JT. CIT(OSD)CENTRAL CIRCLE-5(1), MUMBAI V. M/S NITIN KUMAR DINDAYAL DIDWANIA, MUMBAI

MA 111/MUM/2022

AI Insights

The case involves an application by the Revenue seeking rectification of an order that dismissed the assessee's Cross Objection as infructuous, following the dismissal of the Revenue's appeal on the grounds of low tax effect. The Revenue argued that their case fell under an exception to the low tax effect rule as per CBDT Circulars. However, the Tribunal found that the Revenue's appeal had already been disposed of, and the application for rectification was filed beyond the six-month limitation period. The Tribunal also noted that there was no provision for condonation of delay in filing an application under Section 254(2).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471403 (ITAT-MUMBAI)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Other Referred Cases: Supreme Industries Ltd. vs Addl. Commissioner of Income Tax, 369 ITR 758 (Bom.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAKESH JOSHI
• Keywords: Condonation of delay; Unexplained expenditure; Tax effect; Period of limitation; Capital Gains; Search and seizure; Rectification of order; Earning of tax free income; Bogus
• Section: 143(3); 143(1); 254(2); 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B”, MUMBAI BEFORE JUSTICE (RETD.) C.V. BHADANG, PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER MA NO. 111/MUM/2022 (arising out of ITA NO. 2097/MUM/2019) : A.Y. : 2016-17 Jt. CIT(OSD), Central Circle-5(1), Mumbai. (Applicant) Vs. Nitin Kumar Dindayal Didwania 172, Kshitij Building, 47, Napean Sea Road, Mumbai 400 035. PAN : AACPD7055J (Respondent) Applicant by : Shri R.R. Makwana Respondent by : Shri Rakesh Joshi Date of Hearing : 21/03/2025 Date of Pronouncement : 25/03/2025 O R D E R PER JUSTICE (RETD.) C.V. BHADANG, PRESIDENT : This is an application by the Revenue under Section 254(2) of the Income Tax Act, 1961 (‘Act’ for short) seeking rectification of order dated 03.08.2021 in Cross Objection no. 37/Mum/2021 (arising out of ITA No. 2097/Mum/2019) for assessment year 2016-17. 2. The respondent-assessee had filed his Return of Income (RoI) for the year under consideration declaring a total income of Rs.1,42,71,720/-. The return was processed under Section 143(1) of the Act. Subsequently, a search and seizure action under Section 132(1) of the Act was conducted on Veritas Group (of which the respondent is 2 MA No. 111/Mum/2022 Nitin Kumar D. Didwania the promoter) and his family members in which the Assessing Officer found that the group had indulged in obtaining bogus Long Term Capital Gains (LTCG) entries as exempt income. The Assessing Officer vide order dated 29.12.2017 under Section 143(3) of the Act assessed the income at Rs.1,79,85,280/- by disallowing the claim of exemption under Section 10(38) of the Act as alleged LTCG and added commission as unexplained expenditure under Section 69C of the Act. 3. The learned CIT(A) dismissed the ground of appeal related to the merits of the addition made by the Assessing Officer. However, the learned CIT(A) deleted the addition made of Rs.35,36,720/- and the commission expenses of Rs.1,76,836/- in view of the fact that the source of the cash for obtaining the non-genuine LTCG from penny stock was found to be from the sale of unaccounted stocks in M/s. Hazel Mercantile Ltd. The learned CIT(A), therefore, upheld the addition made in the case of M/s. Hazel Mercantile Ltd. to the extent of 5% of the gross profit and the protective addition made in the case of M/s. Hazel Mercantile Ltd. was treated as substantive addition. 4. Aggrieved by the CIT(A)’s order, Revenue came up in appeal in ITA No. 2097/Mum/2019 while the assessee filed Cross Objection to the extent of the learned CIT(A) refusing to accept the grounds on the merits of the addition made by the Assessing Officer. 5. The record discloses that the appeal filed by the Revenue was disposed of by order dated 21.08.2019 on the basis of low tax effect as per CBDT Circular dated 08.08.2019 read with Circular dated 11.07.2018. Subsequently, the Cross Objection filed by the assessee came to be disposed of as infructuous by order under consideration dated 03.08.2021, inter alia, on the ground that the appeal filed by the Revenue is dismissed on the basis of low tax effect. The Revenue is now seeking rectification of the order on the ground that the case was covered by one of the 3 MA No. 111/Mum/2022 Nitin Kumar D. Didwania exceptions as contained in Circular dated 08.08.2019 read with Circular dated 11.07.2018. 6. We have heard parties. Perused record. 7. It is necessary to note that the Revenue is only seeking restoration of the Cross Objection which was only a consequential order to the disposal of ITA No. 2097/Mum/2019 filed by the Revenue on the ground of low tax effect. Significantly, rectification of that order is not sought for. Although in the application it is claimed that the appeal of the Revenue is still shown pending, we have perused the order dated 21.08.2019 by which the group of appeals (as per Annexure-I to the order) are shown to be disposed of, which includes ITA No. 2097/Mum/2019 at serial number 11. 8. That apart, the application is filed on 28.05.2022, which is beyond the period of limitation of six months as prescribed under Section 254(2) of the Act. 9. The learned DR placed reliance on the decision of Bombay High Court in Supreme Industries Ltd. vs Addl. Commissioner of Income Tax, 369 ITR 758 (Bom.) in order to submit that the Tribunal has to adopt a justice oriented approach and not defeat the legitimate rights on the grounds of procedure and technicalities. We have perused the said order. That was a case where there was a mistake which had occurred while mentioning the ITA number of the appeal filed by the Revenue. The Tribunal, however, rejected the application for rectification on the ground that the rectification application under Section 254(2) of the Act can be entertained only to rectify the order passed under Section 254(1) of the Act and cannot correct an error in an order passed under Section 254(2) of the Act. It can thus be seen that the matter involved mere correction of number of the appeal, which admittedly were not mentioned correctly. The application was also rejected by the Tribunal on the ground of maintainability. The case did not involve issue of limitation. It was not disputed during the course of 4 MA No. 111/Mum/2022 Nitin Kumar D. Didwania arguments at Bar that there is no provision for condonation of delay for filing an application under Section 254(2) of the Act. It is difficult to accept that the Revenue can seek rectification of the order for restoration of the Cross Objection without seeking rectification of order by which its appeal was disposed of for low tax effect. 10. For the aforesaid reasons, the application as framed and filed cannot be entertained. The application stands rejected. Order pronounced in the open court on 25/03/2025. Sd/- Sd/- (B.R. BASKARAN) (JUSTICE (RETD.) C.V. BHADANG) ACCOUNTANT MEMBER PRESIDENT Mumbai; Dated : 25/03/2025 SSL Copy of the Order forwarded to : 1. The Applicant 2. The Respondent 3. The CIT(Judicial) 4. PCIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai "