Facts
The Revenue department filed a miscellaneous application under Section 254(2) of the Income Tax Act, 1961, seeking rectification of an order dated 16.11.2018
Source reference: p. 1-2The Income Tax Appellate Tribunal (ITAT) had originally dismissed the Revenue's appeal (ITA No. 1829/Ahd/2016) on the grounds of "low tax effect," as the tax amount was below the monetary limit of Rs. 20 lakhs prescribed by Circular dated 11.07.2018
Source reference: para. 5The Revenue argued that the case fell under an exception in Clause 10(e) of the Circular because the assessment was based on information from the State Value Added Tax (VAT) department
Source reference: para. 2The ITAT rejected the rectification application on 10.02.2021, holding that the VAT department is not specifically mentioned as a "law enforcement agency" in the Circular
Source reference: para. 6Issues
Whether the State VAT department qualifies as a "law enforcement agency" under Clause 10(e) of Circular dated 11.07.2018 (as modified by Circular dated 20.08.2018) for the purpose of exceeding monetary limits for filing appeals.
Source reference: para. 2 / p. 4Law Applied
Clause 10(e) of CBDT Circular dated 11.07.2018 (read with Circular dated 20.08.2018), which provides exceptions to monetary limits for filing appeals where additions are based on information from external law enforcement agencies such as CBI, ED, DRI, SFIO, or DGGI
Source reference: para. 5incidences where agencies explicitly named in such clauses are examples and not an exhaustive list of qualifying enforcement bodies (illustrative in nature)
Source reference: para. 7Reasoning
The court reasoned that while the clause lists specific agencies like the CBI or DGGI, these references are "illustrative in nature" rather than exhaustive
Source reference: para. 7Since the State VAT department functions as an enforcement agency for tax laws, it is "akin to those mentioned" in the Circular
Source reference: para. 7Consequently, the court determined that information received from the VAT department satisfies the exception criteria, meaning the prescribed monetary limits (Rs. 20 lakhs) do not apply to bar the Revenue's appeal
Source reference: para. 8Holding
The court held that the VAT department is a law enforcement agency under Clause 10(e) of the relevant Circular
The High Court allowed the writ petition and set aside the ITAT’s order dated 10.02.2021
Source reference: para. 8, 11The matter was remanded to the ITAT with directions to restore ITA No. 1829/Ahd/2016 to its original file and decide the case on its merits after hearing both parties
Source reference: para. 9Original Court PDF
THE PR. COMMISSIONER OF INCOME TAX 1, SURATvsM/S KABIR JEWELS PVT. LTD.
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