INCOME TAX OFFICER, WARD-1-4, JAIPUR V. SHRI KAILASH CHAND SHARMA, JAIPUR

ITA 809/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1060 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Audit objection; Tax effect; Penny stocks
• Section: 268A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH VC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 809/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10. THE INCOME TAX OFFICER, WARD 1(4) JAIPUR. CUKE VS. SHRI KAILASH CHAND SHARMA H.NO. 1319, BABA HARISH CHAND MARG, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AGMPS 7641F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : MS CHANCHAL MEENA (ADDL. CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : NONE LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03/06/2020. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 03 /06/2020. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25 TH MARCH, 2019 OF LD. CIT (A)-1, JAIPUR FOR THE ASSESSMENT YE AR 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WAS JUSTIFIED IN RESTRICTING THE AD DITION OF RS. 2,32,500/- TO RS. 50,000/- OF THE BOGUS PURCHASES D ISALLOWED BY THE AO FOLLOWING HONBLE SUPREME COURTS DECISION O N BOGUS 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 ADDIT IONS MADE ON THE BASIS OF CORROBORATIVE INFORMATION RECEIVED FRO M INVESTIGATING WING, MUMBAI WHICH IS A LAW ENFORCEME NT AGENCY 2 ITA NO. 809/JP/2019 SHRI KAILASH CHAND SHARMA, JAIPUR. UNDER THE MINISTRY OF FINANCE AND ACCORDINGLY THE C ASE FALLS UNDER EXCEPTION CLAUSE 10(E) OF CIRCULAR 03 OF 2018 DATED 20.08.2018 ? 2. NONE HAS APPEARED ON BEHALF OF THE ASSESSEE. HOW EVER, AN APPLICATION FOR SEEKING ADJOURNMENT WAS FILED BY THE LD. COUNSEL OF THE ASSESSEE WHICH WAS REJECTED BY THE BENCH DUE TO THE REASON THAT THE TA X EFFECT IN THE APPEAL OF THE REVENUE IS NOT EXCEEDING THE MONETARY LIMIT AS PROV IDED IN CIRCULAR NO. 3/2018. THERE IS NO DISPUTE THAT THE TAX EFFECT IN THE PRES ENT APPEAL OF THE REVENUE IS VERY LOW AND THE ADDITION WHICH WAS DELETED BY THE LD. C IT (A) TO THE EXTENT OF RS. 1,82,500/- HAS BEEN CHALLENGED IN THIS APPEAL. THE LD. D/R HAS CONTENDED THAT THIS CASE FALLS IN THE EXCEPTION PROVIDED IN PARA 10(E) OF THE CIRCULAR NO. 3/2018 AS THE ADDITION IS MADE BY THE AO ON THE BASIS OF THE INFO RMATION RECEIVED FROM THE INVESTIGATION WING, MUMBAI AND, THEREFORE, THE ASSE SSMENT WAS COMPLETED ON THE BASIS OF THE INFORMATION OF THE INVESTIGATION WING WHICH IS A LAW ENFORCEMENT AGENCY. THUS THE LD. D/R HAS SUBMITTED THAT THE AP PEAL OF THE REVENUE IS MAINTAINABLE AND SHALL BE DECIDED ON MERITS OF THE ISSUE. 3. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D/ R AND CAREFULLY PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE ADDITION WAS MADE BY THE AO OF RS. 2,32,500/- ON ACCOUNT OF BOGU S/UNVERIFIABLE PURCHASES BASED ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, MUMBAI. THE QUESTION ARISES WHETHER THIS CASE FALLS IN THE EXCEPTION PRO VIDED IN PARA 10(E) OF THE CIRCULAR NO. 3/2018 OR NOT. AT THE OUTSET, WE NOTE THAT IDE NTICAL ISSUE HAS BEEN CONSIDERED 3 ITA NO. 809/JP/2019 SHRI KAILASH CHAND SHARMA, JAIPUR. BY THIS TRIBUNAL VIDE ORDER DATED 13.03.2020 IN THE CASE OF ITO VS. M/S. A.P. GEMS IN ITA NO. 627/JP/2019 IN PARA 2.4 AS UNDER :- 2.4 HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSAL OF THE RECORD, AT THE OUTSET, WE NOTE THAT IDENTICAL ISSUE HAS BEEN C ONSIDERED BY THIS TRIBUNAL VIDE ORDER DATED 29-11-2019 IN THE CASE OF DCIT VS GEHLO T MOTORS PVT. LTD IN ITA NOS.1165 AND 1166/JP/2019 IN PARA 4 AS UNDER:- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND C AREFULLY PERUSED THE RELEVANT RECORD. THERE IS NO DISPUTE ABOUT THE FACT THAT THE TAX EFFECT IN THESE TWO APPEALS OF THE REVENUE IS NOT EXCEEDING THE LIM ITS PROVIDED IN THE CIRCULAR NO. 3 OF 2018 DATED 11.07.2018. THE QUESTI ON 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 CIRCULAR NO. 3 OF 2018 THESE MATTERS DO NOT FALL IN THE EXCEPTION, HOWEVER, THE SAID CIRCULAR WAS AMENDED BY THE CBDT VIDE NOTI FICATION 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 EF FECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 A BOVE 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 FROM EXTERNAL SOURCES IN THE NATURE OF LAW ENFORCEMENT AGENCIES S UCH AS CBI/ED/DRI/SFIO/DIRECTORATE GENERAL OF GST INTELLIG ENCE (DGGI). (F) CASES WHERE PROSECUTION HAS BEEN FILED BY THE D EPARTMENT AND IS PENDING IN THE COURT. 4 ITA NO. 809/JP/2019 SHRI KAILASH CHAND SHARMA, JAIPUR. THE RELEVANT CLAUSE OF PARA 10 IS CLAUSE (E) WHICH CARVES OUT THE EXCEPTION WHERE THE ADDITION IS BASED ON THE INFORMATION RECE IVED FROM EXTERNAL SOURCE AS SPECIFIED IN THE SAID CLAUSE. THERE IS NO DISPUT E THAT THE CASE OF THE ASSESSEES DOES NOT FALL IN THE CATEGORY OF ADDITION BASED ON SUCH INFORMATION RECEIVED FROM EXTERNAL SOURCE AS PROVIDED UNDER CLA USE (E) OF THE AMENDED PARA 10 OF THE CIRCULAR NO. 3 OF 2018. FURTHER, THE LD. D/R HAS RELIED UPON THE CIRCULAR NO. 23 OF 2019 WHICH FURTHER PROVIDES SOME EXCEPTION TO THE MONETARY LIMITS AS PER PARA 2 AND 3 AS UNDER :- 2. SEVERAL REFERENCES HAVE BEEN RECEIVED BY THE BOARD THAT IN LARGE NUMBER OF CASES WHERE ORGANIZED TAX-EVASION S CAM IS NOTICED THROUGH BOGUS LONG-TERM CAPITAL GAIN (LCG)/SHORT TE RM CAPITAL LOSS (STCL) ON PENNY STOCKS AND DEPARTMENT IS UNABL E TO PURSUE THE CASES IN HIGHER JUDICIAL FOR A ON ACCOUNT OF ENHANC ED MONETARY LIMITS. IT HAS BEEN REPORTED THAT IN LARGE NUMBER O F CASES, ITATS AND HIGH COURT HAVE RECOGNIZED THE UNIQUE MODUS OPERAND I INVOLVED IN SUCH SCAM AND HAVE PASSED JUDGEMENTS IN FAVOUR OF T HE REVENUE. HOWEVER, IN CASES WHERE SOME APPELLATE FOR A HAVE N OT GIVEN DUE CONSIDERATION TO POSITION OF LAW OR FACTS INVESTIGA TED BY THE DEPARTMENT, THERE IS NO REMEDY AVAILABLE WITH THE D EPARTMENT FOR FILING FURTHER APPEAL IN VIEW OF THE PRESCRIBED MON ETARY LIMITS. 3. IN THIS CONTEXT, BOARD HAS DECIDED THAT NOTWITHS TANDING 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 EXCEPTION TO S AID 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 6TH 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 FILED BY THE REVENUE DO NOT FALL IN THE EXCEPTION AS PROVIDED IN THE AMENDED PARA 10(E) OF THE CIRCULAR NO. 3 OF 2018. 5 ITA NO. 809/JP/2019 SHRI KAILASH CHAND SHARMA, JAIPUR. ACCORDINGLY, THE APPEAL OF THE DEPARTMENT IS NOT MA INTAINABLE BEING MONETARY LIMIT IS LESS THAN/NOT EXCEEDING RS. 50,00,000/-. IN THE CASE IN HAND, THE ADDITION WAS MADE BY THE A O BASED ON THE INFORMATION RECEIVED FROM DIT (INVESTIGATION) OF THE DEPARTMENT WHICH IS NOT AN EXTERNAL SOURCE IN THE NATURE OF LAW ENFORCEMENT AGENCIES SUCH AS C BI/ED/DRI/SFIO/DIRECTOR GENERAL OF GST INTELLIGENCE (DGGI) ETC. THEREFORE, THIS CAS E OF THE REVENUE DOES NOT FALL IN THE EXCEPTION PROVIDED IN CLAUSE (E) OF PARA 10 OF THE CIRCULAR NO. 3 OF 2018. ACCORDINGLY, WHEN THE TAX EFFECT OF REVENUES APPEAL IS NOT EXCE EDING THE MONETARY LIMIT AS PRESCRIBED IN THE CIRCULAR THEN THE SAME IS NOT MAI NTAINABLE. HENCE, THE APPEAL OF THE REVENUE IS DISMISSED. THUS THIS TRIBUNAL HAS TAKEN A CONSISTENT VIEW THAT THE 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 EXCEPT ION 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 PRESCR IBED IN THE CIRCULAR NO. 3/2018. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 03/06/202 0. 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:- 03/06/2020. DAS/ 6 ITA NO. 809/JP/2019 SHRI KAILASH CHAND SHARMA, JAIPUR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-THE ITO WARD 1(4), JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT-SHRI KAILASH CHAND SHARMA, 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 NO. 809/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR