2020 (7) TMI 209 - AT - Income Tax

Tribunal Upholds Expenses on Commodity Transactions, Stresses Circular Compliance

The Income Tax Officer, Ward 3 (5) Jaipur. Versus Smt. Laxmi Gupta

The Tribunal dismissed the revenue's appeal challenging the allowance of expenses on commodity transactions, emphasizing that the additions based on ... Maintainability of appeal - low tax effect - Tax effect of Revenue’s appeal not exceeding the monetary limit - reference to monetary limits prescribed by CBDT Circular No. 03 of 2018 dated 20-03-2018 - Unexplained cash credit u/s 68 - Finding of the A.O. is based on the information received from the Investigation Wing of the Department - treating the profit from commodity transactions as unexplained cash credit as well as the addition on account of commission paid for availing such accommodation entries from the brokers - HELD THAT:- As relying on M/S. A.P. GEMS [2020 (3) TMI 1241 - ITAT JAIPUR] Information received from Investigation Wing of the Department does not fall in the category of the information received from external source being law enforcement agencies such as CBI/ED/DRI/SFIO/DGGI etc. as provided in the exception clause (e) of para 10 of the Circular No. 3/2018. Accordingly, the appeal of the revenue is not maintainable being the monetary limit is not exceeding as prescribed in the Circular No. 3/2018. - Decided against revenue. Issues Involved:- Allowance of expenses on commodity transaction- Deletion of additions based on information from Investigation Wing- Maintainability of appeal by Revenue based on monetary limitsAnalysis:Issue 1: Allowance of expenses on commodity transactionThe appeal by the revenue challenged the CIT(A)'s decision to allow the assessee's claim of expenses on commodity transactions, which were initially treated as unexplained cash credit by the AO. The revenue contended that the addition was based on information from the Investigation Wing, justifying the appeal on its merits. However, the assessee argued that the appeal was not maintainable as the tax effect did not exceed the monetary limits set in Circular No. 03/2018. The Tribunal noted that the additions were made by the AO based on information from the Investigation Wing, raising the question of whether it fell within the exception provided in the circular. The Tribunal referred to a previous case to support its decision, emphasizing that the information from the Investigation Wing did not qualify as external information from law enforcement agencies specified in the circular's exception clause (e).Issue 2: Deletion of additions based on information from Investigation WingThe Tribunal examined whether the additions made by the AO, based on information from the Investigation Wing, fell within the exception clause (e) of Circular No. 03/2018. It was established that the information from the Investigation Wing did not meet the criteria of external sources like CBI/ED/DRI/SFIO/DGGI, as specified in the circular. The Tribunal cited a consistent view taken in previous cases, concluding that appeals based on information from the Investigation Wing were not maintainable under the circular due to the absence of external source information.Issue 3: Maintainability of appeal by Revenue based on monetary limitsThe Tribunal addressed the maintainability of the revenue's appeal based on the monetary limits set in Circular No. 03/2018. It was emphasized that the tax effect of the appeal did not exceed the prescribed limits, rendering the appeal not maintainable. The Tribunal dismissed the revenue's appeal, highlighting that the information from the Investigation Wing did not fall under the exception clause of the circular, and the monetary limit criterion was not met.In conclusion, the Tribunal dismissed the revenue's appeal, emphasizing that the additions based on information from the Investigation Wing did not qualify for the exception provided in the circular. The decision highlighted the importance of adhering to monetary limits and criteria specified in circulars while determining the maintainability of appeals in tax matters.