2024 (12) TMI 144 - AT - Income Tax

Maintainability of appeal on low tax effect - addition made by the AO is less than the prescribed monetary limit, specified in the Circular No.3/2018 dated 11.07.2018 - Revenue pointed out that above modified Circular No.3/2018 dated 11.07.2018 stated that in certain circumstances, the matter should be heard on merit, even if addition made by the assessing officer, is less than the prescribed monetary limit, specified in the modified Circular - HELD THAT - We do not agree with learned DR for the revenue, because, in the assessee s case under consideration, the addition was made by the assessing officer, based on the information received from the state police department and not on the basis of enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligences (DGGI), which is mentioned in the modified said Circular No. No.3/2018(supra). Hence, even modified Circular No. No.3/2018 (modified on 20.08.2018,) is not applicable, to the assessee s case under consideration. The various agencies defined in the circular, such as, CBI/ED/DRI/SFIO/Directorate General of GST Intelligences (DGGI), are exhaustive in nature. Exhaustive means comprehensive, thorough or tending to exhaust and no further word / Agency should be added. It is a settled position of law that an act done by the assessee, which is legal, when it was done, cannot be made illegal by enacting a new circular. Therefore we find that even in modified said Circular No. No.3/2018(supra), state police department, is not mentioned, by CBDT, therefore, the said modified circular does not apply to the assessee s case under consideration. The claim of the Revenve, to recall the order of the Tribunal, and to hear on merit, is misconceived. Hence, based on these facts and position in law, we note that miscellaneous application filed by the Revenue deserve to be dismissed. Accordingly, we dismiss the miscellaneous application filed by the Revenue.

Summary

Issues:
1. Whether the latest Circular No.5/2024 issued by CBDT, enlarging the scope of exceptions, applies retrospectively to the assessee's case.
2. Whether the modified Circular No.3/2018, dated 11.07.2018, applies to the assessee's case and necessitates hearing the matter on merit.
3. Whether the state police department's information falls within the scope of the modified Circular No.3/2018.

Analysis:
1. The Revenue contended that Circular No.5/2024, enlarging exceptions, should apply retrospectively to the assessee's case. However, the Tribunal found that the Circular explicitly stated its prospective application and emphasized that CBDT circulars are binding on Revenue. Citing legal precedent, the Tribunal held that Circular No.5/2024 does not apply retrospectively, supporting the assessee's argument that the old Circular No.3/2018 is applicable, leading to the dismissal of the Revenue's appeals due to low tax effect.

2. The Tribunal examined the modified Circular No.3/2018, which allowed hearing on merit in certain circumstances. The Revenue argued for a recall based on this modification. However, the Tribunal noted that the addition in the assessee's case was based on state police information, not enforcement agencies specified in the circular. The Tribunal held that the modified circular did not apply to the state police department's information, as it was not explicitly included, rejecting the Revenue's claim for a recall and emphasizing that legal actions cannot retroactively render legal actions illegal.

3. The Tribunal further clarified that the exhaustive nature of agencies listed in the circular, such as CBI/ED/DRI/SFIO/DGGI, precluded the addition of further agencies like the state police department. The Tribunal concluded that the state police department did not fall within the agencies specified in the circular, thus the modified Circular No.3/2018 did not apply to the assessee's case. Consequently, the Tribunal dismissed the Revenue's miscellaneous applications, affirming that the state police department's information did not warrant a recall for hearing on merit.

In conclusion, the Tribunal dismissed both Miscellaneous Applications (MA No.36/Rjt/2020 and MA No.37/Rjt/2020) of the Revenue, emphasizing the non-retrospective application of Circular No.5/2024 and the inapplicability of the modified Circular No.3/2018 to the state police department's information.