Asssistant Commissioner of Income Tax, Range-1, Lucknow V. Shri Ram Mohan Agarwal, Lucknow

MA 10/LKW/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6764 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 10-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Penny stocks; Capital Gains
• Section: 268A; 254(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW [THROUGH VIRTUAL HEARING] BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER M. A NO. 10 /LKW/ 2020 [IN ITA NO.829/LKW/2017] ASSESSMENT YEAR: 2014 - 15 THE ACIT RANGE 1 LUCKNOW V. RAM MOHAN AGARWAL FLAT NO.101, PARIJAT PALACE SECTOR 12, INDIRA NAGAR LUCKNOW TAN/PAN: ACOPA9494A (APP LIC ANT) (RESPONDENT) APP LIC ANT BY: SHRI AJAY KUMAR, D.R. RESPONDENT BY: SMT. SWETA MITTAL, C.A. DATE OF HEARING: 13 08 20 2 1 DATE OF PRONOUNCEMENT: 07 0 9 20 2 1 O R D E R PER A.D. JAIN, V.P.: THE REVENUE HAS FILED THIS MISCELLANEOUS APPLICATION AGAINST THE ORDER DATED 22.8.2019 PASSED BY THIS BENCH OF THE TRIBUNAL, DISMISSING THE APPEAL OF THE REVENUE IN I.T.A. NO.829/LKW/2017 ON LOW TAX EFFECT. 2. THE LD. D.R. SUBMITTED THAT IN THE CIRCULAR NO.17/2019, DATED 8.8.2019, THE CBDT HAS GIVEN CERTAIN EXCEPTIONS AND THE CASE OF THE ASSESSEE RELATES TO BOGUS LONG TERM CAPITAL GAINS THROUGH PENNY STOCKS, THEREFORE, THE SAME IS TO BE DECIDED ON MERIT. 3. THE LD. DR, INVITING THE ATTENTION OF THE BENCH TO THE ORDER OF THE HYDERABAD BENCH OF THE TRIBUNAL IN M.A NO. M.A NO.10/LKW/2020 PAGE 2 OF 7 122/HYD/2019 IN ACIT VS. SHRI SUBHASH GUPTA, SUBMITTED THAT THE HYDERABAD BENCH OF THE TRIBUNAL, UNDER SIMILAR FACTS AND CIRCUMSTANCES, HAD RECALLED THE TRIBUNALS ORDER; AND THAT THEREFORE, THE ORDER DATED 22.8.2019 MAY BE RECALLED AND THE APPEAL BE FIXED FOR HEARING ON MERIT. 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT MISCELLANEOUS APPLICATION IS IDENTICAL TO THE ISSUE RAISED IN M.A. NO.57/LKW/2019 IN THE CASE OF ITO 2(1), LUCKNOW VS. SH ARPAN AGARWAL, LUCKNOW, WHOSE M.A. WAS DISPOSED OF BY THE LUCKNOW BENCH OF THE TRIBUNAL, VIDE ORDER DATED 5.1.2021, DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEES, THEREFORE, THE SAME VIEW BE TAKEN IN THE PRESENT CASE ALSO. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE TRIBUNAL IN M.A. NO.57/LKW/2019 IN THE CASE OF ITO 2(1), LUCKNOW VS. SH ARPAN AGARWAL, LUCKNOW, ON FACTS EXACTLY SIMILAR, MUTATIS MUTANDIS, TO THOSE PRESENT IN THE PRESENT MISCELLANEOUS APPLICATION, HAD DISMISSED THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE, VIDE ORDER DATED 5.1.2021, HOLDING AS UNDER: 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE HONBLE HYDERABAD BENCH OF THE TRIBUNAL IN MA NO. 122/HYD/2019 VIDE ORDER DATED 01.11.2019 HAS RECALLED THE ORDER WHICH WAS DISMISSED BY THE TRIBUNAL DUE TO LOW TAX EFFECT. WE FIND THAT IN THIS ORDER THE LD. AR HAD NOT MADE ANY SUBMISSIONS AND HONBLE TRIBUNAL ON THE BASIS OF SUBMISSIONS OF LD. DR HAD ALLOWED THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE WHEREAS IN THE ORDER RELIED ON BY THE LD. AR DETAILED SUBMISSIONS HAVE BEEN MADE BY THE ASSESSEE AND THE HONBLE TRIBUNAL AFTER CONSIDERING THE SUBMISSIONS OF THE M.A NO.10/LKW/2020 PAGE 3 OF 7 ASSESSEE AND AFTER ANALYZING THE PROVISION OF CIRCULAR HAS DISMISSED THE MA OF REVENUE BY HOLDING AS UNDER: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LIMITED ISSUE UNDER CONSIDERATION IS WHETHER CBDT CIRCULAR NO. 23 OF 2019 DATED 6.09.2019 READ WITH SPECIAL ORDER OF THE CBDT COMMUNICATED VIDE OFFICE MEMORANDUM DATED 16.09.2019 APPLIES TO THE INSTANT APPEAL AND THE CASE FALLS IN EXCEPTION OF PENNY STOCK, AND THE MATTER WHICH HAS BEEN ALREADY BEEN DISMISSED BY THE TRIBUNAL ON 2.09.2019, FOLLOWING CBDTS EARLIER CIRCULAR DATED 8.8.2019 ON ACCOUNT OF LOW TAX EFFECT, CAN BE RECTIFIED UNDER SECTION 254(2) OF THE ACT. 5. IN THIS REGARD, WE REFER TO CBDT CIRCULAR NO. 23 OF 2019 DATED 6.09.2019, THE CONTENTS THEREOF READ AS UNDER: SUBJECT: -EXCEPTION TO MONETARY LIMITS FOR FILING APPEALS SPECIFIED IN ANY CIRCULAR ISSUED UNDER SECTION 268A OF THE INCOME-TAX ACT, 1961 REFERENCE IS INVITED TO THE CIRCULARS ISSUED FROM TIME TO TIME BY CENTRAL BOARD OF DIRECT TAXES (THE BOARD) UNDER SECTION 268A OF THE INCOME-TAX ACT,1961 (THE ACT), FOR LAYING DOWN MONETARY LIMITS AND OTHER CONDITIONS FOR FILING OF DEPARTMENTAL APPEALS BEFORE INCOME TAX APPELLATE TRIBUNAL (ITAT). HIGH COURTS AND. SLPS/APPEALS BEFORE SUPREME COURT. 2. SEVERAL REFERENCES HAVE BEEN RECEIVED BY THE BOARD THAT IN LARGE NUMBER OF CASES WHERE ORGANISED TAX- EVASION SCAM IS NOTICED THROUGH BOGUS LONG-TERM CAPITAL GAIN (LTCG)/SHORT TERM CAPITAL LOSS (STCL) ON PENNY STOCKS AND DEPARTMENT IS UNABLE TO PURSUE THE CASES IN HIGHER JUDICIAL FORUM ON ACCOUNT OF ENHANCED MONETARY LIMITS. IT HAS BEEN REPORTED THAT IN LARGE NUMBER OF CASES, ITATS AND HIGH COURT HAVE RECOGNIZED THE UNIQUE MODUS OPERANDI INVOLVED IN SUCH SCAM AND HAVE PASSED JUDGMENTS IN FAVOUR OF THE REVENUE. HOWEVER, IN CASES WHERE SOME APPELLATE FORUM HAVE NOT GIVEN DUE CONSIDERATION TO POSITION OF LAW OR FACTS INVESTIGATED BY THE DEPARTMENT, 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 NOTWITHSTANDING ANYTHING CONTAINED IN ANY CIRCULAR M.A NO.10/LKW/2020 PAGE 4 OF 7 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 MERITS AS AN EXCEPTION TO SAID CIRCULAR, WHERE BOARD, BY WAY OF SPECIAL ORDER DIRECT FILING OF APPEAL ON MERIT IN CASES INVOLVED IN ORGANISED TAX EVASION ACTIVITY. 6. PURSUANT TO AFORESAID CIRCULAR, THE SPECIAL ORDER HAS BEEN PASSED BY THE CBDT, COMMUNICATED VIDE OFFICE MEMORANDUM DATED 16.09.2019 AND THE CONTENTS THEREOF READ AS UNDER:- SUBJECT: -SPECIAL ORDER OF BOARD EXEMPTING CASES INVOLVING BOGUS LONG TERM CAPITAL GAINS(LTCG)/SHORT TERM CAPITAL LOSS (STCL) THROUGH PENNY STOCKS FROM MONETARY LIMITS SPECIFIED IN ANY CIRCULAR ISSUED UNDER SECTION 268A OF THE INCOME-TAX ACT, 1961-REG THE UNDERSIGNED IS DIRECTED TO REFER TO CIRCULAR NO. 23 OF 2019 DATED 6 TH SEPTEMBER, 2019 AND TO SAY THAT BY VIRTUE OF POWERS OF THE CENTRAL BOARD OF DIRECT TAXES U/S 268A OF INCOME-TAX ACT,1961, THE MONETARY LIMITS FIXED FOR FILING APPEALS BEFORE ITAT/HC AND SLPS /APPEALS BEFORE SUPREME COURT SHALL NOT APPLY IN CASE OF ASSESSES CLAIMING BOGUS LTCG/STCL THROUGH PENNY STOCKS AND APPEALS/SLPS IN SUCH CASES SHALL BE FILED ON MERITS. 7. ON READING OF THE AFORESAID CIRCULAR NO. 23 OF 2019 SO ISSUED BY THE CBDT, WE FIND THAT THE CBDT HAS DECIDED THAT NOTWITHSTANDING MONETARY LIMITS FOR NOT FILING/PURSUING APPEALS IN TERMS OF ANY CIRCULAR ALREADY ISSUED UNDER SECTION 268A OF THE ACT SPECIFYING THE MONETARY LIMITS, THE APPEALS BY THE REVENUE CAN STILL BE FILED ON MERITS IN CASES INVOLVING ORGANIZED TAX EVASION ACTIVITY. HOWEVER, IN RESPECT OF WHICH ALL CASES OR CATEGORY OF CASES, SUCH APPEAL CAN BE FILED SHALL BE DECIDED BY WAY OF A SPECIAL ORDER PASSED BY THE CBDT. THERE IS THUS A SPECIFIC REQUIREMENT FOR ISSUANCE OF A SPECIAL ORDER BY THE CBDT AND THEREFORE, UNLIKE GENERAL EXCEPTIONS CARVED OUT FROM FILING APPEALS ON MERITS, IN THESE CASES, INVOLVING LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS EXEMPTION THROUGH PENNY STOCKS, THERE IS A REQUIREMENT FOR A SPECIAL ORDER TO BE ISSUED BY M.A NO.10/LKW/2020 PAGE 5 OF 7 THE CBDT AND ONLY WHERE SUCH A SPECIAL ORDER HAS BEEN ISSUED, THE APPEAL SHALL BE FILED BY THE DEPARTMENT. 8. IN CASES INVOLVING LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS EXEMPTION THROUGH PENNY STOCKS, WE FIND THAT THE CBDT HAS SINCE COME OUT WITH A SPECIAL ORDER COMMUNICATED VIDE OFFICE MEMORANDUM DATED 16.09.2019 STATING THAT MONETARY LIMITS FIXED FOR FILING APPEALS IN THESE CASES BEFORE THE TRIBUNAL, HIGH COURT AND SUPREME COURT SHALL NOT APPLY IN CASE OF ASSESSEE CLAIMING BOGUS LTCG/STCG THROUGH PENNY STOCK AND APPEAL SHALL BE FILED ON MERITS. THE SPECIAL ORDER THUS TALKS ABOUT FILING OF APPEAL IN SUCH CASES AND THEREFORE, IT RELATES TO ANY APPEAL IN SUCH CASES WHICH CAN BE FILED PURSUANT TO SUCH AN ORDER ON AND AFTER THE DATE OF SUCH SPECIAL ORDER AND THEREFORE DOESNT CONTEMPLATE A SITUATION WHERE THE APPEAL WHICH HAS ALREADY BEEN FILED PRIOR TO ISSUANCE OF SUCH A SPECIAL ORDER BY THE REVENUE WHICH SHALL BE READ AND UNDERSTOOD AS FILED PURSUANT TO SUCH SPECIAL ORDER. 9. WE ARE CONSCIOUS OF THE FACT THAT CBDT LOW TAX EFFECT CIRCULARS ISSUED FROM TIME TO TIME WHEREIN THE TAX EFFECT HAVE BEEN PROGRESSIVELY INCREASED BY THE REVENUE WITH A VIEW TO MINIMIZE THE LITIGATION HAS BEEN READ BY THE COURTS AND THE TRIBUNAL, AND EVEN THE CBDT HAS ALSO CLARIFIED LATTER, THAT THESE CBDT CIRCULARS SHALL APPLY NOT JUST TO FUTURE APPEALS BUT ALSO TO PENDING APPEALS AND THEREFORE, WHERE THE APPEAL HAS ALREADY BEEN FILED BY THE REVENUE AND IS PENDING, SUCH APPEAL HAS BEEN HELD TO BE COVERED BY A SUBSEQUENT LOW TAX EFFECT CIRCULAR AND DISMISSED ON ACCOUNT OF LOW TAX EFFECT. HOWEVER, IN THE INSTANT CASE, THE ISSUE IS REGARDING CARVING OUT AN EXCEPTION FROM SUCH LOW TAX EFFECT LIMITS AND THAT TOO, NOT JUST BY A GENERAL ORDER BUT BY WAY OF A SPECIAL ORDER WHERE SUCH APPEALS CAN BE FILED, THEREFORE, UNLESS THE SPECIAL ORDER HAS BEEN PASSED BY THE CBDT AND AN APPEAL IS FILED PURSUANT TO SUCH A SPECIAL ORDER, THE EXCEPTION CANNOT BE READ AND UNDERSTOOD TO APPLY TO EXISTING APPEALS WHICH HAVE ALREADY BEEN FILED PRIOR TO ISSUANCE OF THE SPECIAL ORDER. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE CBDT CIRCULAR NO. 23 OF 2019 SHOULD BE READ ALONG WITH SPECIAL ORDER OF THE CBDT DATED 16.09.2019 IN RESPECT OF APPEALS FILED PURSUANT TO M.A NO.10/LKW/2020 PAGE 6 OF 7 SUCH SPECIAL ORDER AND SHALL THUS APPLY TO ALL APPEALS FILED ON OR AFTER 16.09.2019 BY THE REVENUE WHERE THE TAX EFFECT MAY BE LOW BUT THE APPEAL CAN STILL BE FILED BY THE REVENUE ON MERITS. 10. IN THE INSTANT CASE, THE APPEAL OF THE REVENUE WAS FILED ON 16.04.2019 AND THEREFORE, THE PRESENT APPEAL WAS NOT FILED PURSUANT TO SUCH A SPECIAL ORDER OF THE CBDT DATED 16.09.2019 AND THUS, THE MATTER DOESNT FALL IN ANY EXCEPTION AS SO PRESCRIBED BY THE CBDT IN ITS EARLIER CIRCULAR DATED 8.8.2019 AND THE SPECIAL ORDER DOESNT APPLY IN THE INSTANT CASE AND THE APPEAL HAS THUS RIGHTLY BEEN DISMISSED BY THE BENCH ON ACCOUNT OF LOW TAX EFFECT IN LIGHT OF CBDTS CIRCULAR DATED 8.8.2019. 11. IN ANY CASE, BOTH CBDT CIRCULAR NO. 23 OF 2019 AND SPECIAL ORDER DATED 16.09.2019 WERE NOT IN EXISTENCE AND THUS NOT PART OF THE RECORD AT THE TIME WHEN THE MATTER WAS HEARD ON 23.08.2019 OR AT THE TIME OF PASSING OF ORDER BY THE TRIBUNAL ON 2.09.2019 AND THEREFORE, NON-CONSIDERATION OF SUCH CIRCULAR AND THE SPECIAL ORDER SO PASSED BY THE CBDT IS NOT A MISTAKE APPARENT FROM RECORD WHICH CAN BE RECTIFIED WITHIN THE NARROW COMPASS OF SECTION 254(2) OF THE ACT. IN THE RESULT, THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS DISMISSED. 7. THE ABOVE ORDER OF THE HONBLE TRIBUNAL HAS FURTHER BEEN FOLLOWED BY ITAT, AHMEDABAD BENCH IN A NUMBER OF MISCELLANEOUS APPLICATIONS I.E. MAS NO. 401, 386, 35, 26, 150, 151, 387, 70, 91, 25, 405, 404 AND 77, WHERE FOLLOWING THE ABOVE TRIBUNALS ORDER, THE MISCELLANEOUS APPLICATIONS FILED BY REVENUE WERE DISMISSED VIDE ORDER DATED 09.09.2020. WHILE THE LD. DR HAS FILED ONLY ONE TAX-EFFECT ORDER OF THE TRIBUNAL IN FAVOUR OF DEPARTMENT AND ON THE OTHER HAND, THE LD. AR HAS FILED A NUMBER OF TRIBUNAL ORDERS IN FAVOUR OF THE ASSESSEE. MOREOVER, WE FIND THAT THE ORDER RELIED ON BY THE LD. DR DO NOT CONTAIN ANY ARGUMENTS OF LD. AR WHEREAS THE ORDERS RELIED ON BY LD. AR CONTAIN DETAILED ARGUMENTS AND THEREFORE THE HONBLE TRIBUNALS HAS PASSED DETAILED ORDERS AND THEREFORE, WE ARE INCLINED TO FOLLOW THE M.A NO.10/LKW/2020 PAGE 7 OF 7 LATTER DETAILED ORDERS OF THE TRIBUNAL WHEREIN THE MAS FILED BY REVENUE HAS BEEN DISMISSED. 8. IN THE RESULT, MA FILED BY THE REVENUE IS DISMISSED. 6. THE LUCKNOW BENCH OF THE TRIBUNAL, WHILE DECIDING THE M.A. NO.57/LKW/2019 OF THE REVENUE IN THE CASE OF ITO 2(1), LUCKNOW VS. SH ARPAN AGARWAL, LUCKNOW, HAS ALSO CONSIDERED THE ORDER OF THE HYDERABAD BENCH OF THE TRIBUNAL IN M.A NO. 122/HYD/2019 IN ACIT VS. SHRI SUBHASH GUPTA REFERRED TO BY THE REVENUE AND HAS DISMISSED THE MISCELLANEOUS APPLICATION PREFERRED BY THE REVENUE. 7. WE DO NOT FIND ANY DISPARITY ON FACTS, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THIS BENCH OF THE TRIBUNAL IN M.A. NO.57/LKW/2019 (SUPRA), WE DISMISS THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE. 8. IN THE RESULT, MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/09/2021. SD/ - SD/ - [T. S. KAPOOR] [A. D. JAIN] ACCOUNTANT MEMBER VICE PRESIDENT DATED:07/09/2021 JJ: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSISTANT REGISTRAR