Assistant Commissioner of Income Tax-1(2), RAIPUR (CG) V. Klowin Business (India) Limited, RAIPUR

MA 5/RPR/2019

AI Insights

The case revolves around a miscellaneous application filed by the Assistant Commissioner of Income Tax-1(2), Raipur, against M/s. Klowin Business (India) Limited. The application sought to recall an earlier Tribunal order that dismissed the revenue's appeal for the assessment year 2008-09, citing low tax effect as per the CBDT Circular No. 3/2018. The revenue argued that the case fell under an exception in the circular concerning constitutional validity issues. However, the Tribunal found no constitutional validity issue in the original appeal and thus dismissed the application.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 128041 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 10 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 11-12-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-10-2022
• Assessment Year: 2008-2009
• Appeal Filed On: 17-01-2019
• Other Referred Cases: Jasmeen Kaur Vs UOI, Salem Advocate Bar Association T.N. Vs Union of India, Pavan kumar M Sanghvi Vs ITO, CIT Vs Precision Finance Pvt Ltd, A. Govindarajulu Mudaliar Vs CIT, CIT Vs M. Ganapathi Mudaliar, Rameshwar Prasad Bagla Vs CIT, Homi Vs CIT, Sanjay Bimalchand Jain Vs CIT, Kale Khan Mohammad Hanif Vs CIT, Sumati Dayal Vs CIT, Durga Prasad More Vs CIT, Rajmandir Estates Pvt. Ltd. vs PCIT-III, Kolkata, Subhlakshmi Vanijya (P) Ltd. Vs CIT-1, Kolkata, Bisakha Sales (P) Ltd. Vs CIT-II, Kolkata
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect
• Section: 68; 254(2); 72

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI G D PADMAHSHALI, ACCOUNTANT MEMBER M.A. No.05/RPR/2019 (Arising out of ITA No.158/RPR/2011) Ǔनधा[रण वष[ / Assessment Year : 2008-09 The Assistant Commissioner of Income Tax-1(2), Raipur (C.G.) ........... आवेदक/Applicant बनाम / V/s. M/s. Klowin Business (India) Limited Plot No.638/3, Urla Industrial Area, Urla, Raipur (C.G.) PAN : AACCK0811E .......Ĥ×यथȸ / Respondent Assessee by : Shri Nikhilesh Begani, CA Revenue by : Shri S. K Meena, Sr. DR स ु नवाई कȧ तारȣख / Date of Hearing : 21.10.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 12.12.2022 2 ACIT-1(2), Raipur Vs. Klowin Business (India) Limited MA No. 05/RPR/2019 आदेश / ORDER PER RAVISH SOOD, JM: The present Miscellaneous Application filed by the revenue arises from the order passed by the Tribunal while disposing off the revenue’s appeal for the assessment year 2008-09 in ITA No.158/BLPR/2011, dated 06.08.2018. 2. On a perusal of the aforesaid miscellaneous application, it transpires that the revenue-applicant has sought our indulgence for recalling the order that was passed by the Tribunal u/s 254(1) of the Act while disposing off the revenue’s appeal, vide its order dated 06.08.2018. It is the claim of the revenue-applicant that the Tribunal had erred in dismissing its appeal on account of low tax effect by drawing support from the CBDT Circular No.03/2018, dated 11.07.2018, for the reason that the appeal filed by the revenue was covered by the exception provided in Clause 10(a) of the CBDT Circular No. 3/2018, dated 11.07.2018. Also, we find that the revenue/applicant by preferring the present miscellaneous application has sought our indulgence for adjudicating certain questions of law, as under: “1. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits when the issue of acquiring funds by way of bogus share 3 ACIT-1(2), Raipur Vs. Klowin Business (India) Limited MA No. 05/RPR/2019 application money is so clinching thereby ignoring the addition of Rs.50,00,000/- made by the A.O u/s.68 of the Act?" 2. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits thereby ignoring the facts as brought on record by the AO that the assessee company failed to prove the identity, genuineness and creditworthiness of the investor company as per the parameters of the legal provisions u/s 68 of the Act?" 3. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits thereby ignoring the fact that the onus was on the assessee to prove the genuineness of the transactions which was questioned by the AO, and the assessee failed to produce the evidence on which the AO could make a proper assessment of the assessee's income?" 4. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits thereby ignoring the ratio of the judgement passed by the Hon'ble High Court of Delhi in the case of Jasmeen Kaur Vs UOI [W.P.(C) 7040/2018 dated 10.07.2018] stating, "it is trite to state that merit cannot be defeated on technical grounds". In the case of Salem Advocate Bar Association T.N. Vs Union of India reported as (2005) 6 SCC 344, Hon'ble Supreme Court stated "it is a settled legal position that construction of rules or procedure which promotes justice and prevent miscarriage has to be preferred. The rules or procedure is the handmaid of justice and not its mistress. 5. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits thereby not considering and not distinguishing the findings of the AO which is well supported by the ratio of the judgment of Hon'ble Gujarat High Court in the case of Pavan kumar M Sanghvi Vs ITO (2018) 404 ITR 601 (Guj), wherein it is mentioned that 'it is also settled legal position that the onus of the assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions are done through the banking channels or even by filing the income tax assessment particulars' ?" 6. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits which is contrary to the ratio of the decisions in CIT Vs Precision 4 ACIT-1(2), Raipur Vs. Klowin Business (India) Limited MA No. 05/RPR/2019 Finance Pvt Ltd 1994 2008 ITR 465, wherein it was held that it is for the assessee to prove the identity of the creditors, the creditworthiness and genuineness of the transaction and mere furnishing of particulars is not enough?" 7. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits which is contrary to the ratio of the decisions of Hon'ble Supreme Court in the case of A. Govindarajulu Mudaliar Vs CIT (1958) 34 ITR 807 (SC), CIT Vs M. Ganapathi Mudaliar (1964) 53 ITR 623 (SC), which clearly states that where the assessee failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assessee, it is not necessary for the Department to locate its exact source?" 8. Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits thereby not considering and distinguishing the ratio of the judgment of the cases such as Rameshwar Prasad Bagla 68 ITR 653(Allahabad) & Homi Vs CIT 41 ITR 135, 142 by (Supreme Court) wherein it is stated that the totality of circumstances must be considered in a case of circumstantial evidence & the totality of the circumstances has to be taken into consideration and the combined effect of all those circumstances is determinative of the question as to whether or not a particular act is proved ?" 9. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits and giving a decision in favour of the assessee and against the revenue, thereby giving a finding against the ratio of the settled law of the Hon'ble Bombay High Court in the case of Sanjay Bimalchand Jain, Nagpur (I.T.A. No. 18/2017 dated 10.04.2017, Bombay High Court, Nagpur Bench) wherein it is stated that since there is no economic or financial justification for the investment in the shares, the transaction has all the ingredients of attracting the rigors of Section 68 of the IT Act ?" 10. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits thereby not distinguishing the findings of the AO which are based on the reliance placed on the ratios of the catena of court orders such as Kale Khan Mohammad Hanif 50 ITR 1 (SC), Sumati Dayal 214 ITR 801 (SC), Durga Prasad More 72 ITR 807 (SC)?" 5 ACIT-1(2), Raipur Vs. Klowin Business (India) Limited MA No. 05/RPR/2019 11. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits thereby ignoring the ratio of the decision of Hon'ble Supreme Court in the case of M/s. Rajmandir Estates Pvt. Ltd. vs PCIT-III, Kolkata (SLP No. 22566-22567 dt. 09.01.2017?" 12. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits thereby ignoring the ratio of the decision of ITAT, Kolkata 'B' Bench in the case of M/s. Subhlakshmi Vanijya (P) Ltd. Vs CIT-1, Kolkata in ITA No.1104/Kol/2014 and other cases dated 30.07.2015?" 13. "Whether on points of law and on facts & circumstances of the case, the ITAT was justified in not deciding the case on merits hereby ignoring the ratio of the decision of Hon'ble ITAT, Kolkata Bench in the case of M/s Bisakha Sales (P) Ltd. Vs CIT-II, Kolkata [ITA No. 1493/Kolkata/2013]?" 14. "Whether on points of law and on facts & circumstances of the case, the ITAT which is the last fact finding authority, not deciding the case on merits has upheld the decision of CIT(A) which is contrary to the evidence on record, as the CIT(A) has accepted the identity, creditworthiness of the entities investing in the share capital and share premiums of the assessee company as genuine, a finding which is factually incorrect, thereby rendering the decision, which is perverse?" 15. "Whether on points of law and on facts & circumstances of the case, the ITAT which is the last fact finding authority, not deciding the case on merits has upheld the decision of CIT(A) thereby giving a decision in favour of the assessee and against the revenue though there is no nexus between the conclusion of fact and primary fact upon which conclusion is based?" 3. After having given a thoughtful consideration to the present miscellaneous application preferred by the revenue-applicant, we are unable to comprehend the very basis on which the same had been filed before us. At the very outset, we may herein observe, that as the exception carved out in Clause 10(a) of the CBDT Circular No. 3/2018, 6 ACIT-1(2), Raipur Vs. Klowin Business (India) Limited MA No. 05/RPR/2019 dated 11.07.2018 as had been relied upon by the department for seeking recall of the order passed by the Tribunal u/s. 254(1) of the Act, envisages a situation where the appeal involving an issue qua the constitutional validity had been dismissed on account of low tax effect. On a specific query by the Bench as to what issue of constitutional validity is involved in the present appeal, on the basis of which support was drawn from the aforesaid exception, i.e., Clause 10(a) (supra), the Ld. Departmental Representative (for short ‘DR’) failed to come forth with any plausible reply. On a perusal of the exception 10(a) of the CBDT Circular No. 3/2018, dated 11.07.2018, it transpires that the same reads as under: “10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect 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...” 4. We have given a thoughtful consideration and are of a strong conviction that the very reliance placed by the Ld. DR on the exception carved out in Clause 10(a) (supra) is absolutely misconceived or in fact, misplaced. WE, say so, for the reason that the appeal filed by the department in ITA No. 158/BLPR/2011 does not involve any challenge to the constitutional validity, which would have otherwise justified 7 ACIT-1(2), Raipur Vs. Klowin Business (India) Limited MA No. 05/RPR/2019 triggering of the exception carved out under Clause 10(a) of the CBDT Circular No. 3/2018, dated 11.07.2018. Considering the aforesaid facts, we reject the claim of the department for recalling the order passed by the Tribunal u/s.254(1) of the Act dated 06.08.2018, on the ground that the same was covered by the exception carved out in Clause 10(a) of the CBDT Circular No. 3/2018, dated 11.07.2018. 5. Apropos, the seeking of the department of our indulgence for adjudicating the aforesaid 15 questions of law, we find it absolutely beyond comprehension as to on what basis the same could be done in the garb of the present application. We, say so, for the reason that the scope of an application filed under sub-section (2) of Section 254 of the Act is confined to rectification by the tribunal of a mistake which is glaring, apparent, patent or obvious from the record, and not for the purpose of reviewing its own order or adjudicating certain issues afresh. In fact, we would not hesitate in observing that the department in the garb of the present miscellaneous application filed u/s.254(2) of the Act is trying to seek our indulgence for adjudicating certain issues, which, it had failed to raise in the course of the original appellate proceedings. Considering our aforesaid observation, we are of the view that the present miscellaneous application filed by the revenue u/s. 254(2) of the Act being devoid and bereft of any merit is liable to the dismissed. We, 8 ACIT-1(2), Raipur Vs. Klowin Business (India) Limited MA No. 05/RPR/2019 thus, in terms of our aforesaid observation dismiss the miscellaneous application filed by the revenue. 6. In the result, the miscellaneous application filed by the revenue is dismissed in terms of our aforesaid observations. Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board. Sd/- Sd/- G D PADMAHSHALI RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 12 th December, 2022 SB आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals), Raipur (C.G) 4. The JCIT, Range-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur.