Low Tax Effect Appeal cannot be Filed In HC for Low Tax Effect Appeals If Review Application Before Tribunal Has Already Been Filed

PCIT (Central) Vs Rashmi Rajesh Bafna (Gujarat High Court)

Appeals Could Not Be Filed In High Court As Per CBDT Circular No. 23/2019 On Low Tax Effect Appeals If Review Application Before Tribunal Has Already Been Filed

When Revenue Already Filed Rectification Application Before Tribunal For Review Of Order Which Has Been Dismissed Than Appeal Could Not Be Filed In High Court Even After CBDT Circular No. 23/2019 Dated 06.09.2019 Which Allows Appeals To Be Filed In Low Tax Effect Cases If It Involves Issue Of Systematic Tax Evasion

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

1. The present appeal has been filed by the Principal Commissioner of Income Tax (Central), Surat under Section 260-A of the Income Tax Act, 1961, challenging the order dated 14.8.2019 made by the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench “A” in IT(SS)A No.332/Ahd/2018 for the A.Y. 2012-13 in respect of the respondent – Assessee.

2. The learned Sr. Standing Counsel Mrs.Mauna Bhatt for the appellant submits that the appeal has been filed, challenging the impugned order passed by the Tribunal, on the ground that the case of the respondent fell under the exceptions carved out in the Circular dated 8.8.2019 read with the Circular No. 23/2019 Dated 06.09.2019 and Office Memorandum dated 16.9.2019, which provided that the monetary limits for filing appeals shall not apply to the cases where Assessee has claimed bogus LTCG/STCL through penny stocks. Of course, she submitted that the appellant had filed Misc. Application No.77/2020 in ITA No.1274/2019 and other Misc. Applications under Section 254(2) for the rectification of the impugned order dated 14.8.2019, on the same ground, and that the Tribunal having rejected the said applications vide the order dated 9.9.2019, the appellant had filed the Special Civil Application No.7520 of 2021 before this Court, and that this Court vide the order dated 24.6.2021 has dismissed the said Special Civil Application in limine.

3. In view of the above submission of Mrs.Bhatt, it may be noted that though not stated in the memo of appeal, it is not disputed that the common order dated 14.8.2019 passed by the Tribunal in about 628 appeals was sought to be reviewed at the instance of the appellant Department by filing the Misc. Application No.77 of 2020 and others under Section 254 of the IT Act for rectification, on the ground that the cases of some of the Assessees fell within the exceptions carved out in the Circular dated 8.8.2019 read with the Circular dated 6.9.2019 and Office Memorandum dated 16.9.2019. The Tribunal vide the order dated 9.9.2020 had dismissed the said Misc. Application No.77/2020 along with the other Misc. Applications by holding that there was no mistake apparent on the face of record in the order dated 14.8.2019, which could be rectified within the narrow compass under Section 254(2) of the said Act, and after holding inter alia that the said Circular dated 6.9.2019 should be read along with the Office Memorandum dated 16.9.2019 in respect of the appeals to be filed pursuant to the Special Order of CBDT, and shall apply to such appeals that may be filed on or after 16.9.2019 by the Revenue. The said order having been challenged by the appellant Revenue before this Court by filing SCA No.7520 of 2021, this Court vide order dated 24.6.2021 has dismissed the same in limine. The relevant part thereof is reproduced as under:-

“7. From the bare reading of the Circular dated 06.09.2019, it appears that the CBDT had decided that notwithstanding anything contained in any Circular issued under Section 268A specifying monetary limits for filing of departmental appeals before the Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/ Appeals before the Supreme Court, appeals may be filed on merits as the exception to the said Circular, where the Board by way of special order direct filing of appeals on merits in cases involved in organized tax evasion activity. The Office Memorandum dated 16.09.2019 was issued pursuant to the said circular dated 06.09.2019 stating inter alia that by virtue of the powers of CBDT under Section 268A of the Income Tax Act, the monetary limits fixed for filing appeals before ITAT/High Court and SLPs/Appeals before Supreme Court shall not lie in case of assessees claiming bogus LTCG/STCL through penny stocks and appeals/ SLPs in such cases appeals shall be filed on merits. There is nothing to suggest in the said Circular/ Office Memorandum that they shall have retrospective effect. On the contrary, from the language employed in the said Circular dated 06.09.2019, it clearly transpires that the appeals may be filed on merits as an exception to the other Circulars issued earlier, where the Board by way of special order direct filing of Appeals on merits in the cases involved in organized tax evasion activity. Therefore, by virtue of the said Circular dated 06.09.2019, the appeals could be filed on merits, irrespective of the monetary limits fixed in earlier cases, if the Board passes special order for filing appeals in cases involving tax evasion activity. The said Circular speaks about the Appeals that may be filed with the special order of the Board in future, and hence could not be construed to have retrospective effect. The Tribunal interpreting the said Circular/ Office Memorandum in the impugned order has rightly observed that in respect of each case or category of cases whether an appeal should be filed in view of the Circular dated 06.09.2019 or not shall be decided by the Board by way of special order, and thus a specific requirement of issuance of special order by CBDT is a must. The Tribunal therefore has rightly held that the CBDT Circular No. 23/2019 Dated 06.09.2019 should be read along with the Office Memorandum dated 16.09.2019, in respect of the appeals to be filed pursuant to such special orders of CBDT and shall apply to all the appeals filed on or after 16.09.2019 by the revenue, where the tax effect may be low but the appeal could still be filed by the revenue on merits.

8. The appeals including the appeal in case of the respondent, which were disposed of by the Tribunal vide the common order dated 14.08.2019 could not be said to have been filed pursuant to the special order of the CBDT in view of the Circular dated 06.09.2019 read with the Office Memorandum dated 16.09.2019, and therefore it could not be said that the Tribunal had committed any mistake apparent from the record, which would require rectification as envisaged in Section 254(2) of the said Act.

9. In that view of the matter, the Court does not find any illegality or infirmity in the impugned order dated 09.09.2020 passed by the Tribunal dismissing the Miscellaneous Application filed by the petitioner. The petition being devoid of merits is dismissed in limine.”

4. In view of the aforesaid premises, the appellant having already filed the rectification applications before the Tribunal, seeking rectification of its order dated 14.8.2019, and the said applications having been dismissed by the Tribunal vide order dated 9.9.2020, and the said order dated 9.9.2020 having been challenged by the appellant by filing the Special Civil Application No.7520 of 2021, the appellant should not and could not have filed the present appeal challenging the original order dated 14.8.2019. In any case, this Court having upheld the order dated 9.9.2020 by dismissing the Special Civil Application as stated above, the present appeal does not survive and stands dismissed accordingly.