2022 (5) TMI 1097 - AT - Income Tax

Maintainability of appeal - low tax effect - disallowance on account of bogus short term capital loss - applicability of Circular No. 23/2019 dated 06.09.2019 and Office Memorandum No. 279 dated 16.09.2019 to appeals filed by the Department prior to 16.09.2019 - HELD THAT - There is nothing in the aforesaid circulars to suggest that they shall have retrospective effect. Thus, ultimately, the Hon ble Court concluded that the exceptions to CBDT Circular No.17/2019 dated 08.08.2019 as provided in CBDT Circular No. 23/2019 dated 06.09.2019 read along with Office Memorandum No. 279 dated 16.09.2019 would be applicable to appeals filed by the Revenue on or after 16.09.2019. The view expressed by the Hon ble Court, as aforesaid, was reiterated in the other decisions cited before us by learned counsel for the assessee. DR failed to bring to our notice any decision of any other High Court or Hon ble Supreme Court expressing a view contrary to the view expressed by the Hon ble Gujarat High Court in the aforesaid decision. Since, these decisions are directly on the issue and are the only decisions of any High Court dealing with issue, adhering to the norms of judicial discipline, we respectfully follow the view expressed in these decisions. Therefore, we hold that the present appeal having been filed by the Revenue prior to 16.09.2019, the date on which, Office Memorandum No. 279 dated 16.09.2019 was issued by the Board by way of a special order, the exceptions provided therein would not apply. Thus, assessee s appeal would be covered under CBDT Circular No.17/2019 dated 08.08.2019. Since, the tax effect on the amount disputed by the Revenue in the present appeal is below the monetary limit of Rs.50 lakhs, which learned Departmental Representative accepts, the present appeal of the Revenue is not maintainable, hence, deemed to have been withdrawn. Accordingly, the appeal is dismissed as withdrawn.

Summary

Issues:
- Maintainability of the appeal by the Revenue based on the tax effect limit
- Applicability of CBDT Circular No. 17/2019 and subsequent Circulars to the present appeal

Analysis:

1. Maintainability of the appeal: The Revenue appealed against the deletion of a disallowance of Rs. 88,22,803 on account of bogus short term capital loss for the assessment year 2015-16. The assessee contended that the appeal was not maintainable as the tax effect was below the monetary limit of Rs. 50 lakhs as per CBDT Circular No. 17/2019. The Departmental Representative argued that the exception to the circular applied due to the nature of the case involving short term capital loss from penny stocks.

2. Applicability of Circulars: The key issue was the applicability of CBDT Circular No. 23/2019 and Office Memorandum No. 279 dated 16.09.2019 to the present appeal. The Circular No. 17/2019 raised the monetary limit for appeals to Rs. 50 lakhs, applying to pending and fresh appeals. However, Circular No. 23/2019 and the Office Memorandum exempted cases involving organized tax evasion through bogus capital gain or penny stocks from the tax effect limit. The Gujarat High Court clarified that these exceptions applied prospectively from 16.09.2019.

3. Judicial Precedents: The decisions cited, including PCIT Vs. Anand Natwarlal Sharda, supported the view that the exceptions to Circular No. 17/2019 would be applicable to appeals filed after 16.09.2019. The Tribunal, following the judicial discipline, held that since the Revenue's appeal was filed before 16.09.2019, the exceptions did not apply. Consequently, as the tax effect was below the limit, the Revenue's appeal was deemed withdrawn and dismissed.

4. Final Decision: The Tribunal dismissed the Revenue's appeal for the assessment year 2015-16 as withdrawn due to the tax effect being below the monetary limit set by CBDT Circular No. 17/2019. The applicability of subsequent Circulars exempting certain cases from the limit was determined to be prospective, thereby not affecting the present appeal filed before the specified date.