2020 (2) TMI 1545 - AT - Income Tax

Revenue's Appeal Dismissed for Tax Deletions: CBDT Circular Limit Upheld

The Tribunal dismissed the revenue's appeal challenging the deletion of additions totaling Rs. 102.36 Lacs for Assessment Year 2007-08 due to ... Maintainability of appeal - Monetary limit - Low tax effect - as per DR additions were made on account of accommodation unsecured loans pursuant to search action being carried out by DGIT (Investigation) in the case of Shri Bhanwar Lal Jain group of cases and therefore, factual matrix was covered by exception provided in CBDT Circular No. 23 of 2019 dated 06/09/2019 read with office memorandum dated 16/09/2019 - HELD THAT:- The tax effect being contested by the revenue is less than prescribed limit of ₹ 50 Lacs and the same is covered by recently issued low tax effect Circular No.17/2019 dated 08/08/2019 issued by Central Board of Direct Taxes [CBDT]. This recent circular further enhances the monetary limit fixed in earlier Circular No.3 of 2018 dated 11/07/2018 issued by CBDT as amended on 20/08/2018. Undisputedly, the factual matrix is not covered by any of the exceptions as provided in para-10 of Circular no. 3 of 2018 dated 11/07/2018. The co-ordinate bench of this Tribunal in ITO V/s Late Shri Amarchand P.Shah [2019 (8) TMI 1402 - ITAT MUMBAI] has already held that Directorate of Income Tax (investigation) is a law enforcement agency under the control of Ministry of Finance and would thus constitute internal agency / wing of Income Tax Department which works under the aegis of its controlling authority CBDT and therefore, the same could not be considered as ‘external source’ as is referred to in para 10(e) of CBDT circular dated 20/08/2018. No contrary decision is on record. So far as the exceptions as provided in subsequent CBDT Circular No. 23 of 2019 dated 06/09/2019 read with office memorandum dated 16/09/2019 is concerned, upon perusal of the same, we find that the same applies only to cases involving bogus long term capital gains (LTCG) / Short Term Capital Loss (STCL) through penny stocks and do not apply to the cases of accommodation unsecured loans. As gone through the circulars and find that the tax effect in dispute is below prescribed limit of ₹ 50 Lacs and the assessee stood benefitted by the above circular issued by CBDT wherein the minimum monetary limit for filing the appeals before various appellate authorities have been fixed - The aforesaid limits, as per para 13 of the Circular no. 3 of 2018 dated 11/07/2018, applies to pending appeals also. In view of the same, we dismiss the revenue’s appeal. Issues:- Contesting deletion of certain additions on account of accommodation entries for unsecured loans and interest paid thereupon.- Maintainability of appeal based on prescribed monetary limit.- Interpretation of CBDT Circulars regarding tax effect limits for filing appeals.- Applicability of exceptions provided in CBDT Circulars to the case.- Dismissal of revenue's appeal based on monetary limit.Analysis:1. The appeal by the revenue challenges the deletion of additions totaling Rs. 102.36 Lacs made by the Assessing Officer on account of accommodation entries for unsecured loans and interest paid thereupon for Assessment Year 2007-08.2. The Authorized Representative for the Assessee argued that the appeal is not maintainable as the tax effect of the disputed quantum additions is less than the prescribed limit of Rs. 50 Lacs as per CBDT Circular No.17/2019. Reference was made to a Tribunal decision highlighting that the Directorate of Income Tax (Investigation) is an internal agency of the Income Tax Department and not an external source as mentioned in the circular.3. The Departmental Representative contended that the additions were made in connection with accommodation unsecured loans during a search action by DGIT (Investigation) in a specific case, falling under an exception provided in CBDT Circular No. 23 of 2019.4. Upon reviewing the case records, it was observed that the tax effect contested by the revenue is below the prescribed limit of Rs. 50 Lacs, as per CBDT Circulars. The Tribunal noted that the factual matrix did not fall under any exceptions mentioned in the circulars, reinforcing the decision that the Directorate of Income Tax (Investigation) is an internal agency of the Income Tax Department.5. The Tribunal clarified that the exceptions in subsequent CBDT Circular No. 23 of 2019 applied only to cases involving bogus long-term capital gains or short-term capital loss through penny stocks, not to cases of accommodation unsecured loans.6. The Tribunal acknowledged that the tax effect in dispute was below the prescribed limit of Rs. 50 Lacs, benefiting the assessee under the CBDT circular. The circular set monetary limits for filing appeals before different appellate authorities, which were also applicable to pending appeals, leading to the dismissal of the revenue's appeal.7. The Tribunal granted the revenue the liberty to seek a recall of the appeal if it later found that the matter fell under any exceptions provided in the circulars or if the tax effect exceeded the prescribed monetary limit.8. Consequently, the Tribunal dismissed the revenue's appeal based on the monetary limit set by the CBDT Circulars.