The Orissa High Court clarified that an order by the Income Tax Appellate Tribunal (ITAT) dismissing the department’s appeal due to a low tax effect can be appealed before the High Court under Section 260A of the Income Tax Act, 1961. However, the High Court cannot entertain an appeal against the ITAT’s dismissal of the Revenue’s recall application.
In a case presided over by Acting Chief Justice Dr. B.R. Sarangi and Justice Murahari Sri Raman, the department’s appeal against the ITAT’s rejection of their request to recall an earlier order was dismissed. The department sought a recall to reexamine the case’s merits following CBDT Circular No. 23 of 2019 dated September 6, 2019, and an Office Memorandum dated September 16, 2019. The CBDT circular had withdrawn the monetary limit for Revenue’s appeals in cases where the assessee claimed false capital gains through penny stocks.
An individual, the respondent/assessee, filed their income tax return electronically for the assessment year 2014–15 on October 7, 2014, revealing a total income of Rs. 15,19,420. Subsequently, a special survey was conducted on July 22, 2015, under Section 133A of the Income Tax Act, 1961, at the business premises of Kishore Kumar Mohapatra and a group of assessees. This survey led to the scrutiny of the assessee’s return under CASS (Computer-Assisted Scrutiny Selection).
During this survey, the assessee, a family member of the aforementioned group, was presented with statements from directors of specific Kolkata-based companies. These companies’ shares were traded by the respondent-assessee in the stock market. The Kolkata-based companies were under investigation by the Income Tax Department for potentially facilitating accommodation entries and had subsequently become subjects of search and seizure operations.
The Income Tax Department compiled a roster of beneficiaries who had received accommodation entries from the Kolkata-based companies, among whom were the family members of the Kishore Kumar Mohapatra group. Consequently, the respondent-assessee revised their income return. They withdrew the initial claim for exemption under Section 10(38) of the Income Tax Act, 1961, regarding long-term capital gains (LTCG) on shares, opting instead to declare the entire income for taxation as “Income From Other Sources.”
The respondent-assessee appealed against the Assessing Officer’s decision with the Commissioner of Income Tax (Appeals). The CIT(A) nullified the additions made by the Assessing Officer, prompting the department to appeal this decision before the ITAT.
However, the ITAT dismissed the department’s appeal, citing that the tax impact did not surpass the specified monetary limit of 50 lakhs, as outlined in CBDT Circular No. 3/2018 and Circular No. 17/2019. Relying on these circulars and an office memorandum, the department filed a Miscellaneous Application (MA) before the ITAT, seeking a reconsideration of the case on its merits. Yet, the ITAT rejected this application, asserting that their initial dismissal of the department’s appeal based on a lower tax effect occurred before the issuance of the CBDT’s special circular and office memorandum. Thus, it wasn’t a clear error in the record warranting a recall of the order for fresh consideration.
The department argued that the CBDT’s Circular No. 23/2019 dated September 6, 2019, and a special order from September 16, 2019, withdrew the monetary limit for filing appeals. The Income Tax Appellate Tribunal (ITAT) allowed the Revenue the option to file a miscellaneous application when the tax impact exceeded the specified monetary limit. Hence, considering this liberty to file an M.A. and the removal of the monetary limit, the department submitted a miscellaneous application on November 11, 2019, relying on the Circulars dated September 6, 2019, and September 16, 2019, seeking a thorough review of the case.
The assessee argued that the current ITA (Income Tax Appeal) is not maintainable against the decision made in the miscellaneous application. No substantial question has been framed that would warrant an answer from this Court. Consequently, the ITA should be completely dismissed.
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The court ruled that there is no doubt that the order issued under Section 254(2) of the Income Tax Act, 1961, cannot be deemed an order falling within the purview of Section 260A, making it eligible for appeal before this Court. Instead, the order passed under Section 254(2) is not subject to appeal, and the appropriate recourse is available by invoking Article 226 of the Constitution of India.
| Case Title | Sekhar Kumar Mohapatra Vs Principal Commissioner of Income Tax-1, Bhubaneswar |
| Citation | ITA NO. 64 OF 2022 |
| Date | 11.10.2023 |
| For Appellant | Mr. Tushar Kanti Satapathy |
| For Respondent | Mr Rudra Prasad Kar, Mr Pranay Kumar Mishra |
| Orissa High Court | Read Order |
