2021 (6) TMI 1065 - HC - Income Tax

High Court upholds ITAT's decision on circulars' retrospective effect, emphasizes CBDT directives for appeal limits.

Principal Commissioner Of Income Tax (Central) Ahmedabad Versus Anand Natwarlal Sharda

The High Court dismissed the petition challenging the ITAT's order, emphasizing that the circulars issued by the CBDT did not have retrospective effect. ... Rectification u/s 254 - non maintainability of appeal on low tax effect - apparent error in the order of the ITAT vide which the Tribunal has disposed a large number of cases by a combined order dated 14.8.2019 due to low tax effect relying on the CBDT Circular No.17 of 2019 dated 8.8.2019 - HELD THAT:- HELD THAT:- There is nothing to suggest in the said Circular/ Office Memorandum that they shall have retrospective effect. On the contrary, from the language employed in the said Circular dated 06.09.2019, it clearly transpires that the appeals may be filed on merits as an exception to the other Circulars issued earlier, where the Board by way of special order direct filing of Appeals on merits in the cases involved in organized tax evasion activity. By virtue of the said Circular dated 06.09.2019, the appeals could be filed on merits, irrespective of the monetary limits fixed in earlier cases, if the Board passes special order for filing appeals in cases involving tax evasion activity. The said Circular speaks about the Appeals that may be filed with the special order of the Board in future, and hence could not be construed to have retrospective effect. Tribunal interpreting the said Circular/ Office Memorandum in the impugned order has rightly observed that in respect of each case or category of cases whether an appeal should be filed in view of the Circular dated 06.09.2019 or not shall be decided by the Board by way of special order, and thus a specific requirement of issuance of special order by CBDT is a must. The Tribunal therefore has rightly held that the CBDT Circular No. 23/2019 dated 06.09.2019 should be read along with the Office Memorandum dated 16.09.2019, in respect of the appeals to be filed pursuant to such special orders of CBDT and shall apply to all the appeals filed on or after 16.09.2019 by the revenue, where the tax effect may be low but the appeal could still be filed by the revenue on merits. Appeals including the appeal in case of the respondent, which were disposed of by the Tribunal vide the common order dated 14.08.2019 could not be said to have been filed pursuant to the special order of the CBDT in view of the Circular dated 06.09.2019 read with the Office Memorandum dated 16.09.2019, and therefore it could not be said that the Tribunal had committed any mistake apparent from the record, which would require rectification as envisaged in Section 254(2) of the said Act. Issues:Challenge to order of Income Tax Appellate Tribunal under Article 226/227 of the Constitution of India. Dismissal of Miscellaneous Application under Section 254(2) of the Income Tax Act, 1961. Interpretation of Circulars issued by CBDT regarding monetary limits for filing appeals. Retrospective effect of Circular dated 06.09.2019 and Office Memorandum dated 16.09.2019.Issue 1: Challenge to ITAT Order:The Principal Commissioner of Income Tax challenged the order of the Income Tax Appellate Tribunal (ITAT) dated 09.09.2020, which dismissed the Miscellaneous Applications, including M.A. No. 77 of 2020, filed under Section 254(2) of the Income Tax Act, 1961. The Tribunal held that there was no mistake apparent on the face of the record that could be rectified within the scope of Section 254(2) of the Act.Issue 2: Dismissal of Appeal by ITAT:The petitioner had initially filed an appeal (ITA No. 1274 of 2019) against the order of the CIT (Appeals). The ITAT dismissed this appeal on 14.08.2019, along with other appeals, citing that the Tax Effect did not exceed a certain limit as per a circular issued by the CBDT. The petitioner filed Miscellaneous Applications, including M.A. No. 77 of 2020, under Section 254(2) of the Act, claiming exceptions under subsequent circulars issued by the CBDT.Issue 3: Interpretation of Circulars by CBDT:The petitioner argued that subsequent circulars issued by the CBDT, including Circular No. 23/2019 dated 06.09.2019 and Office Memorandum No. 279 dated 16.09.2019, exempted certain cases from monetary limits for filing appeals. The petitioner contended that these circulars had retrospective effect, allowing for the recall of the ITAT's order dated 14.08.2019. The petitioner emphasized that the Tribunal should have considered the circulars while deciding the Miscellaneous Applications.Issue 4: Retrospective Effect of Circulars:The Court analyzed the Circular dated 06.09.2019 and the Office Memorandum dated 16.09.2019 issued by the CBDT. It noted that these circulars did not explicitly mention retrospective application. The Court found that the circulars allowed for filing appeals on merits as an exception to previous limits, subject to a special order from the Board. As the appeals in question were not filed pursuant to such special orders, the Court concluded that the Tribunal did not commit any rectifiable mistake as per Section 254(2) of the Act.In summary, the High Court dismissed the petition challenging the ITAT's order, emphasizing that the circulars issued by the CBDT did not have retrospective effect. The Court held that the Tribunal rightly dismissed the Miscellaneous Applications as the appeals were not filed under special orders exempting them from monetary limits. The judgment underscores the importance of specific directives from the CBDT for appeals falling outside standard monetary limits, ensuring clarity in the application of tax laws and appeal procedures.