2022 (7) TMI 1336 - HC - Income Tax

Maintainability of appeal against ITAT order - low tax effect - addition of bogus LTCG - penny stock purchases - Tribunal had dismissed the appeal filed by the revenue by noting the fact that the appeal is less than the monetary limit of Rs.50 lakhs fixed by the CBDT - HELD THAT - Exception to penny stock cases from the stipulation of monetary limit would be indeed operable from 16.09.2019 that is only in the cases where appeal was filed on or after 16.09.2019. In the light of the stand taken by the Department, the monetary limit would be operable from 16th September, 2019, that is, only in cases where appeal was filed on or after 16th September, 2019. In the light of the above clarification, we find that the order passed by the learned Tribunal does not call for any interference. Accordingly, we hold that there is no substantial question of law arising for consideration in these appeals and they are dismissed.

Summary

Issues:
1. Condonation of delay in preferring the appeal.
2. Applicability of Circular No. 23 dated 6th September, 2019 and Office Memorandum dated 16th September, 2019.
3. Retrospective or prospective effect of the Office Memorandum.
4. Interpretation of the exception to monetary limits for filing appeals in Long Term Capital Gain/Penny Stock cases.

Condonation of Delay:
The High Court considered an application for condonation of delay of 354 days in preferring the appeal and found sufficient reasons given in the affidavit supporting the application. The delay was condoned, and the application was allowed.

Applicability of Circular and Office Memorandum:
The appeals filed by the revenue under Section 260A of the Income Tax Act, 1961 challenged a common order passed by the Income Tax Appellate Tribunal. The revenue raised substantial questions of law regarding the Tribunal's grant of relief without analyzing the organized tax evasion scan through bogus Long Term Capital Gains on Penny Stocks. The issue revolved around whether the Tribunal erred in granting relief within the exception to monetary limits for filing appeals as prescribed by Circular No. 23 of 2019.

Retrospective or Prospective Effect:
The High Court examined the applicability of the Circular and Office Memorandum, considering the decisions of other High Courts and the Supreme Court. The Court noted that the Office Memorandum dated 16th September, 2019 should be read along with Circular No. 23 dated 6th September, 2019 and can only have prospective effect. The Court directed the Commissioner of Income Tax to provide necessary assistance and material for further examination of the issue.

Interpretation of Exception to Monetary Limits:
The Department clarified that the exception to the monetary limit for Penny Stock cases would be operable from 16th September, 2019, only in cases where the appeal was filed on or after that date. Based on this clarification, the High Court found no interference necessary in the order passed by the Tribunal. Consequently, the Court held that there was no substantial question of law arising for consideration in the appeals, leading to their dismissal along with connected applications.

This detailed analysis of the judgment covers the issues of condonation of delay, the applicability of Circular No. 23 and Office Memorandum, the retrospective or prospective effect of the Office Memorandum, and the interpretation of the exception to monetary limits for filing appeals in Long Term Capital Gain/Penny Stock cases.