2021 (10) TMI 412 - AT - Income Tax

Tribunal dismisses Revenue's rectification application based on CBDT circular.

ITO, ward-2 (2) (3) Ahmedabad. Versus Jignashaben Harishbahi Patel

The Tribunal dismissed the Revenue's Misc. Application seeking rectification of an error in the ITAT order based on a CBDT circular. The Tribunal held ... Rectification of mistake 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:- In the present case, the subsequent judgment of Hon’ble jurisdictional High Court in the case of Anand Natwarlal Sharda [2021 (6) TMI 1065 - GUJARAT HIGH COURT] laid down that on the day when the Tribunal has decided the appeal, circular no.23, guidance note etc. were not in the picture. In that case, even the appeals were decided on 14.8.2019 and the impugned circular came on 6.9.2019. In other words, appeals were decided by the Tribunal including that of the present assessee on 14.8.2019 i.e. prior to the circular issued by the Board on 6.9.2019, and 16.9.2019. Therefore, the judgment of Hon’ble High Court is fully applicable on the facts of the present case and accordingly, MA of the Revenue has no merit. It is dismissed. Issues:1. Rectification of apparent error in ITAT order based on CBDT circular.2. Application of CBDT circulars for maintaining appeal on merit despite low tax effect.3. Interpretation of Section 254(2) of the Income Tax Act for rectification of mistakes.4. Effect of subsequent circulars on previous ITAT orders.5. Impact of High Court judgments on ITAT decisions.Analysis:1. The case involved a Misc. Application by the Revenue seeking rectification of an apparent error in the ITAT order dated 14.8.2019 related to the disposal of cases based on low tax effect as per CBDT Circular No.17 of 2019. The Revenue challenged the dismissal of its appeal by the Tribunal regarding additions made under section 68 by the AO, which were deleted by the CIT(A) resulting in a tax effect below the threshold limit prescribed by the circular.2. The Revenue contended that exceptions mentioned in subsequent CBDT circulars allowed for appeals on merit despite low tax effect, specifically in cases of alleged bogus claims of short and long term capital gains. The Tribunal examined the circulars cited by the Revenue and emphasized that rectification under section 254 of the Income Tax Act can only be made for obvious and patent mistakes, not debatable issues requiring lengthy reasoning.3. The Tribunal referred to the scope of rectification powers under section 254(2) as established by various court decisions, highlighting that the power should be used to correct mistakes apparent from the record. The judgment of the Hon'ble jurisdictional High Court in a similar case emphasized the need for clarity in the application of circulars and the requirement for a special order from the CBDT to file appeals on merits.4. The Tribunal noted that subsequent circulars issued after the ITAT's decision could not be considered as mistakes apparent from the record, as they were not in existence at the time of the original order. The High Court's ruling clarified that the circulars did not have retrospective effect and that the Tribunal's decision was not erroneous based on the subsequent circulars.5. The Tribunal concluded that the subsequent judgment of the Hon'ble jurisdictional High Court established that the ITAT's decision, including the present case, was made before the issuance of the relevant circulars. Therefore, the Misc. Application of the Revenue had no merit, and it was dismissed based on the High Court's interpretation of the timing of the circulars in relation to the Tribunal's decisions.In summary, the judgment addressed the application of CBDT circulars, the interpretation of rectification powers under the Income Tax Act, and the impact of subsequent circulars and High Court judgments on ITAT decisions.