Case Law Details
PCIT Vs Taha Wires Pvt. Ltd. (Gujarat High Court)
The Gujarat High Court allowed the Revenue’s writ petition and held that the Directorate General of Central Excise Intelligence (DGCEI) is a law enforcement agency for the purpose of Clause 10(e) of the CBDT Circular dated 11 July 2018, as modified by the Circular dated 20 August 2018. Consequently, the Tribunal had erred in excluding DGCEI from the exception to the monetary limits prescribed for filing departmental appeals.
The petition challenged the Income Tax Appellate Tribunal’s order dated 10 February 2021 rejecting the Revenue’s miscellaneous application filed under Section 254(2) of the Income Tax Act seeking rectification of its earlier order dated 23 August 2019.
The Revenue contended that the Tribunal had incorrectly interpreted Clause 10(e) of the CBDT Circulars by holding that DGCEI did not fall within the expression “law enforcement agencies.” It argued that DGCEI is an enforcement agency and should be treated as one of the agencies covered by Clause 10(e). Therefore, the case fell within the exception to the prescribed monetary limits for departmental appeals, making the tax effect threshold inapplicable.
The respondent submitted that subsequent CBDT Circulars dated 15 March 2024 and 17 September 2024 clarified that the enhanced monetary limits of ₹60 lakh for appeals before the Tribunal and ₹2 crore for appeals before the High Court apply only where assessments are reopened based on information relating to offences under other laws received from law enforcement or intelligence agencies referred to in Clause 10(e) of the Circular dated 11 July 2018, read with the Circular dated 20 August 2018, Clause 3.1(c) of the Circular dated 15 March 2024, and paragraph 5 of the Circular dated 17 September 2024. On that basis, dismissal of the petition was sought.
The High Court noted that the Tribunal had originally disposed of the Revenue’s appeal on 23 August 2019 on the ground of low tax effect by applying the monetary limit prescribed for appeals before the Tribunal under the CBDT Circulars. Thereafter, the Revenue filed a miscellaneous application under Section 254(2), relying upon Clause 10(e), which excludes cases involving information received from external sources in the nature of law enforcement agencies, such as the CBI, ED, DRI, SFIO and Directorate General of GST Intelligence (DGGI), from the monetary limit restrictions.
The Tribunal rejected the miscellaneous application by relying on a coordinate Bench decision of the Mumbai Tribunal and held that DGCEI was not a law enforcement agency and therefore was not covered by Clause 10(e).
The High Court found this interpretation to be erroneous. It observed that Clause 10(e) refers to agencies such as CBI, ED, DRI, SFIO and DGGI, indicating that the list is illustrative and not exhaustive. Since it was undisputed that DGCEI is an enforcement agency, it should be regarded as one of the law enforcement agencies similar to those specifically mentioned in the Circular.
Holding that the Tribunal had misinterpreted Clause 10(e) by excluding DGCEI from its scope, the High Court set aside the Tribunal’s order dated 10 February 2021. The miscellaneous application was restored to the Tribunal’s file with a direction to decide it afresh after granting both parties a full opportunity of hearing. The Court clarified that all rights and contentions of both parties remained open and accordingly allowed the writ petition.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. The present petition has been filed assailing the order dated 10.02.2021 passed by the Income Tax Appellate Tribunal, Surat Bench, Surat (for short, “the Tribunal”) in MA No.24/SRT/2020 (arising out of IT(SS)A No. 226/AHD/2021), whereby the miscellaneous application filed under Section 254(2) of the Income Tax Act, 1961 (for short, “the Act”) by the Revenue, seeking rectification of the original order dated 23.08.2019 came to be rejected.
2. Learned Senior Standing Counsel Mr.Sanghani, appearing for the petitioner – department, at the outset, has submitted that the Tribunal fell in error in interpreting Clause 10(e) of the Circular dated 11.07.2018, as modified by the Circular dated 20.08.2018. It is submitted that the Tribunal has held that DGCEI i.e. the Directorate General of Central Excise Intelligence, would not fall within the ambit of “law enforcement agencies”, as mentioned in Clause 10(e) of the aforesaid circulars. It is submitted that, in fact, DGCEI is an enforcement agency and ought to be considered as one of the agencies referred to in Clause 10(e) of the said circulars. Consequently, it is submitted that the case of the Revenue would fall within the exception provided therein and the monetary limit of Rs.20 lakhs, as prescribed in the circulars, would not apply to the present case. Thus, it is urged that the impugned judgment and order be quashed and set aside.
3. Per contra, learned advocate Mr.Soparkar appearing for the respondent has submitted that, subsequent to the order dated 10.02.2021 passed by the Tribunal, the Department has issued Circular dated 15.03.2024, which has further been clarified by Circular dated 17.09.2024. It is submitted that, as per the aforesaid circulars, the enhanced monetary limits of Rs.60 lakhs for the Tribunal and Rs. 2 crores for the High Court would apply only to such cases, where the assessment is reopened on the basis of information relating to any offence alleged to have been committed under any other law, received from law enforcement or intelligence agencies referred to in Clause 10(e) of the Circular dated 11.07.2018 read with Circular dated 20.08.2018, Clause 3.1(c) of the Circular dated 15.03.2024 and the paragraph No.5 of the Circular dated 17.09.2024. Thus, it is urged that the present petition be dismissed.
4. We have heard the learned advocates appearing for the respective parties at length.
5. We have also perused the impugned order dated 10.02.2021 passed by the Tribunal. It is not in dispute that by the order dated 23.08.2019 passed in IT(SS)A No. 226/AHD/2021, the appeal came to be disposed of by the Tribunal on the ground of low tax effect, applying the monetary limit of Rs.50 lakhs prescribed for filing appeals before the Tribunal. The Tribunal placed reliance on the Circular dated 11.07.2018 read with the Circular dated 20.08.2018 and disposed of the matter accordingly. Subsequently, the Revenue filed MA No.24/SRT/2020 under Section 254(2) of the Act, placing reliance on Clause 10(e) of the Circular dated 11.07.2018 read with the Circular dated 20.08.2018. The relevant clause of the Circular is reproduced as under:
“10. “ “ “
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(e) Where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/ Directorate General of GST Intelligence (DGGI).”
6. The Tribunal, by placing reliance on the order of its Coordinate Bench at Mumbai in ITA Nos.818–820/Mum/2017, rejected the miscellaneous application by holding that DGCEI is not a law enforcement agency and, therefore, would not be covered by paragraph 10(e) of the Circular dated 11.07.2018 read with the Circular dated 20.08.2018. We find that the Tribunal has committed an error in recording such a finding.
7. A careful reading of Clause 10(e) of the Circular dated 11.07.2018 read with the Circular dated 20.08.2018 would indicate that it contains references to agencies such as “CBI/ED/DRI/SFIO/Director General of GST Intelligence (DGGI)”. It is not in dispute that DGCEI is also an enforcement agency. Hence, the agencies referred to in Clause 10(e) are illustrative in nature and DGCEI being a law enforcement agency, ought to be considered as one of the agencies akin to those mentioned therein.
8. Thus, the Tribunal has misinterpreted the provisions of Clause 10(e) of the Circular dated 11.07.2018 read with the Circular dated 20.08.2018 by excluding DGCEI from its ambit. On this short ground, we set aside the impugned order dated 10.02.2021 passed by the Tribunal and remand the matter to the Tribunal.
9. We direct that MA No.24/SRT/2020 shall be restored to its original file. The Tribunal shall decide the same afresh after granting full opportunity of hearing to the respective parties.
10. We clarify that all rights and contentions of the respective parties are kept open.
11. With these observations, the present writ petition stands allowed.
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