ITO Ward-1(1), Jaipur, Ward-1(1), Jaipur V. M/s. A.P. Gems, 2337, Ramlala Street, Johari Bazar, Jaipur, Jaipur

ITA 627/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2269 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 02-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA J
• Assessee Lawyers: MANISH MEHTA DHK
• Keywords: Bogus purchase; Audit objection; Tax effect; Penny stocks
• Section: 268A; 13

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 JKO] U;KF;D LNL; ,OA 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. 627/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 THE ITO WARD- 1(1) JAIPUR CUKE VS. M/S. A.P. GEMS 2337, RAMLALA STREET JOHRI BAZAR,JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAGFA 5042 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI K.C. GUPTA, JCIT-DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH MEHTA, ADVOCATE LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12/03/2020 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 13 /03/2020 VKNS'K@ ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-1, JAIPUR DATED 28-02-2019 FOR THE ASSESSME NT YEAR 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN ESTIMATING T HE GP @ 17.5% AGAINST 25% OF THE BOGUS PURCHASES DISALLOWED BY THE AO FOLLOWING HON'BLE SUPREME COURT DECISION ON BOGU S PURCHASES IN THE CASE OF VIJAY PROTEINS PVT. LTD.? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS MADE ON THE BASIS OF CORROBORATION INFORMATION RECE IVED FROM ITA NO.627/JP/2019 THE ITO , WARD- 1(1), JAIPUR VS M/S. A.P. GE MS, JAIPUR 2 THE INVESTIGATING WING, MUMBAI WHICH IS A LAW ENFORCEMENT AGENCY UNDER THE MINISTRY OF FINANCE AN D ACCORDINGLY THE CASE FALLS UNDER EXCEPTION CLAUSE 1 0(E) OF CIRCULAR 03 OF 2018 DATED 20-08-2018? 2.1 UNDISPUTEDLY, THE TAX EFFECT IN THIS APPEAL OF THE REVENUE IS ONLY RS. 90,713/-. THEREFORE, IT IS NOT EXCEEDING THE MO NETARY LIMITS PRESCRIBED BY CBDT CIRCULAR NO. 03 OF 2018 DATED 20-03-2018. 2.2 WE HAVE HEARD THE LD. DR AS WELL AS LD.AR AND A LSO CONSIDERED THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE LD. DR HAS SUBMITTED THAT THIS CASE OF REVENUE IS COVERED UNDER EXCEPTION PROVIDED IN CLAUSE 10 (E) OF THE CBDT CIRCULAR NO. 3 OF 2018 DATED 20-08-2018 AS THE AO HAS MADE ADDITION ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING, MUMBAI. 2.3 ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE HA S SUBMITTED THAT APPEAL OF THE REVENUE DOES NOT FALL IN THE EXCEPTIO N PROVIDED IN THE CIRCULAR AS THE REPORT OF THE INVESTIGATION WING, M UMBAI IS NOT AN INFORMATION OF EXTERNAL LAW ENFORCEMENT AGENCY. 2.4 HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSAL OF THE RECORD, AT THE OUTSET, WE NOTE THAT IDENTICAL I SSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL VIDE ORDER DATED 29-11-2019 IN THE CASE OF DCIT VS GEHLOT MOTORS PVT. LTD IN ITA NOS.1165 AND 1166/JP/ 2019 IN PARA 4 AS UNDER:- ITA NO.627/JP/2019 THE ITO , WARD- 1(1), JAIPUR VS M/S. A.P. GE MS, JAIPUR 3 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RELEVANT RECORD. THERE IS NO DISPUTE A BOUT THE FACT THAT THE 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 IS 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 CIRCUL AR NO. 3 OF 2018 THESE MATTERS DO NOT FALL IN THE EXCEPTION, HOWEVER , THE SAID CIRCULAR WAS AMENDED BY THE CBDT VIDE NOTIFICATION DATED 20. 08.2018 AND THE AMENDED PARA 10 OF CIRCULAR NO. 3 OF 2018 READS AS UNDER :- 10. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING I SSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SP ECIFIED 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 CIRCULAR 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 AGENCIES SUCH AS CBI/ED/DRI/SFIO/DIRECTORATE GENERAL OF GST INTELLIGENCE (DGGI). (F) CASES WHERE PROSECUTION HAS BEEN FILED BY THE DEPARTMENT 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 INFORM ATION RECEIVED FROM EXTERNAL SOURCE AS SPECIFIED IN THE SAID CLAUSE. T HERE IS NO DISPUTE THAT THE CASE OF THE ASSESSEES DOES NOT FALL IN THE CATE GORY OF ADDITION BASED ON SUCH INFORMATION RECEIVED FROM EXTERNAL SO URCE AS PROVIDED UNDER CLAUSE (E) OF THE AMENDED PARA 10 OF THE CIRC ULAR NO. 3 OF 2018. ITA NO.627/JP/2019 THE ITO , WARD- 1(1), JAIPUR VS M/S. A.P. GE MS, JAIPUR 4 FURTHER, THE LD. D/R HAS RELIED UPON THE CIRCULAR N O. 23 OF 2019 WHICH FURTHER PROVIDES SOME EXCEPTION TO THE MONETA RY LIMITS AS PER 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-EVASIO N SCAM IS NOTICED THROUGH BOGUS LONG-TERM CAPITAL GAI N (LCG)/SHORT TERM CAPITAL LOSS (STCL) ON PENNY STOCK S AND DEPARTMENT IS UNABLE TO PURSUE THE CASES IN HIG HER JUDICIAL FOR A ON ACCOUNT OF ENHANCED MONETARY LIMI TS. IT HAS BEEN REPORTED THAT IN LARGE NUMBER OF CASES, IT ATS AND HIGH COURT HAVE RECOGNIZED THE UNIQUE MODUS OPERANDI INVOLVED IN SUCH SCAM AND HAVE PASSED JUDGEMENTS IN FAVOUR OF THE REVENUE. HOWEVER, IN CA SES WHERE SOME APPELLATE FOR A HAVE NOT GIVEN DUE CONSIDERATION TO POSITION OF LAW OR FACTS INVESTIGA TED BY THE DEPARTMENT, THERE IS NO REMEDY AVAILABLE WITH T HE DEPARTMENT FOR FILING FURTHER APPEAL IN VIEW OF THE PRESCRIBED MONETARY LIMITS. 3. IN THIS CONTEXT, BOARD HAS DECIDED THAT NOTWITHS TANDING ANYTHING CONTAINED IN ANY CIRCULAR ISSUED U/S 268A SPECIFYING MONETARY LIMITS FOR FILING OF DEPARTMENTAL APPEALS BEFORE INCOME TAX APPELLATE TRIBUNAL (ITAT), HIGH COURTS AND SLPS /APPEALS BEFORE SUPREME COURT, APPEALS MAY BE FILED ON MERIT S AS AN EXCEPTION TO SAID CIRCULAR, WHERE BOARD, BY WAY OF SPECIAL ORDER DIRECT 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 WH ERE ORGANIZED 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 WHEN THE ADDITION IS NOT IN RESPECT OF CA PITAL GAIN ON PENNY STOCKS. ACCORDINGLY, THE SAID CIRCULAR WILL NOT HE LP THE CASES OF THE DEPARTMENT. THUS WE HOLD THAT THE APPEALS FILED BY THE REVENUE DO NOT FALL IN THE EXCEPTION AS PROVIDED IN THE AMENDE D PARA 10(E) OF THE CIRCULAR NO. 3 OF 2018. ACCORDINGLY, THE APPEAL OF THE DEPARTMENT IS NOT MAINTAINABLE BEING MONETARY LIMIT IS LESS THAN/ NOT EXCEEDING RS. 50,00,000/-. ITA NO.627/JP/2019 THE ITO , WARD- 1(1), JAIPUR VS M/S. A.P. GE MS, JAIPUR 5 IN THE CASE IN HAND, THE ADDITION WAS MADE BY THE A O BASED ON THE INFORMATION RECEIVED FROM DIT (INVESTIGATION) OF TH E DEPARTMENT WHICH IS NOT AN EXTERNAL SOURCE IN THE NATURE OF LAW ENFO RCEMENT AGENCIES SUCH AS CBI/ED/DRI/SFIO/DIRECTOR GENERAL OF GST INTELLIG ENCE (DGGI) ETC. THEREFORE, THIS CASE OF THE REVENUE DOES NOT FALL I N THE EXCEPTION PROVIDED IN CLAUSE (E) OF PARA 10 OF THE CIRCULAR N O. 3 OF 2018. ACCORDINGLY, WHEN THE TAX EFFECT OF REVENUES APPEA L IS NOT EXCEEDING THE MONETARY LIMIT AS PRESCRIBED IN THE CIRCULAR TH EN THE SAME IS NOT MAINTAINABLE. HENCE, THE APPEAL OF THE REVENUE IS D ISMISSED. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/03/202 0. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 13/03/ 2020 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1 VIHYKFKHZ@ THE APPELLANT- ITO, WARD- 1(1), JAIPUR 2 IZR;FKHZ@ THE RESPONDENT- M/S. A.P. GEMS, JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.627/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR