PCIT Vs Kabir Jewels Pvt. Ltd. (Gujarat High Court)
The Gujarat High Court considered a petition filed by the Revenue challenging the Income Tax Appellate Tribunal, Surat Bench order dated 10.02.2021 in MA No.26/SRT/2019, arising from ITA No.1829/Ahd/2016 for AY 2011-12. The Tribunal had rejected the Revenue’s miscellaneous application under Section 254(2) of the Income Tax Act, 1961, which sought rectification of its original order dated 16.11.2018.
The original appeal had been disposed of by the Tribunal on the ground of low tax effect, applying the monetary limit of Rs.20 lakhs prescribed for appeals before the Tribunal under Circular dated 11.07.2018, as modified by Circular dated 20.08.2018. The Revenue subsequently relied upon Clause 10(e) of the circulars, which provides an exception where an addition is based on information received from external sources in the nature of law enforcement agencies such as CBI, ED, DRI, SFIO and Directorate General of GST Intelligence (DGGI).
Before the High Court, the Revenue submitted that the Tribunal had erred in holding that the State VAT department did not fall within the expression “law enforcement agencies” because it was not specifically mentioned in Clause 10(e). The Revenue contended that the VAT department is an enforcement agency and should be covered by the exception, meaning that the monetary limit of Rs.20 lakhs would not apply.
The respondent opposed the petition and referred to subsequent Circular dated 15.03.2024 and clarification dated 17.09.2024. It was submitted that the enhanced monetary limits would not apply only to cases involving assessment reopened on the basis of information concerning an alleged offence under another law received from specified law enforcement or intelligence agencies. The respondent also argued that State law enforcement agencies were not referred to in Clause 10(e) of the earlier circulars.
The High Court examined the Tribunal’s order and found that the Tribunal had relied upon the decision of the Coordinate Bench at Pune in DCIT Vs. Chebbi Electricals Pvt Ltd, M.A. No.1/Pune/2019, while holding that the VAT department was not referred to as a law enforcement agency under Clause 10(e).
The High Court held that the agencies specifically mentioned in Clause 10(e)—CBI, ED, DRI, SFIO and DGGI—were illustrative in nature. It observed that the VAT department is also an enforcement agency and, therefore, ought to be considered as one of the agencies akin to those specifically mentioned in the clause.
Accordingly, the High Court held that the Tribunal had misinterpreted Clause 10(e) of the Circular dated 11.07.2018 read with the Circular dated 20.08.2018 by excluding the VAT department from its ambit.
On this ground, the High Court set aside the Tribunal’s order dated 10.02.2021 and remanded the matter to the Tribunal. It directed that ITA No.1829/Ahd/2016 be restored to its original file and decided on merits after granting full opportunity of hearing to both parties. The Court also clarified that all rights and contentions of the respective parties were kept open. The writ petition was accordingly allowed.
Cases Discussed
- DCIT Vs. Chebbi Electricals Pvt Ltd (ITAT Pune), M.A. No.1/Pune/2019
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.26/SRT/2019 (arising out of ITA No. 1829/Ahd/2016 for AY 2011-12), 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 16.11.2018 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 there is no reference of any State Government Agencies such as Sales tax department or Value Added Tax (for short ‘VAT’) department and therefore, 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, State VAT department 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 Senior Advocate Mr. Tushar Hemani 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 not 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. Learned Senior Advocate Mr. Hemani further argued that State law enforcement agencies are not referred under Clause 10(e) of the Circular dated 11.07.2018 read with Circular dated 20.08.2018. 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 16.11.2018 passed in ITA No. 1829/AHD/2016, the appeal came to be disposed of by the Tribunal on the ground of low tax effect, applying the monetary limit of Rs.20 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.26/SRT/2019 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. ** ** **
(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 Coordinate Bench at Pune in the case of DCIT Vs. Chebbi Electricals Pvt Ltd, in M.A. No.1/Pune/2019 rejected the miscellaneous application by holding that VAT department is not referred as 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 VAT department is also an enforcement agency. Hence, the agencies referred to in Clause 10(e) are illustrative in nature and VAT department 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 provision of Clause 10(e) of the Circular dated 11.07.2018 read with the Circular dated 20.08.2018 by excluding VAT department 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 ITA No.1829/Ahd/2016 shall be restored to its original file. The Tribunal shall decide the same on merits 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.
