THE DY. COMMISSIONER OF INCOME TAX, GANDHIDHAM CIRCLE, GANDHIDHAM V. FRIENDS OIL & CHEMICAL TERMINALS PVT. LTD., GANDHIDHAM-KUTCH

MA 197/AHD/2019

AI Insights

The case involves the Deputy Commissioner of Income-tax, Gandhidham Circle, as the appellant, and Friends Oil & Chemical Terminals Pvt. Ltd. as the respondent. The Revenue filed miscellaneous applications seeking to rectify the Tribunal's earlier order dismissing their appeal on the grounds of low tax effect, which was below Rs. 20 lakhs. The Tribunal had initially dismissed the appeal without considering the merits, based on the CBDT Circular No. 3 of 2018. However, the Revenue argued that the tax effect exceeded the threshold when considered cumulatively across multiple assessment years, and thus the matter should be adjudicated on merits. The Tribunal, after considering the amendments in the CBDT Circular No. 17 of 2019 and the specific circumstances of the case, decided to dismiss the applications, emphasizing that the tax effect for individual years did not meet the threshold for filing an appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314102 (ITAT-RAJKOT)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 06-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Other Referred Cases: DCIT Vs. M/s Gautam Frieght Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHIMANYU SINGH YADAV; LD.
• Keywords: Document seized; Documents seized; Tax effect
• Section: 14A

Judgement Text

"MA No.196 to 198/AHD/2019 Deputy Commissioner of Income-tax, Gandhidham Circle, Ghandidham IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER ͪवͪवध आवेदन/MA No.196 to 198/AHD/2019 (Arising out of IT(SS)A No.180-182/Rjt/2016) (AYs. 2006-2007 to 2008-09) (Physical Hearing) Deputy Commissioner of Income-tax, Gandhidham Circle, Ghandidham Vs. Friends Oil & Chemical Terminals Pvt. Ltd. Maitri Bhavan, Plot No.18, Sector No.8, Ghandhidham-Kutch- 370201 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAACF3177A (Appellant) (Respondent) अपीलाथȸ ओर से/ Applicant by : Shri K. C. Thacker, Ld. AR Ĥ×यथȸ कȧ ओर से/Respondent by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR सुनवाई कȧ तारȣख/Date of Hearing : 21.03.2025 घोषणा कȧ तारȣख /Date of Pronouncement: 06.05.2025 आदेश / O R D E R PER DR. A. L. SAINI, AM: By way of these captioned three Miscellaneous Applications (MA), the Revenue has sought to point out that a mistake apparent from record within the meaning of section 254(2) of the Income Tax Act, 1961 (in short ‘the Act’) has crept in the order of the Tribunal dated 17.12.2018, vide order of Tribunal in IT(SS)A Nos.180-182/AHD/2016 and CO. Nos.148-150/AHD/2016. 2. Since the issue involved in all the Miscellaneous Applications are common and identical, therefore these Miscellaneous Applications have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the facts, as well as, contention raised by the Page | 2 MA Nos.196-198/Ahd/2019 M/s Friends Oil & Chemical Terminals Pvt. Ltd Revenue, in the Miscellaneous Application in MA No.196/AHD/2019 in the case of M/s Friends Oil & Chemical Terminals Pvt. Ltd. for Assessment Year (AY) 2006-07, have been considered for deciding these three Miscellaneous Applications en masse. The mistake apparent from record, pointed out by the Revenue in this Miscellaneous Application, are as follows: “2. In this case, the revenue had filed an appeal before the Hon’ble Income-tax Appellate Tribunal, D-Bench, Ahmedabad against the order of the Ld.CIT(A)-12, Ahmedabad dated 28.03.2015. The Hon’ble Income-tax Appellate Tribunal, D- Bench, Ahmedabad vide order dated 17.12.2018, has dismissed the appeal IT(SS)A No.180/Ahd/2016 of the Revenue. 3. In this connection, I have to submit that the Hon’ble ITAT dismissed the appeal of the revenue without expressing any opinion on the merits of the case on account of taking low tax effect in view of the CBDT Circular No.3 of 2018 dated 11.07.2018 [F.No.279/Misc.142/2007-ITJ(Pt)]. The tax effect involved in this case exceeds Rs.20 lacs, as laid down in the Circular No.03/2018 dated11.07.2018 (as amended by F.No.279/Misc.142/2007-ITJ(Pt) dated 28.08.2018). 4. The facts of the case are mentioned in Annexure-A attached herewith. 5. In view of the above, it is prayed that this Misc. Application may kindly be admitted against the above mentioned order of the ITAT, requesting it to decide the matter on merits in view of the above mentioned facts.” 3. Learned Sr-DR for the Revenue, argued that as per CBDT Circular No.3/2018, dated 11.07.2018, if there is a common issue involved in the combined order of Ld.CIT(A), then notwithstanding in any of particular assessment year, if the tax effect is below monetary limit of Rs.20,00,000/-, the Revenue has rightly to prefer appeal and in these circumstances the adjudication is to be done by the Tribunal on merit. These three applications (in brief, ‘MAs’) pertain to the CBDT’s Circular No.3/2018 dated 11.07.2018, wherein monetary limit was prescribed Rs.20,00,000/-. Therefore, in these three MAs, the disallowance u/s 14A of the Act in all the assessment years, vide AY 2006-07 to 2008-09 are common, which is combined for the purpose of filing this miscellaneous Page | 3 MA Nos.196-198/Ahd/2019 M/s Friends Oil & Chemical Terminals Pvt. Ltd application. Therefore, as per para-5 of the said Circular (supra) the tax effect is more than monetary limit specified by the CBDT, provided the combined figure is taken. Therefore, adjudication has to be done on merit. Hence, the order of the Tribunal may be recalled for adjudication on merit. 4. The above referred M.As. have been filed by the Department against the dismissal of appeal no.IT(SS)180/Ahd/2016 which was dismissed without expressing any opinion on the merits of the case only on the account of low tax effect, being less than Rs. 20 lakhs, as laid down in circular no.3 of 2018 dated 11/07/2018.In the Annexure A attached to the above referred MA, the calculation of tax effect has been computed in para 3a for 2006-07, 3b for 2007-08 and 3c for 2008-09. The perusal of above referred para 3 shows that the composite tax effect with respect to issue of disallowance u/s 14A is Rs.33,11,213/- and the composite tax effect with respect to issue of disallowance of interest u/s 36(1) (iii) is Rs. 1,02,56,322/-for all the AYs concerned i.e. AY 2006-07 to 2008-09. Thus, it can be seen that the composite tax effect of each of the above two issues against which the addition has been made in A.Y. 2007-08 exceeds the threshold tax effect of Rs.20 lakhs as per circular no. 3 of 2018.The para 5 of circular no. 3 of 2018 dated 11/07/2018 as it stood before amendment by circular no. 17 of 2019 dated 08/08/2019 clearly stated that \".....However, in case of composite orders of any High court or appellate authority, which involves more than one Assessment year and common issues in more than one Assessment Year, appeals shall be filed in respect of all such A.Y.s' even if the tax effect is less than the prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which tax effect exceeds the monetary limit prescribed.\" .Thus, as is clear from the reading of para 5 of circular no. 3 of 2018 as quoted above, since appeal is being filed for the other A.Y. Page | 4 MA Nos.196-198/Ahd/2019 M/s Friends Oil & Chemical Terminals Pvt. Ltd (namely AY 2007-08) with respect to issues of disallowance of repairs and maintenance expenses and disallowance of interest u/s 36(1)(iii) and the composite tax effect exceeds Rs. 20 lakhs, appeal also needs to be filed for A.Y. 2008-09. Though this para 5 of circular 3 no. 2018 has been amended by circular 17 of 2019 dated 08/08/2019, the said circular clearly notes in para no. 4 that the said modification shall come to effect from the date of issue of circular which clearly shows that intent of legislature for prospective application of the amended provisions. It is pertinent to note that present MA has been filed on 28/05/2019 which is prior to the date of issue of circular no. 17 of 2019 dated 08/08/2019 and therefore the unamended provisions of para 5 of circular no. 3 of 2018, as quoted above, shall be relevant and operational for the A.Y. under consideration. In view of the detailed discussion above, the case laws relied upon by the Ld. AR in the case of DCIT Vs. M/s Gautam Frieght Pvt. Ltd., MA no. 56/Rjt/2019 dated 14/09/2022 is found different on facts and therefore not applicable in the present case. In the above referred case law what has been held by the Hon’ble Tribunal is that in the case of composite order of Ld. CIT(A) consolidated tax effect of all the A.Y. does not become tax effect relevant for applicability of circular 3/2018. As has been stated in the preceding paragraphs, only issue-wise composite tax effect with respect to common issue occurring in all the years of the composite order having tax effect exceeding Rs.20 lakhs has been considered and therefore direction of circular no. 3 of 2018 (unamended) are directly applicable to the assessee, hence, these MAs of Revenue should be allowed. 5. On the other hand, Ld AR for the assessee submitted that latest Circular No.17 of 2019 issued by the Ld.CIT(A) would be applicable and this monetary limit will not applicable in these assessment years. Therefore, Revenue’s MAs may be dismissed. The Ld. Counsel also contended that all the MAs should not have been adjudicated on merits, as Page | 5 MA Nos.196-198/Ahd/2019 M/s Friends Oil & Chemical Terminals Pvt. Ltd the revenue took the combined figure of all the assessment years to show the tax effect more than Rs.20,00,000/-. The tax effect of the individual appeal comes below Rs.20,00,000/-, therefore, all these miscellaneous applications of the revenue, should be dismissed. 6. Learned Counsel also submitted that latest effective Circular of the CBDT is applicable to the assessee. The Hon'ble Tribunal passed the order in IT(SS)A No180 & 182/Ahd/2016, on 17-12-2018, stating in paragraph 4 of the order that on 11-07-2018 CBDT has issued Circular No. 3 of 2018 prohibiting its subordinate offices from filing appeals to Tribunal where tax effect is less than Rs.20 lakhs. The Ld. Sr. DR has not offered his comments on the order of the Tribunal, and has also missed to notice the specific direction in para 13 of the Circular No.3/2018 which is reproduced below. “13This Circular will apply to SLPs/appeals/cross objections/references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/appeals/cross objections/references. Pending appeals below the specified tax limits in para 3 above may be withdrawn/not pressed.” Therefore, learned Counsel for the assessee submitted that all the miscellaneous applications filed by the revenue may be dismissed. 7. We have heard both the parties and perused the material available on record. We find that the details of tax effect shown in paragraph 3b of the Revenue`s Misc. Application related to A.Y. 2007-08 is misconceived because appeal for the said assessment year is not dismissed on the ground of low tax effect, but on the technical ground that additions were not based on incriminating material found during the search relying upon the judgment of Hon’ble jurisdictional High Court of Gujarat. The combined tax effect of both the common issues for remaining two assessment years, viz: 2006-07 and 2008-09 (excluding A, Y. 2007-08), in Page | 6 MA Nos.196-198/Ahd/2019 M/s Friends Oil & Chemical Terminals Pvt. Ltd respect of which appeals were filed and were dismissed by the Hon'ble Tribunal on the ground of low tax effect, works out to Rs.27.80 lakhs (apprx) i.e., more than Rs.20 lakhs as mentioned in para 4 of the written submission. The Learned Sr. DR has referred to the modifications brought about by the Circular No.17 of 2019 dated 08-08-2019, vis-à-vis Circular No.3/2018, in para No.5 of the written submission. The Circular No.17/2019 dated 08-08-2019, has made two such modifications. First modification, is in enhancing the monetary limits, up to which appeals were not to be filed to higher forums. For example, as per Circular No. 3/2018, appeals were not to be filed to Appellate Tribunal, if tax effect was less than Rs.20 lakhs, but after the issuance of Circular No.17/2019, it was directed that appeal to Appellate tribunal should not be filed where the tax effect is less than Rs.50 lakhs. The second modification was that the Circular 17/2019 substituted paragraph 5 of Circular 3/2018 with a revised paragraph whereby it was provided as under: “Further, with a view to provide parity in filing of appeals in scenarios where separate order is passed by higher appellate authorities for each assessment year vis-à-vis where composite order for more than one assessment years is passed. Para 5 of the circular is substituted by the following para: \"5. The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. Further, even in the case of composite order of any High Court or appellate authority which involves more than one assessment year and common issues in more than one assessment year, no appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In case where a composite order/judgement involves more than one assessee, each assessee shall be dealt with separately.\" From the above, it would be seen that the CBDT revised its order to the effect that even in case of composite appellate order, for the purpose of filing appeal in the higher forum, tax effect of each year will be separately Page | 7 MA Nos.196-198/Ahd/2019 M/s Friends Oil & Chemical Terminals Pvt. Ltd worked out, and if it is below the prescribed monetary limits for a particular year, appeal will not be filed for that year. 8. Now, Sr. DR's contention is that as per para 4 of the Circular No.17/2019 modifications made by the Circular No.17/2019, modification, came into effect from the date of Circular, that is, from 08- 08-2019, and that since the MA under consideration was filed prior to that date, on 28-05-2019, the un-amended para 5 of the previous Circular No.3/2018 was relevant and operational in relation to the MA. In this regard, ld.Counsel submitted that these Circulars are issued by the CBDT directing the subordinate authorities not to file appeals to higher forums keeping in view the monetary limits and circumstances specified therein. The filing of MA before the date of issue of Circular No.17/2019 is of no relevance because the directions are on the issue whether appeal is to be filed or not, and in the instant case, the appeal for A. Y. 2006-07 was filed on 27-06-2016, that is, even before the date on which Circular No.3/2018 was issued. This fact only justifies the filing of appeal on 27-06-2016 when no such directions were issued. We note this fact that when the appeal came up for hearing on 13-12-2018, Circular No.3/2018 dated 11- 07-2018, was available and that had to be given effect to. The Hon'ble Tribunal therefore passed the order in IT(SS)A No180 & 182/Ahd/2016, on 17-12-2018, stating in paragraph 4 of the order that on 11-07-2018 CBDT has issued Circular No. 3 of 2018 prohibiting its subordinate offices from filing appeals to Tribunal where tax effect is less than Rs.20 lakhs. The Ld. Sr. DR has not offered his comments on the order of the Tribunal, and has also missed to notice the specific direction in para 13 of the Circular No.3/2018 which is reproduced below. “13 This Circular will apply to SLPs/appeals/cross objections/references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/appeals/cross objections/references. Pending appeals below the specified tax limits in para 3 above may be withdrawn/not pressed.” Page | 8 MA Nos.196-198/Ahd/2019 M/s Friends Oil & Chemical Terminals Pvt. Ltd Thus, it is clear that the Circular applied to pending appeals and it was incumbent upon the concerned authorities to withdraw such appeals, failing which the Tribunal had to dismiss such appeals. Keeping in view the factual position emerging from the above, the contention of the Id. DR that the un-amended para 5 of the Circular No.3/2018 needs to be considered because MA was filed prior to the date of Circular No.17/2019, 08-08-2019, even when the MA is being heard in 2024 that is, 5 years after the issuance of the said Circular, is against the express intention of the CBDT, as is evident in para 13 reproduced above, and untenable in law. It is settled position of law that the beneficial Circulars would be applicable to all pending matters. 9. In respect of Miscellaneous Application No. 197/Ahd/ 2019, we also note that the Miscellaneous Application is filed by Revenue on the wrong notion that the Revenue's appeal was dismissed by the Hon'ble Tribunal on the ground of Tax effect being less than Rs.20 lakhs. As a matter of fact, the appeal for the cited assessment year 2007-08, was dismissed on the ground that in the assessment u/s.153A of the Act the additions were made de hors incriminating material found during the year. Relevant paragraph from the order of the Hon'ble Tribunal dated12-08-2022, is reproduced below. “In the instant case, we observe that search was carried out on 15-06-2011 end at time of search, it is not in dispute that no proceedings were pending before the Ld. Assessing Officer in respect of the captioned assessment year, and the assessment year 2007-08 was \"unabated\". Before us, the Ld. DR has not pointed out any incriminating seized documents or material found during the course of search, on the basis of which the aforesaid additions have been made. Therefore, in view of the judicial precedents cited before us, which have consistently held that additions made by the Ld. Assessing Officer de hors any reference to or foundation in any incriminating material seized during the course of search action, are not sustainable. In view of the above, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in deleting the additions during the course of appellate proceedings.” Page | 9 MA Nos.196-198/Ahd/2019 M/s Friends Oil & Chemical Terminals Pvt. Ltd 10. Considering these facts and circumstances, we dismiss all the miscellaneous applications of the Revenue. 11. In the result, Miscellaneous Applications filed by the Revenue (MA No. 196 to 198), are dismissed. Order is pronounced in the open court on 06/05/2025 Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) Æयाियक सदÖय/JUDICIALMEMBER लेखा सदÖय/ACCOUNTANT MEMBER राजकोट /Rajkot िदनांक/ Date: 06/05/2025 DKP Outsourcing Sr.P.S आदेश कì ÿितिलिप अúेिषत/ Copy of the order forwarded to :  अपीलाथê/ The Appellant  ÿÂयथê/ The Respondent  आयकर आयुĉ/ CIT  आयकर आयुĉ(अपील)/ The CIT(A)  िवभागीय ÿितिनिध, आयकर अपीलीय आिधकरण, राजकोट/ DR, ITAT, RAJKOT  गाडªफाईल/ Guard File By order/आदेश से , सहायकपंजीकार आयकर अपीलीय अिधकरण राजकोट "