DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR V. SHRI SURENDRA KUMAR PATNI, JAIPUR

MA 68/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4714 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 06-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Accommodation entries; Assessment record; Tax effect; Penny stocks; Capital Gains
• Section: 268A; 254(2); 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH FOT; IKWY 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-@ MA NO.68/JP/2019 (ARISING OUT OF ITA NO. 535/JP/2019) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14 THE DCIT, CIRCLE-2, JAIPUR. CUKE VS. SHRI SURENDRA KUMAR PATNI 421, SARAOGI MANSION, M.I. ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADUPP 9249 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : MISS CHANCHAL MEENA ( JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 20.12.2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT:24/02/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THE PRESENT MISCELLANEOUS APPLICATION HAS BEEN FILE D BY THE REVENUE AGAINST THE ORDER PASSED BY THE BENCH IN IT A NO. 535/JP/2019 DATED 02.09.2019. IN THE MISCELLANEOUS APPLICATION, THE REVENUE HAS REQUESTED TO RECTIFY THE MISTAKE U/S 254(2) OF THE ACT BY RECALLING THE EARLIER ORDER PASSED BY THE BENCH WITH THE FOLLOWIN G PRAYER:- M.A. NO. 68/JP/2019 DCIT VS. SH. SURENDRA KUMAR PATNI 2 1. VIDE ORDER DATED 02.09.2019 IN ITA NO. 535/JP/2 019 FOR A.Y. 2013-14 IN THE CASE OF SH. SURENDRA KUMAR PATNI, 421, SARAOGI MANSION, M. I. ROAD JAIPUR RECEIVED IN THE OFFICE OF PR. CIT-1, JAIPUR ON 25.10.2019, THE HON' BLE TRIBUNAL WHILE DECIDING BOTH THE GROUNDS OF THE DEPARTMENTAL APPEAL HAS DISMISSED THE APPEAL OF THE DEPARTMENT ON THE BASIS OF PRESCRIBED MONETARY LIMI T STATING AS UNDER :- ' ACCORDINGLY, THE APPEAL OF THE DEPARTMENT IS NOT MAINTAINABLE BEING MONETARY LIMIT IS LESS THAN/NOT EXCEEDING RS. 50,00,000. THE DEPARTMENT IS AT LIBERTY TO FILE THE MISCELLANE OUS APPLICATION IN CASE THE TAX EFFECT IN THIS APPEAL I S FOUND TO BE MORE THAN RS. 50,00,000/- OR THE CASE FALLS IN A NY OF THE EXCEPTIONS OF THE CIRCULAR' 2. ON PERUSAL OF THE ASSESSMENT RECORD OF THE ASSES SEE FOR A.Y. 2013-14, IT IS FOUND THAT THE ASSESSEE HAS CLAIMED EXEMPTION OF RS. 1,11,52,431/-U/S 10(38) OF CAPITAL GAIN(LTCG). THE AO HELD THAT THE ASSESSEE HAS TAKEN BOGUS ENTRY ONLY TO CONVERT THE BLACK MONEY INTO WH ITE BY WHICH THE ASSESSEE HAD CLAIMED EXEMPT LTCG U/S 10(3 8) OF THE ACT. THE AO MADE ADDITIONS OF RS. 1,30,77,742/- ON ACCOUNT OF SEC 68 OF THE ACT AND OF RS. 6,53,837/- ON ACCOUNT OF COMMISSION PAID FOR THESE ACCOMMODATION ENTRIES OF RS. 6,53,837/ -. 3. IN VIEW OF ABOVE THE CASE FALLS IN EXCEPTION OF PENNY STOCK VIDE CBDT CIRCULAR NO. 23 OF 2019. M.A. NO. 68/JP/2019 DCIT VS. SH. SURENDRA KUMAR PATNI 3 4. THE ORDER OF THE HON'BLE ITAT, JAIPUR BENCH, JAI PUR DATED 02.09.2019 IN THE CASE OF THE DCIT, CIRCLE-2, JAIPUR VS. SH. SURENDRA KUMAR PATNI, IN ITA NO. 535/JP/201 9 FOR A.Y. 2013-14, ON BOTH GROUNDS REQUIRES TO BE RECTIF IED AS THIS CASE FALLS IN EXCEPTION OF PENNY STOCK VIDE CB DT CIRCULAR NO. 23 OF 2019. IT IS THEREFORE, REQUESTED THAT THE ORDER ON BOTH GROUNDS MAY KINDLY BE RECTIFIED UNDER SECTION 254(2) OF IT ACT 1961 BY RECALLING THE APPEAL ORDER AND REMOVING THE AMBIGUITY. 2. THE LD. DR IS HEARD WHO HAS RELIED ON THE CBDT CIRCULAR NO. 23 OF 2019 AS WELL AS SPECIAL ORDER OF THE CBDT DAT ED 16.09.2019. SHE HAS SUBMITTED THAT IN VIEW OF THE C BDT CIRCULAR AND THE SPECIAL ORDER, THE MATTER FALLS UNDER THE E XCEPTION AND THEREFORE, THE EARLIER ORDER PASSED BY THE TRIBUNAL MAY BE RECALLED TO HEAR THE SAME ON MERITS. 3. PER CONTRA, THE LD AR SUBMITTED THAT CIRCULAR NO . 23 OF 2019 HAS BEEN ISSUED BY THE CBDT ONLY ON 6.09.2019 AFTER PASSING OF THE ORDER OF THE TRIBUNAL ON 2.09.2019 AND FURTHER, IN THE SAID CIRCULAR, THE CBDT HAS STATED THAT IT HAS DECIDED T HAT THE APPEAL MAY BE FILED ON MERITS AS AN EXCEPTION TO SAID CIRC ULAR, WHERE THE BOARD BY WAY OF SPECIAL ORDER DIRECT FILING OF APPE AL ON MERITS IN CASES INVOLVED IN ORGANIZED TAX EVASION ACTIVITY. IT WAS SUBMITTED THAT THE SAID CIRCULAR HAS TO BE READ IN RESPECT OF FUTURE APPEALS AND NOT APPEALS WHICH HAVE ALREADY B EEN DISPOSED OFF BY THE TRIBUNAL AND SECONDLY, THE BOARD HAS TO ISSUE A SPECIAL ORDER DIRECTING FILING OF AN APPEAL ON MERITS IN SU CH CASES. IT WAS FURTHER SUBMITTED THAT THE BOARD HAS SINCE ISSUED A N OFFICE M.A. NO. 68/JP/2019 DCIT VS. SH. SURENDRA KUMAR PATNI 4 MEMORANDUM DATED 16.09.2019 WHEREBY THE CBDT THROUG H A SPECIAL ORDER PASSED U/S 268A OF THE ACT HAS HELD T HAT THE MONETARY LIMITS FIXED FOR FILING APPEALS BEFORE ITA T/HC AND SLPS/APPEALS BEFORE THE SUPREME COURT SHALL NOT APP LY IN CASE OF ASSESSEE CLAIMING BOGUS LTCG/STCL THROUGH PENNY STO CKS AND APPEALS/SLPS IN SUCH CASES SHALL BE FILED ON MERITS . IT WAS SUBMITTED THAT EVEN THE AFORESAID SPECIAL ORDER OF THE CBDT HAS BEEN ISSUED ONLY ON 16.09.2019 MUCH AFTER PASSING O F THE ORDER IN THE INSTANCE CASE BY THE TRIBUNAL AND IN ANY CAS E, IT TALKS ABOUT FILING OF APPEALS ON MERITS AND THEREFORE, DO ESNT APPLY TO APPEALS ALREADY FILED AND DISMISSED BY THE TRIBUNAL . 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. THE LIMITED ISSUE UND ER CONSIDERATION IS WHETHER CBDT CIRCULAR NO. 23 OF 20 19 DATED 6.09.2019 READ WITH SPECIAL ORDER OF THE CBDT COMMU NICATED VIDE OFFICE MEMORANDUM DATED 16.09.2019 APPLIES TO THE INSTANT APPEAL AND THE CASE FALLS IN EXCEPTION OF PENNY STO CK, 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 S ECTION 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 IN COME-TAX ACT, 1961-REG M.A. NO. 68/JP/2019 DCIT VS. SH. SURENDRA KUMAR PATNI 5 REFERENCE IS INVITED TO THE CIRCULARS ISSUED FROM T IME TO TIME BY CENTRAL BOARD OF DIRECT TAXES (THE BOARD) UNDER SECTION 268 A OF THE INCOME- TAX ACT,1961 (THE ACT), FOR LAYING DOWN MONETARY LI MITS AND OTHER CONDITIONS FOR FILING OF DEPARTMENTAL APPEALS BEFOR E INCOME TAX APPELLATE TRIBUNAL (ITAT). HIGH COURTS AND. SLPS/AP PEALS BEFORE SUPREME COURT. 2. SEVERAL REFERENCES HAVE BEEN RECEIVED BY THE BOA RD THAT IN LARGE NUMBER OF CASES WHERE ORGANISED TAX-EVASION SCAM IS NOTICED THROUGH BOGUS LONG-TERM CAPITAL GAIN (LTCG)/SHORT TERM CAPI TAL LOSS (STCL) ON PENNY STOCKS AND DEPARTMENT IS UNABLE TO PURSUE THE CASES IN HIGHER JUDICIAL FORA ON ACCOUNT OF ENHANCED MONETARY LIMIT S. IT HAS BEEN REPORTED THAT IN LARGE NUMBER OF CASES, ITATS AND H IGH COURT HAVE RECOGNIZED THE UNIQUE MODUS OPERANDI INVOLVED IN SU CH SCAM AND HAVE PASSED JUDGMENTS IN FAVOUR OF THE REVENUE. HOWEVER, IN CASES WHERE SOME APPELLATE FORA HAVE NOT GIVEN DUE CONSIDERATIO N TO POSITION OF LAW OR FACTS INVESTIGATED BY THE DEPARTMENT, THERE IS N O REMEDY AVAILABLE WITH THE DEPARTMENT FOR FILING FURTHER APPEAL IN VI EW OF THE PRESCRIBED MONETARY LIMITS. 3. IN THIS CONTEXT, BOARD HAS DECIDED THAT NOTWITHSTAN DING ANYTHING CONTAINED IN ANY CIRCULAR ISSUED U/S 268A SPECIFYIN G MONETARY LIMITS FOR FILING OF DEPARTMENTAL APPEALS BEFORE INCOME TAX AP PELLATE TRIBUNAL (ITAT), HIGH COURTS AND SLPS/APPEALS BEFORE SUPREME COURT. APPEALS MAY BE FILED ON MERITS AS AN EXCEPTION TO SAID CIRC ULAR, WHERE BOARD, BY WAY OF SPECIAL ORDER DIRECT FILING OF APPEAL ON MERIT IN CASES INVOLVED IN ORGANISED TAX EVASION ACTIVITY. M.A. NO. 68/JP/2019 DCIT VS. SH. SURENDRA KUMAR PATNI 6 6. PURSUANT TO AFORESAID CIRCULAR, THE SPECIAL ORDE R HAS BEEN PASSED BY THE CBDT, COMMUNICATED VIDE OFFICE MEMORANDUM DA TED 16.09.2019 AND THE CONTENTS THEREOF READ AS UNDER:- SUBJECT: -SPECIAL ORDER OF BOARD EXEMPTING CASES I NVOLVING BOGUS LONG TERM CAPITAL GAINS(LTCG)/SHORT TERM CAPITAL LOSS (S TCL) 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,19 61, THE MONETARY LIMITS FIXED FOR FILING APPEALS BEFORE ITAT/HC AND SLPS /APPEALS BEFORE SUPREME COURT SHALL NOT APPLY IN CASE OF ASSESSES C LAIMING 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/PURS UING 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 ORGANIZ ED 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 S PECIFIC REQUIREMENT FOR ISSUANCE OF A SPECIAL ORDER BY THE CBDT AND THEREFORE, UNLIKE GENERAL EXCEPTIONS CARVED OUT FRO M FILING APPEALS ON MERITS, IN THESE CASES, INVOLVING LONG TERM CAPI TAL GAINS AND M.A. NO. 68/JP/2019 DCIT VS. SH. SURENDRA KUMAR PATNI 7 SHORT TERM CAPITAL GAINS EXEMPTION THROUGH PENNY ST OCKS, THERE IS A REQUIREMENT FOR A SPECIAL ORDER TO BE ISSUED BY T HE CBDT AND ONLY WHERE SUCH A SPECIAL ORDER HAS BEEN ISSUED, TH E APPEAL SHALL BE FILED BY THE DEPARTMENT. 8. IN CASES INVOLVING LONG TERM CAPITAL GAINS AND S HORT TERM CAPITAL GAINS EXEMPTION THROUGH PENNY STOCKS, WE FI ND THAT THE CBDT HAS SINCE COME OUT WITH A SPECIAL ORDER COMMUN ICATED VIDE OFFICE MEMORANDUM DATED 16.09.2019 STATING THAT MON ETARY 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 AP PEAL SHALL BE FILED ON MERITS. THE SPECIAL ORDER THUS TALKS A BOUT FILING OF APPEAL IN SUCH CASES AND THEREFORE, IT RELATES TO A NY APPEAL IN SUCH CASES WHICH CAN BE FILED PURSUANT TO SUCH AN ORDER ON AND AFTER THE DATE OF SUCH SPECIAL ORDER AND THEREFORE DOESN T CONTEMPLATE A SITUATION WHERE THE APPEAL WHICH HAS ALREADY BEEN F ILED PRIOR TO ISSUANCE OF SUCH A SPECIAL ORDER BY THE REVENUE WHI CH SHALL BE READ AND UNDERSTOOD AS FILED PURSUANT TO SUCH SPECI AL ORDER. 9. WE ARE CONSCIOUS OF THE FACT THAT CBDT LOW TAX E FFECT 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 FI LED BY THE REVENUE AND IS PENDING, SUCH APPEAL HAS BEEN HELD T O BE COVERED M.A. NO. 68/JP/2019 DCIT VS. SH. SURENDRA KUMAR PATNI 8 BY A SUBSEQUENT LOW TAX EFFECT CIRCULAR AND DISMISS ED ON ACCOUNT OF LOW TAX EFFECT. HOWEVER, IN THE INSTANT CASE, T HE ISSUE IS REGARDING CARVING OUT AN EXCEPTION FROM SUCH LOW TA X EFFECT LIMITS AND THAT TOO, NOT JUST BY A GENERAL ORDER BUT BY WA Y OF A SPECIAL ORDER WHERE SUCH APPEALS CAN BE FILED, THEREFORE, U NLESS THE SPECIAL ORDER HAS BEEN PASSED BY THE CBDT AND AN AP PEAL IS FILED PURSUANT TO SUCH A SPECIAL ORDER, THE EXCEPTION CAN NOT BE READ AND UNDERSTOOD TO APPLY TO EXISTING APPEALS WHICH HAVE ALREADY BEEN FILED PRIOR TO ISSUANCE OF THE SPECIAL ORDER. THER EFORE, WE ARE OF THE CONSIDERED VIEW THAT THE CBDT CIRCULAR NO. 23 O F 2019 SHOULD BE READ ALONG WITH SPECIAL ORDER OF THE CBDT DATED 16.09.2019 IN RESPECT OF APPEALS FILED PURSUANT TO SUCH SPECIAL O RDER AND SHALL THUS APPLY TO ALL APPEALS FILED ON OR AFTER 16.09.2 019 BY THE REVENUE WHERE THE TAX EFFECT MAY BE LOW BUT THE APP EAL 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 NO T 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 APP EAL HAS THUS RIGHTLY BEEN DISMISSED BY THE BENCH ON ACCOUNT OF L OW 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 TH US NOT PART OF THE RECORD AT THE TIME WHEN THE MATTER WAS HEARD ON 23.08.2019 M.A. NO. 68/JP/2019 DCIT VS. SH. SURENDRA KUMAR PATNI 9 OR AT THE TIME OF PASSING OF ORDER BY THE TRIBUNAL ON 2.09.2019 AND THEREFORE, NON-CONSIDERATION OF SUCH CIRCULAR A ND THE SPECIAL ORDER SO PASSED BY THE CBDT IS NOT A MISTAKE APPARE NT FROM RECORD WHICH CAN BE RECTIFIED WITHIN THE NARROW COM PASS OF SECTION 254(2) OF THE ACT. IN THE RESULT, THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24/02/2020. SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- DCIT, CIRCLE-2, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- SHRI SURENDRA KUMAR PATNI, 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 { M.A. NO. 68/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR.