M/S GEHLOT MOTORS PVT. LTD., JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR

ITA 1165/JPR/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0085 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 30-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANMOHAN KANDPAL ACIT
• Assessee Lawyers: S R SHARMA C A DHK
• Keywords: Unexplained cash credit; Audit objection; Tax effect; Penny stocks
• Section: 201; 268A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1165/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2009-10. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2, JAIPUR. CUKE VS. M/S. GEHLOT MOTORS PVT. LTD., NATIONAL MOTORS BUILDING, M.I. ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACG 6757 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 1166/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2009-10. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2, JAIPUR. CUKE VS. M/S. GEHLOT TRACTORS PVT. LTD., NATIONAL MOTORS BUILDING, M.I. ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACG 7120 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SMT. RUNI PAL (JCIT) AND SHRI MAN MOHAN KANDPAL (ACIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.R. SHARMA (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28.11.2019. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 29/11/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAI NST TWO SEPARATE ORDERS OF THE LD. CIT (A)-I, JAIPUR BOTH DATED 04.07.2019 IN RESPECT OF TWO RELATED ASSESSEES 2 ITA NOS. 1165 & 1166/JP/2019 M/S. GEHLOT MOTORS P. LTD. & M/S. GEHLOT TRACTORS P . LTD. JAIPUR. FOR THE ASSESSMENT YEAR 2009-10. THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS IN THESE APPEALS :- ITA NO. 1165/JP/2019 : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 13,65,000/- ON ACCOUNTS OF UNEXPLAINED CASH CREDITS (ACCOMMODAT ION ENTRIES IN THE SHAPE OF SHARE CAPITAL) ? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITIONS MADE ON THE BASIS OF CORROBORATIVE INFORMATION RECEIVED FROM INVESTIG ATING WING, MUMBAI WHICH IS A LAW ENFORCEMENT AGENCY UNDER THE MINISTRY OF FINANCE AND ACCORDINGLY THE CASE FALLS UNDER EXCEPT ION CLAUSE 10(E) OF CIRCULAR 03 OF 2018 DATED 20.08.2018 ? ITA NO. 1166/JP/2019 : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 12,25,000/- ON ACCOUNTS OF UNEXPLAINED CASH CREDITS (ACCOMMODAT ION ENTRIES IN THE SHAPE OF SHARE CAPITAL) ? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITIONS MADE ON THE BASIS OF CORROBORATIVE INFORMATION RECEIVED FROM INVESTIG ATING WING, MUMBAI WHICH IS A LAW ENFORCEMENT AGENCY UNDER THE MINISTRY OF FINANCE AND ACCORDINGLY THE CASE FALLS UNDER EXCEPT ION CLAUSE 10(E) OF CIRCULAR 03 OF 2018 DATED 20.08.2018 ? 2. AS IT IS CLEAR FROM THE GROUNDS OF APPEALS THAT THE TAX EFFECT IN THE APPEALS IS RS. 4,21,785/- AND RS. 3,78,525/- RESPECTIVELY. THU S QUESTION OF MAINTAINABILITY OF THE APPEALS OF THE REVENUE IN VIEW OF THE CIRCULAR NO. 3 OF 2018 ARISES. THE LD. D/R HAS SUBMITTED THAT AS PER THE SUBSEQUENT CIRCULAR D ATED 6 TH SEPTEMBER, 2019, THE CBDT HAS CLARIFIED EXCEPTION TO THE MONETARY LIMITS FOR FILING OF THE APPEALS BY THE 3 ITA NOS. 1165 & 1166/JP/2019 M/S. GEHLOT MOTORS P. LTD. & M/S. GEHLOT TRACTORS P . LTD. JAIPUR. REVENUE AND, THEREFORE, THE CASE IN THE PRESENT APP EALS FALLS IN THE EXCEPTION AS CLARIFIED BY THE CBDT IN CIRCULAR NO. 23 OF 2019 DA TED 6 TH SEPTEMBER, 2019. 3. ON THE OTHER HAND, THE LD. A/R OF THE ASSESSEE H AS SUBMITTED THAT THE CIRCULAR OF THE CBDT DATED 6 TH SEPTEMBER, 2019 IS ONLY IN RESPECT OF LONG TERM CA PITAL GAIN/SHORT TERM CAPITAL GAIN ON PENNY STOCKS AND, T HEREFORE, THE SAID CIRCULAR IS NOT APPLICABLE ON THE ISSUE INVOLVED IN THE PRESENT APP EALS WHICH IS REGARDING CAPITAL RECEIVED BY THE ASSESSEE. HE HAS ALSO RELIED UPON THE CBDT CIRCULAR DATED 20 TH AUGUST, 2018 WHEREBY AMENDMENT TO PARA 10 OF THE CI RCULAR NO. 3 OF 2018 IS PROVIDED. THE LD. A/R HAS SUBMITTED THAT AS PER TH E AMENDED PARA 10 OF THE CIRCULAR NO. 3 OF 2018 THE EXCEPTION UNDER CLAUSE ( E) IS PROVIDED ONLY IN RESPECT OF THE ADDITION BASED ON INFORMATION RECEIVED FROM EXT ERNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT AGENCIES SUCH AS CBI/ED/DRI/SFIO/DG OF GST INTELLIGENCE. THEREFORE, WHEN THE ADDITION MADE IN THE CASE OF AS SESSEES IS NOT BASED ON THE INFORMATION RECEIVED FROM THESE EXTERNAL AGENCIES S PECIFIED IN THE AMENDED PARA 10 OF THE CIRCULAR NO. 3 OF 2018, THEN THESE CASES DO NOT FALL IN THE EXCEPTION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE RELEVANT RECORD. THERE IS NO DISPUTE ABOUT THE FACT THAT TH E TAX EFFECT IN THESE TWO APPEALS OF THE REVENUE IS NOT EXCEEDING THE LIMITS PROVIDED IN THE CIRCULAR NO. 3 OF 2018 DATED 11.07.2018. THE QUESTION AS RAISED BY THE LD. D/R I S WHETHER THESE CASES FALL IN THE EXCEPTION AS PROVIDED IN PARA 10(E) OF THE CIRCULAR NO. 3 OF 2018. AT THE OUTSET, WE NOTE THAT AS PER THE ORIGINAL CIRCULAR NO. 3 OF 201 8 THESE MATTERS DO NOT FALL IN THE EXCEPTION, HOWEVER, THE SAID CIRCULAR WAS AMENDED B Y THE CBDT VIDE NOTIFICATION DATED 20.08.2018 AND THE AMENDED PARA 10 OF CIRCULA R NO. 3 OF 2018 READS AS UNDER :- 4 ITA NOS. 1165 & 1166/JP/2019 M/S. GEHLOT MOTORS P. LTD. & M/S. GEHLOT TRACTORS P . LTD. JAIPUR. 10. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING I SSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EF FECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT : (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE IS UNDER CHALLENGE, OR (B) WHERE BOARDS ORDER, NOTIFICATION, INSTRUCTION OR C IRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT, OR (D) WHERE ADDITION RELATES TO UNDISCLOSED FOREIGN INCOME/UNDISCLOSED FOREIGN ASSETS (INCLUDING FINANC IAL ASSETS)/UNDISCLOSED FOREIGN BANK ACCOUNT. (E) WHERE ADDITION IS BASED ON INFORMATION RECEIVED FRO M EXTERNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT A GENCIES SUCH AS CBI/ED/DRI/SFIO/DIRECTORATE GENERAL OF GST INTELLIGENCE (DGGI). (F) CASES WHERE PROSECUTION HAS BEEN FILED BY THE DEPAR TMENT AND IS PENDING IN THE COURT. THE RELEVANT CLAUSE OF PARA 10 IS CLAUSE (E) WHICH CARVES OUT THE EXCEPTION WHERE THE ADDITION IS BASED ON THE INFORMATION RECEIVED F ROM EXTERNAL SOURCE AS SPECIFIED IN THE SAID CLAUSE. THERE IS NO DISPUTE THAT THE C ASE OF THE ASSESSEES DOES NOT FALL IN THE CATEGORY OF ADDITION BASED ON SUCH INFORMATION RECEIVED FROM EXTERNAL SOURCE AS PROVIDED UNDER CLAUSE (E) OF THE AMENDED PARA 10 OF THE CIRCULAR NO. 3 OF 2018. FURTHER, THE LD. D/R HAS RELIED UPON THE CIRCULAR N O. 23 OF 2019 WHICH FURTHER PROVIDES SOME EXCEPTION TO THE MONETARY LIMITS AS P ER PARA 2 AND 3 AS UNDER :- 2. SEVERAL REFERENCES HAVE BEEN RECEIVED BY THE B OARD THAT IN LARGE NUMBER OF CASES WHERE ORGANIZED TAX-EVASION S CAM IS NOTICED THROUGH BOGUS LONG-TERM CAPITAL GAIN (LCG)/ SHORT TERM CAPITAL LOSS (STCL) ON PENNY STOCKS AND DEPART MENT IS UNABLE TO PURSUE THE CASES IN HIGHER JUDICIAL FOR A ON ACCOUNT OF ENHANCED MONETARY LIMITS. IT HAS BEEN REPORTED THAT IN LARGE 5 ITA NOS. 1165 & 1166/JP/2019 M/S. GEHLOT MOTORS P. LTD. & M/S. GEHLOT TRACTORS P . LTD. JAIPUR. NUMBER OF CASES, ITATS AND HIGH COURT HAVE RECOGNIZ ED THE UNIQUE MODUS OPERANDI INVOLVED IN SUCH SCAM AND HAV E PASSED JUDGEMENTS IN FAVOUR OF THE REVENUE. HOWEVER, IN CA SES WHERE SOME APPELLATE FOR A HAVE NOT GIVEN DUE CONSIDERATI ON TO POSITION OF LAW OR FACTS INVESTIGATED BY THE DEPART MENT, THERE IS NO REMEDY AVAILABLE WITH THE DEPARTMENT FOR FILING FURTHER APPEAL IN VIEW OF THE PRESCRIBED MONETARY LIMITS. 3. IN THIS CONTEXT, BOARD HAS DECIDED THAT NOTWITHSTAN DING ANYTHING CONTAINED IN ANY CIRCULAR ISSUED U/S 268A SPECIFYIN G MONETARY LIMITS FOR FILING OF DEPARTMENTAL APPEALS BEFORE INCOME TA X APPELLATE TRIBUNAL (ITAT), HIGH COURTS AND SLPS/APPEALS BEFOR E SUPREME COURT, APPEALS MAY BE FILED ON MERITS AS AN EXCEPTI ON TO SAID CIRCULAR, WHERE BOARD, BY WAY OF SPECIAL ORDER DIRE CT FILING OF APPEAL ON MERIT IN CASES INVOLVED IN ORGANIZED TAX EVASION ACTIVITY. THEREFORE, EVEN AS PER CIRCULAR NO. 23 OF 2019 DATE D 6 TH SEPTEMBER, 2019 THE EXCEPTION IS PROVIDED ONLY IN THE CASES WHERE ORGAN IZED TAX EVASION IS NOTICED THROUGH BOGUS LONG TERM CAPITAL/SHORT TERM CAPITAL GAIN ON PENNY STOCKS. THEREFORE, THE SAID CIRCULAR CANNOT BE APPLIED IN THE CASES WH EN THE ADDITION IS NOT IN RESPECT OF CAPITAL GAIN ON PENNY STOCKS. ACCORDINGLY, THE SAID CIRCULAR WILL NOT HELP THE CASES OF THE DEPARTMENT. THUS WE HOLD THAT THE APPEALS F ILED BY THE REVENUE DO NOT FALL IN THE EXCEPTION AS PROVIDED IN THE AMENDED PARA 10(E) OF THE CIRCULAR NO. 3 OF 2018. ACCORDINGLY, THE APPEAL OF THE DEPARTMENT IS NOT MA INTAINABLE BEING MONETARY LIMIT IS LESS THAN/NOT EXCEEDING RS. 50,00,000/-. 5. IN THE RESULT, APPEALS OF THE DEPARTMENT ARE DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/11/2019 . SD/- SD/- FOE FLAG ;KNO FOT; IKY JKWO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29/11/2019. DAS/ 6 ITA NOS. 1165 & 1166/JP/2019 M/S. GEHLOT MOTORS P. LTD. & M/S. GEHLOT TRACTORS P . LTD. JAIPUR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE-2, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT-M/S. GEHLOT MOTORS PVT. LTD. & M/S. GEHLOT TRACTORS PVT. LTD., JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NOS. 1165 & 1166/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR