2021 (2) TMI 412 - AT - Income Tax

Tribunal Upholds Dismissal of Revenue's Appeal on Tax Effect, Emphasizes CBDT Circulars

The Tribunal upheld the original order dismissing the Revenue's appeal due to low tax effect. It highlighted the importance of considering subsequent CBDT ... Exception to monetary limits for filing appeals in penny stock bogus LTCG/STCL cases - application of CBDT Circular No. 23 of 2019 and CBDT special order dated 16.09.2019 - non-retrospective application of a CBDT special order to appeals filed prior to its issuance - rectification of Tribunal order under section 254(2) of the Income-tax Act - low tax effect/monetary limits for departmental appealsApplication of CBDT Circular No. 23 of 2019 and CBDT special order dated 16.09.2019 - non-retrospective application of a CBDT special order to appeals filed prior to its issuance - exception to monetary limits for filing appeals in penny stock bogus LTCG/STCL cases - Whether CBDT Circular No. 23 of 2019 and the CBDT special order dated 16.09.2019 operate so as to permit the Revenue to pursue an appeal filed prior to issuance of the special order and thus remove the bar of low tax effect monetary limits. - HELD THAT: - The Tribunal examined Circular No. 23 of 2019 and the subsequent special order dated 16.09.2019 and held that the CBDT intended the exception for bogus LTCG/STCL through penny stocks to operate by way of a special order authorising filing of appeals on merits. The special order contemplates filing of appeals pursuant to that order and therefore applies to appeals filed on or after the date of the special order. The Bench noted established practice that low tax effect circulars have been applied to pending appeals when expressly so read, but emphasised that the present exception was not a general retrospective carve out: it requires a specific special order and does not retrospectively validate earlier filings. Consequently, appeals filed before the special order (and before issuance of Circular No. 23) do not fall within the exception and remain subject to the then operative low tax effect limits. The Tribunal applied this reasoning to the facts: the departmental appeal was filed before issuance of the special order and Circular No. 23, hence the exception could not be invoked to recall the earlier dismissal for low tax effect. [Paras 7, 8, 9, 10, 11]Circular No. 23 of 2019 and the special order dated 16.09.2019 do not apply to departmental appeals filed prior to the special order; the appeal filed earlier was rightly dismissed on account of low tax effect.Rectification of Tribunal order under section 254(2) of the Income-tax Act - low tax effect/monetary limits for departmental appeals - Whether non consideration of Circular No. 23 of 2019 and the special order by the Tribunal at the time of hearing amounts to a mistake apparent on the record warranting recall under section 254(2). - HELD THAT: - The Bench considered the narrow scope of section 254(2) and observed that neither Circular No. 23 nor the special order existed at the time the appeal was heard and decided. Non consideration of documents or orders that were not in existence or part of the record when the Tribunal heard and decided the appeal cannot be characterised as a 'mistake apparent' to justify rectification under section 254(2). The Tribunal therefore found no ground to recall or rectify its earlier order under the said provision merely because a subsequent CBDT circular and special order were later issued. [Paras 11]Non consideration of Circular No. 23 and the special order at the time of hearing is not a mistake apparent on the record; rectification under section 254(2) is not maintainable.Final Conclusion: The miscellaneous application filed by the Revenue seeking recall of the Tribunal's earlier dismissal on account of low tax effect is dismissed: the CBDT exception for penny stock bogus LTCG/STCL cases operates only pursuant to the CBDT special order and does not retrospectively apply to appeals filed before that order, and non consideration of the subsequent circular and special order is not a mistake apparent warranting rectification under section 254(2). Issues:1. Interpretation of CBDT Circulars regarding monetary limits for filing appeals.2. Application of special orders by CBDT exempting certain cases from monetary limits.3. Consideration of subsequent CBDT Circulars and special orders in pending appeals.Analysis:Issue 1: Interpretation of CBDT Circulars regarding monetary limits for filing appealsThe Revenue filed a miscellaneous application against a Tribunal order, arguing that the order was unacceptable as it did not appreciate the findings of the Assessing Officer (AO) based on information from the Investigation Unit and SEBI. The Revenue contended that despite the tax effect being below the limit for filing appeals specified by CBDT Circular No. 17/2019, the order should be recalled under section 254(2) of the Income Tax Act, 1961, citing CBDT Circular No. 23 of 2019. The Assessing Officer argued that the appeal was correctly dismissed due to low tax effect based on CBDT Circular dated 8.08.2019, which increased the monetary limit for maintaining appeals.Issue 2: Application of special orders by CBDT exempting certain cases from monetary limitsThe Assessing Officer further argued that the subsequent CBDT Circular No. 23 of 2019, along with a special order communicated on 16.09.2019, exempted cases involving penny stocks from monetary limits for filing appeals. The Tribunal referred to a similar case before the Jaipur Bench, where it was held that the special order exempting certain cases from monetary limits must be issued by the CBDT for appeals to be filed on merits. The Tribunal emphasized that the appeal in question was filed before the special order was issued and, therefore, did not fall under the exception prescribed by the CBDT Circulars.Issue 3: Consideration of subsequent CBDT Circulars and special orders in pending appealsThe Tribunal highlighted that the subsequent CBDT Circular No. 23 of 2019 and the special order dated 16.09.2019 were not in existence at the time of the original Tribunal order. It was emphasized that the non-consideration of these subsequent circulars and special orders was not a mistake apparent from the record that could be rectified under section 254(2) of the Act. The Tribunal dismissed the miscellaneous application filed by the Revenue, stating that it was not maintainable in light of the discussion regarding the interpretation and application of CBDT Circulars and special orders in pending appeals.In conclusion, the Tribunal upheld the original order dismissing the Revenue's appeal due to low tax effect and emphasized the importance of considering subsequent CBDT Circulars and special orders in determining the applicability of monetary limits for filing appeals.