Facts of the Case

  • The Revenue filed an appeal before the High Court challenging the order of the ITAT dated 23.08.2019.
  • The ITAT had dismissed the Revenue’s appeal earlier due to low tax effect, relying on CBDT Circular No. 17/2019, which prescribed a monetary threshold of ₹50 lakhs.
  • Subsequently, the Revenue filed a miscellaneous application seeking recall of the order on the basis of CBDT Circular No. 23/2019, which carved out an exception for cases involving bogus long-term capital gains (penny stocks).
  • The ITAT rejected the application stating that the later circular could not be applied retrospectively.
  • The Revenue then approached the High Court.

Issues Involved

  1. Whether CBDT Circular No. 23/2019 (exception for penny stock cases) could be applied retrospectively to recall an already decided ITAT order.
  2. Whether the ITAT erred in refusing to recall its earlier order based on subsequent policy changes.
  3. Whether any substantial question of law arose under Section 260A of the Income-tax Act.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that:
    • It is the prerogative of the litigant to decide whether to pursue or press an appeal.
    • Since CBDT policy changed through Circular No. 23/2019, the ITAT should have considered the exception for penny stock transactions.
    • The appeal should have been decided on merits, rather than dismissed on monetary limits.

Respondent’s Arguments

  • No appearance was made on behalf of the respondent before the High Court.

Court’s Findings / Order

  • The Court held that:
    • CBDT circulars prevailing at the relevant time are binding on the Revenue.
    • At the time when the ITAT dismissed the appeal, Circular No. 17/2019 was applicable and did not contain any exception.
    • Subsequent circulars cannot be applied retrospectively to reopen concluded matters.
    • There was no error apparent on record that would justify recall of the ITAT’s order.
    • No substantial question of law arose in the matter.

Final Order: Appeal dismissed.

 Important Clarification by the Court

  • CBDT circulars are binding on the Revenue authorities.
  • Applicability of circulars depends on the date of decision, not subsequent amendments or clarifications.
  • Recall of an order is permissible only when there is a clear error apparent on record, not due to later policy changes.

 Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/59025042023ITA2422023_152834.pdf

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