Appeal Against ITAT Order Dismissing Revenue’s Recall Application Does Not Lie Before High Court: Orissa High Court

The Orissa High Court has held that the order passed by the Income Tax Appellate Tribunal (ITAT) dismissing the department’s appeal on the ground of the low tax effect is appealable before the High Court under Section 260A of the Income Tax Act, 1961; however, an appeal against the ITAT order dismissing Revenue’s recall application does not lie before the High Court.

The bench of Acting Chief Justice Dr. B.R. Sarangi and Justice Murahari Sri Raman has dismissed the appeal of the department against the ITAT order rejecting the miscellaneous application for recalling its earlier order as not maintainable. The department preferred the recall application for consideration of the case on merit in view of CBDT Circular No. 23 of 2019 dated September 6, 2019 and the Office Memorandum dated September 16, 2019. As per the CBDT circular monetary limit for filing appeals by the Revenue, it was withdrawn in respect of cases where the assessee claimed bogus capital gains in penny stocks.

The respondent/assessee, who is an individual, filed its return of income by e-mode for the assessment year 2014–15 on October 7, 2014, disclosing total income of Rs. 15,19,420. Later on, a special survey was conducted under Section 133A of the Income Tax Act, 1961, in the business premises of Kishore Kumar Mohapatra and a group of assessees on July 22, 2015. As a result of a survey, the return of the assessee was selected for scrutiny under CASS (Computer-Assisted Scrutiny Selection). During the course of the survey, the assessee, who is a family member of the group, was confronted with the statements of the directors of certain Kolkata-based companies whose shares were bought and sold in the stock market by the respondent-assessee. Those Kolkata-based companies were under the scanner of the Income Tax Department for providing accommodation entries and had subsequently been subjected to search and seizure operations.

A list of beneficiaries who had taken accommodation entries from those Kolkata-based companies had been drawn up by the Income Tax Department, and the family members of the Kishore Kumar Mohapatra group featured in it. Consequently, the respondent-assessee filed a revised return of income. The original claim of exemption under Section 10(38) of the Income Tax Act, 1961, in respect of long-term capital gain (LTCG) on shares was withdrawn, and the entire income was offered for taxation as “Income From Other Sources”.

The respondent-assessee preferred an appeal against the order of the AO before the Commissioner of Income Tax (Appeals). The CIT(A) deleted the additions made by the Assessing Officer against which department preferred the appeal before the ITAT.

The ITAT dismissed the department’s appeal on the ground that the tax effect does not exceed the monetary limit of 50 lakhs as per CBDT Circular No. 3/2018 and Circular No. 17/2019. On the basis of the circular and office memorandum, the department filed MA before ITAT for consideration of the case on merit, which was dismissed by ITAT. The ITAT held that the ITAT order dismissing the department's appeal on the basis of a lower tax effect was passed before the CBDT’s special circular and office memorandum, thus not a mistake apparent on record to recall the order for fresh consideration.

The department contended that in the CBDT’s Circular No. 23/2019 dated 06.09.2019 and special order dated 16.09.2019, the monetary limit for filing an appeal has been withdrawn. The ITAT has granted liberty to the Revenue to file a miscellaneous application where the tax effect is greater than the prescribed monetary limit. Therefore, keeping in view the liberty to file an M.A. and withdrawal of the monetary limit, the department filed a miscellaneous application on November 11, 2019, based on the Circulars dated September 6, 2019, and September 16, 2019, for consideration of the case on merit.

The assessee contended that against the order passed in the miscellaneous application, the present ITA is not maintainable. No substantial question is framed so as to be answered by this Court. As a consequence thereof, the ITA should be dismissed outright.

The court held that there is no iota of doubt that the order passed under Section 254(2) of the Income Tax Act, 1961, cannot be construed to be an order within the meaning of Section 260A to make it appealable before this Court. Rather, the order passed under Section 254(2) is not an appealable one, and the remedy is available by invoking Article 226 of the Constitution of India.

Counsel for Petitioner: Tushar Kanti Satapathy

Counsel for Respondent: Rudra Prasad Kar

Case Title: Principal Commissioner of Income Tax-1 Versus Sekhar Kumar Mohapatra

Case No.: ITA No. 64 of 2022

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