Rajasthan High Court - Jaipur
Commissioner Of Income Tax vs M/S Gad Fashion on 10 November, 2017
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Income Tax Appeal No. 575 / 2008
COMMISSIONER OF INCOME TAX, JAIPUR-II, JAIPUR
----Appellant
Versus
M/S GAD FASHION, G-152, RIICO SANGANER INDUSTRIAL AREA
JAIPUR.
----Respondent
_____________________________________________________
For Appellant(s) : Mr. R.B.Mathur with Mr. Prateek Kedawat and
Ms. Meenal Ghiya, Mr. Sameer Jain with Ms.
Mahi Yadav, Mr. Daksh Pareek and Mr. Arjun
Singh & Mr. Anuroop Singhi with Mr. Aditya
Vijay and Mr. Narendra Singh Bhati.
For Respondent(s) : Mr. Sanjay Jhanwar with Mr. Atul Saxena, Mr.
Ankit Sareen, Mr. Rajat Sharma and Mr.
Sanjeev Pandey.
_____________________________________________________
HON'BLE MR. JUSTICE K.S.JHAVERI
HON'BLE MR. JUSTICE M.N. BHANDARI
HON'BLE MR. JUSTICE INDERJEET SINGH
Order
Per Hon'ble Jhaveri & Inderjeet Singh, JJ.
10th November, 2017.
1. By way of reference, this Court vide order dated
05.07.2017 framed the following reference for consideration by
the larger Bench.
"Whether the Department can take a
contrary view than the circular which has
been issued for reduction of arrears in the
Supreme Court, High Courts and Tribunals
and insist for arguing the matter on merits."
(2 of 89)
[ITA-575/2008]
2. The statutory provision which is required to be
considered by us reads as under:
"268A. Filing of appeal or application
for reference by income-tax
authority.- (1) The Board may, from time
to time, issue orders, instructions or
directions to other income-tax authorities,
fixing such monetary limits as it may deem
fit, for the purpose of regulating filing of
appeal or application for reference by any
income-tax authority under the provisions
of this Chapter.
(2) Where, in pursuance of the orders,
instructions or directions issued under sub-
section (1), an income-tax authority has
not filed any appeal or application for
reference on any issue in the case of an
assessee for any assessment year, it shall
not preclude such authority from filing an
appeal or application for reference on the
same issue in the case of--
(a) the same assessee for any other
assessment year; or
(b) any other assessee for the same or any
other assessment year.
(3) Notwithstanding that no appeal or
application for reference has been filed by
an income-tax authority pursuant to the
orders or instructions or directions issued
under sub-section (1), it shall not be lawful
for an assessee, being a party in any appeal
or reference, to contend that the income-
tax authority has acquiesced in the decision
on the disputed issue by not filing an appeal
or application for reference in any case.
(4) The Appellate Tribunal or Court, hearing
such appeal or reference, shall have regard
to the orders, instructions or directions
issued under sub-section (1) and the
circumstances under which such appeal or
application for reference was filed or not
filed in respect of any case.
(5) Every order, instruction or direction
which has been issued by the Board fixing
monetary limits for filing an appeal or
application for reference shall be deemed to
have been issued under sub-section (1) and
(3 of 89)
[ITA-575/2008]
the provisions of sub-sections (2), (3) and
(4) shall apply accordingly."
3. Another statutory provision which is required to be
considered reads as under:
"119. Instructions to subordinate
authorities.- (1) The Board may, from
time to time, issue such orders, instructions
and directions to other income-tax
authorities as it may deem fit for the proper
administration of this Act, and such
authorities and all other persons employed
in the execution of this Act shall observe
and follow such orders, instructions and
directions of the Board :
Provided that no such orders, instructions
or directions shall be issued--
(a) so as to require any income-tax
authority to make a particular assessment
or to dispose of a particular case in a
particular manner; or
(b) so as to interfere with the discretion of
the Commissioner (Appeals) in the exercise
of his appellate functions.
(2) Without prejudice to the generality of
the foregoing power,--
(a) the Board may, if it considers it
necessary or expedient so to do, for the
purpose of proper and efficient
management of the work of assessment
and collection of revenue, issue, from time
to time (whether by way of relaxation of
any of the provisions of sections 115P,
115S, 115WD, 115WE, 115WF, 115WG,
115WH, 115WJ, 115WK, 139, 143, 144,
147, 148, 154, 155 , 158BFA, sub-section
(1A) of section 201, sections 210, 211,
234A, 234B, 234C, 271 and 273 or
otherwise), general or special orders in
respect of any class of incomes or fringe
benefits or class of cases, setting forth
directions or instructions (not being
prejudicial to assessees) as to the
guidelines, principles or procedures to be
followed by other income-tax authorities in
the work relating to assessment or
collection of revenue or the initiation of
proceedings for the imposition of penalties
(4 of 89)
[ITA-575/2008]
and any such order may, if the Board is of
opinion that it is necessary in the public
interest so to do, be published and
circulated in the prescribed manner for
general information;
(b) the Board may, if it considers it
desirable or expedient so to do for avoiding
genuine hardship in any case or class of
cases, by general or special order, authorise
any income-tax authority, not being a
Commissioner (Appeals) to admit an
application or claim for any exemption,
deduction, refund or any other relief under
this Act after the expiry of the period
specified by or under this Act for making
such application or claim and deal with the
same on merits in accordance with law;
(c) the Board may, if it considers it
desirable or expedient so to do for avoiding
genuine hardship in any case or class of
cases, by general or special order for
reasons to be specified therein, relax any
requirement contained in any of the
provisions of Chapter IV or Chapter VI-A,
where the assessee has failed to comply
with any requirement specified in such
provision for claiming deduction thereunder,
subject to the following conditions,
namely:-
(i) the default in complying with such
requirement was due to circumstances
beyond the control of the assessee; and
(ii) the assessee has complied with such
requirement before the completion of
assessment in relation to the previous year
in which such deduction is claimed :
Provided that the Central Government shall
cause every order issued under this clause
to be laid before each House of Parliament."
4. The circulars which are the subject matter of this
petition read as under:
(5 of 89)
[ITA-575/2008]
"INSTRUCTION NO.3/2011
(F.NO.279/MISC.142/2007-1TJ)
SECTION 268A OF THE INCOME-TAX
ACT,1961- APPEALS AND REVISION-
FILING OF APPEAL OR APPLICATION
FOR REFERENCE BY INCOME-TAX
AUTHORITY- REVISION OF MONETARY
LIMITS FOR FILING OF APPEALS BY THE
DEPARTMENT BEFORE INCOME TAX
APPELLATE TRIBUNAL, HIGH COURTS
AND SUPREME COURT- MEASURES FOR
REDUCING LITIGATION
Reference is Invited to Board's instruction
No. 5/2008 dated 15-5-2008 wherein
monetary limits and other conditions for
filing departmental appeals (In Income-tax
matters) before Appellate Tribunal, High
Courts and Supreme Court were specified.
2. In supersession of the above instruction,
it has been decided by the Board that
departmental appeals may be filed on merits
before Appellate Tribunal, High Courts and
Supreme Court keeping in view the
monetary limits and conditions specified
below.
3. Henceforth appeals shall not be filed in
cases where the tax effect does not exceed
the monetary limits given hereunder:--
S. Appeals in Income-tax matters Monetary
No. Limit (In Rs.)
1. Appeal before Appellate Tribunal 3,00,000
2. Appeal u/s 260A before High Court 10,00,000
3. Appeal before Supreme Court 25,00,000
It is clarified that an appeal should not be
filed merely because the tax effect in a case
exceeds the monetary limits prescribed
above. Filing of appeal in such cases is to be
decided on merits of the case.
4. For this purpose, "tax effect" means the
difference between the tax on the total
income assessed and the tax that would
have been chargeable had such total income
been reduced by the amount of income in
respect of the issues against which appeal is
intended to be filed (hereinafter referred to
(6 of 89)
[ITA-575/2008]
as "disputed Issues"). However the tax will
not include any interest thereon, except
where chargeability of interest itself is in
dispute. In case the chargeability of interest
is the issue under dispute, the amount of
interest shall be the tax effect. In cases
where returned loss is reduced or assessed
as income, the tax effect would include
notional tax on disputed additions. In case
of penalty orders, the tax effect will mean
quantum of penalty deleted or reduced in
the order to be appealed against.
5. The Assessing Officer shall calculate the
tax effect separately for every assessment
year in respect of the disputed issues in the
case of every assessee. If, in the case of an
assessee, the disputed issues arise in more
than one assessment year, appeal, can be
filed in respect of such assessment year or
years in which the tax effect in respect of
the disputed issues exceeds the monetary
limit specified in para 3. No appeal shall be
filed in respect of an assessment year or
years in which the tax effect is less than the
monetary limit specified in para 3. In other
words, henceforth, appeals can be filed only
with reference to the tax effect in the
relevant assessment year. However, in case
of a composite order of any High Court or
appellate authority, which involves more
than one assessment year and common
issues in more than one assessment year,
appeal shall be filed in respect of all such
assessment years even if the 'tax effect' is
less than the prescribed monetary limits in
any of the year(s), if it is decided to file
appeal in respect of the year(s) in which 'tax
effect' exceeds the monetary limit
prescribed. In case where a composite
order/judgment involves more than one
assessee, each assessee shall be dealt with
separately.
6. In a case where appeal before a Tribunal
or a Court is not filed only on account of the
(7 of 89)
[ITA-575/2008]
tax effect being less than the monetary limit
specified above, the Commissioner of
Income-tax shall specifically record that
"even though the decision is not acceptable,
appeal is not being filed only on the
consideration that the tax effect is less than
the monetary limit specified in this
instruction". Further, in such cases, there will
be no presumption that the Income-tax
Department has acquiesced in the decision
on the disputed issues. The Income-tax
Department shall not be precluded from
filing an appeal against the disputed issues
in the case of the same assessee for any
other assessment year, or in the case of any
other assessee for the same or any other
assessment year, if the tax effect exceeds
the specified monetary limits.
7. In the past, a number of instances have
come to the notice of the Board, whereby an
assessee has claimed relief from the Tribunal
or the Court only on the ground that the
Department has implicitly accepted the
decision of the Tribunal or Court in the case
of the assessee for any other assessment
year or in the case of any other assessee for
the same or any other assessment year, by
not filing an appeal on the same disputed
issues. The Departmental
representatives/counsels must make every
effort to bring to the notice of the Tribunal
or the Court that the appeal in such cases
was not filed or not admitted only for the
reason of the tax effect being less than the
specified monetary limit and, therefore, no
inference should be drawn that the decisions
rendered therein were acceptable to the
Department. Accordingly, they should
impress upon the Tribunal or the Court that
such cases do not have any precedent value.
As the evidence of not filing appeal due to
this instruction may have to be produced in
courts, the judicial folders in the office of
CSIT must be maintained in a Systemic
manner for easy retrieval.
(8 of 89)
[ITA-575/2008]
8. Adverse judgments relating to the
following issues should be contested on
merits notwithstanding that the tax effect
entailed is less than the monetary limits
specified in para 3 above or there is no tax
effect.
(a) Where the Constitutional validity of the
provisions of an Act or Rule are under
challenge, or
(b) Where Board's order, Notification,
Instruction or Circular has been held to be
illegal or ultra vires, or
(c) Where Revenue Audit objection in the
case has been accepted by the Department.
9. The proposal for filing Special Leave
Petition under Article 136 of the Constitution
before the Supreme Court should, in all
cases, be sent to the Directorate of Income-
tax (Legal & Research), New Delhi and the
decision to file Special Leave Petition shall
be in consultation with the Ministry of Law
and Justice.
10. The monetary limits specified in para 3
above shall not apply to writ matters and
direct tax matters other than Income-tax,
filing of appeals in other direct tax matters
shall continue to be governed by relevant
provisions of statute and rules. Further, filing
of appeal in cases of Income-tax, where the
tax effect is not quantifiable or not involved,
such as the case of registration of trusts or
institutions under section 12A of the IT Act,
1961, shall not be governed by the limits
specified in para 3 above and decision to file
appeal in such cases may be taken on merits
of a particular case.
11. This instruction will apply to appeals
filed on or after 9th February 2011.
However, the cases where appeals have
been filed before 9th February 2011 will
be governed by the instructions on this
(9 of 89)
[ITA-575/2008]
subject, operative at the time when such
appeal was filed.
12. This issues under section 268A(1) of the
Income-tax Act, 1961."
"Circular No. 21/2015
F No 279/Misc. 142/2007-ITJ (Pt
Government of India
Ministry of Finance
Department of Revenue
Central Board Direct Taxes
New Delhi the 10th December, 2015
Subject: Revision of monetary limits for
filing of appeals by the Department before
Income Tax Appellate Tribunal and High
Courts and SLP before Supreme Court -
measures for reducing litigation - Reg -
Reference is invited to Board's instruction
No 5/2014 dated 10.07.2014 wherein
monetary limits and other conditions for
filing departmental appeals (in Income-tax
matters) before Appellate Tribunal and High
Courts and SLP before the Supreme Court
were specified.
2. In supersession of the above instruction,
it has been decided by the Board that
departmental appeals may be filed on
merits before Appellate Tribunal and High
Courts and SLP before the Supreme Court
keeping in view the monetary limits and
conditions specified below.
3. Henceforth, appeals/ SLPs shall not be
filed in cases where the tax effect does not
exceed the monetary limits given
hereunder: -
S.No Appeals in Income-tax matters Monetary Limit (in
Rs.)
1. Before Appellate Tribunal 10,00,000/-
(10 of 89)
[ITA-575/2008]
2. Before High Court 20,00,000/-
3. Before Supreme Court 25,00,000/-
It is clarified that an appeal should not be
filed merely because the tax effect in a case
exceeds the monetary limits prescribed
above. Filing of appeal in such cases is to
be decided on merits of the case.
4. For this purpose, "tax effect" means the
difference between the tax on the total
income assessed and the tax that would
have been chargeable had such total
income been reduced by the amount of
income in respect of the issues against
which appeal is intended to be filed
(hereinafter referred to as "disputed
issues"). However the tax will not include
any interest thereon, except where
chargeability of interest itself is in dispute.
In case the chargeability of interest is the
issue under dispute, the amount of interest
shall be the tax effect. In cases where
returned loss is reduced or assessed as
income, the tax effect would include
notional tax on disputed additions. In case
of penalty orders, the tax effect will mean
quantum of penalty deleted or reduced in
the order to be appealed against.
5. The Assessing Officer shall calculate the
tax effect separately for every assessment
year in respect of the disputed issues in the
case of every assessee. lf, in the case of an
assessee, the disputed issues arise in more
than one assessment year, appeal, can be
filed in respect of such assessment year or
years in which the tax effect in respect of
the disputed issues exceeds the monetary
limit specified in para 3. No appeal shall be
filed in respect of an assessment year or
years in which the tax effect is less than the
monetary limit specified in para 3. In other
words, henceforth, appeals can be filed only
with reference to the tax effect in the
relevant assessment year. However, in case
(11 of 89)
[ITA-575/2008]
of a composite order of any High Court or
appellate authority, which involves more
than one assessment year and common
issues in more than one assessment year,
appeal shall be filed in respect of all such
assessment years even if the 'tax effect' is
less than the prescribed monetary limits in
any of the year(s), if it is decided to file
appeal in respect of the year(s) in which
'tax effect' exceeds the monetary limit
prescribed. In case where a composite
order/ judgement involves more than one
assessee, each assessee shall be dealt with
separately.
6. In a case where appeal before a Tribunal
or a Court is not filed only on account of the
tax effect being less than the monetary
limit specified above, the Commissioner of
Income-tax shall specifically record that
"even though the decision is not acceptable,
appeal is not being filed only on the
consideration that the tax effect is less than
the monetary limit specified in this
instruction". Further, in such cases, there
will be no presumption that the Income-tax
Department has acquiesced in the decision
on the disputed issues. The Income-tax
Department shall not be precluded from
filing an appeal against the disputed issues
in the case of the same assessee for any
other assessment year, or in the case of any
other assessee for the same or any other
assessment year, if the tax effect exceeds
the specified monetary limits.
7. In the past, a number of instances have
come to the notice of the Board, whereby
an assessee has claimed relief from the
Tribunal or the Court only on the ground
that the Department has implicitly accepted
the decision of the Tribunal or Court in the
case of the assessee for any other
assessment year or in the case of any other
assessee for the same or any other
assessment year, by not filing an appeal on
the same disputed issues. The
Departmental representatives/counsels
(12 of 89)
[ITA-575/2008]
must make every effort to bring to the
notice of the Tribunal or the Court that the
appeal in such cases was not filed or not
admitted only for the reason of the tax
effect being less than the specified
monetary limit and, therefore, no inference
should be drawn that the decisions
rendered therein were acceptable to the
Department. Accordingly, they should
impress upon the Tribunal or the Court that
such cases do not have any precedent
value. As the evidence of not filing appeal
due to this instruction may have to Page 2
of 4 be produced in courts, the judicial
folders in the office of CSIT must be
maintained in a systemic manner for easy
retrieval.
8. Adverse judgments relating to the
following issues should be contested on
merits notwithstanding that the tax effect
entailed is less than the monetary limits
specified in para 3 above or there is no tax
effect:
(a) Where the Constitutional validity of the
provision under challenge, or
(b) Where Board's order, Notification,
Instruction or Circular has been held to be
illegal or ultra vires, or
(c) Where Revenue Audit objection in the
case has been accepted by the Department,
or
(d) Where the addition relates to
undisclosed foreign assets/ bank accounts.
9. The monetary limits specified in para 3
above shall not apply to writ matters and
direct tax matters other than Income tax.
Filing of appeals in other Direct tax matters
shall continue to be governed by relevant
provisions of statute & rules. Further, filing
of appeal in cases of Income Tax, where the
tax effect is not quantifiable or not involved,
such as the case of registration of trusts or
institutions under se the IT Act, 1961, shall
not be governed by the limits specified in
(13 of 89)
[ITA-575/2008]
para 3 above and decision to file appeal in
such cases may be taken on merits of a
particular case.
10. This instruction will apply
retrospectively to pending appeals and
applications be filed henceforth in High
Courts/ Tribunals. Pending appeals below
the specified tax limits in para 3 above may
be withdrawn/ not pressed. Appeals before
the Supreme Court will be governed by the
instructions on this subject, operative at the
time when such appeal was filed.
11. This issue under Section 268A (1) of
the Income-tax Act 1961."
5. Counsel for the Department Mr. R.B. Mathur has relied
upon the following decisions:
(i) K.P. Varghese vs. Income Tax Officer,
Ernakulam and Anr.(04.09.1981 - SC),
[1981]131ITR597(SC)
11. There is also one other circumstance which
strongly reinforces the view we are taking in
regard to the construction of Sub-section (2).
Soon after the introduction of Sub-section (2),
the Central Board of Direct Taxes, in exercise of
the power conferred under Section 119 of the
Act, issued a circular dated 7th July, 1964
explaining the scope and object of Sub-section
(2) in the following words:
Section 13 of the Finance Act has introduced a
new Sub-section (2) in Section 52 of the
Income-tax Act with a view to countering
evasion of tax on capital gains through the
device of an under-statement of the full value of
the consideration received or receivable on the
transfer of a capital asset.
The provision existing in Section 52 of the
Income-tax Act before the amendment (which
has now been remembered as Sub-section (2)
enables the computation of capital gains arising
on transfer of a capital asset with reference to
(14 of 89)
[ITA-575/2008]
its fair market value as on the date of its
transfer, ignoring the amount of the
consideration shown by the assessee, only if the
following two conditions are satisfied:
(a) the transferee is a person who is directly or
indirectly connected with assessee, and
(b) the Income-tax Officer has reason to believe
that the transfer was effected with object of
avoidance or reduction of the liability of
assessee to tax on capital gains.
In view of these conditions, this provision has a
limited operation and does not apply to other
cases where the tax liability on capital gains
arising on transfer of capital assets between
parties not connected with each other, is sought
to be avoided or reduced by an under-statement
of the consideration paid for the transfer of the
asset.
The circular also drew the attention of Income-
tax Authorities to the assurance given by the
Finance Minister in his speech that Sub-section
(2) was not aimed at perfectly honest and
bonafide transactions where the consideration in
respect of the transfer was correctly disclosed or
declared by the assessee, but was intended to
deal only with cases where the consideration for
the transfer was under-stated by the assessee
and was shown at a lesser figure than that
actually received by him. It appears that despite
this circular, the Income-tax Authorities in
several cases levied tax by invoking the
provision in Sub-section (2) even in cases where
the transaction was perfectly, honest and
bonafide and there was no under-statement of
the consideration. This was quite contrary to the
instructions issued in the circular which was
binding on the Tax Department and the Central
Board of Direct Taxes was, therefore,
constrained to issue another circular on 14th
January, 1974 whereby the Central Board, after
reiterating the assurance given by the Finance
Minister in the course of his speech pointed out:
It has come to the notice of the Board that in
some cases the Income-tax Officers have
(15 of 89)
[ITA-575/2008]
invoked the provisions of Section 52(2) even
when the transactions were bonaflde. In this
context reference is invited to the decision of the
Supreme Court in Navnitlal C. Jhaveri v. K.K.
Sen [1965]56ITR198(SC) and Ellerman Lines
Ltd. v. Commissioner of Income-tax, West
Bengal [1971]82ITR913(SC) wherein it was held
that the circular issued by the Board would be
binding on all officers and persons employed in
the execution of the Income-tax Act. Thus, the
Income-tax Officers are bound to follow the
instructions issued by the Board.
and instructed the Income-tax Officers that
"while completing the assessments they should
keep in mind the assurance given by the Minister
of Finance and the provisions of Section 52(2) of
the Income-tax Act may not be invoked in cases
of bonafide trans-actions". These two circulars of
the Central Board of Direct Taxes are, as we
shall presently point out, binding on the Tax
Department in administering or executing the
provision enacted in Sub-section (2), but quite
apart from their binding character, they are
clearly in the nature of contemporanea
exposition furnishing legitimate aid in the
construction of Sub-section (2). The rule of
construction by reference to contemporanea
exposition is a well established rule for
interpreting a statute by reference to the
exposition it has received from contemporary
authority, though it must give way where the
language of the statute is plain and
unambiguous. This rule has been succinctly and
felicitously expressed in Crawford on Statutory
Construction (1940 ed) where it is stated in
paragraph 219 that "administrative construction
(i.e. contemporaneous construction placed by
administrative or executive officers charged with
executing a statute) generally should be clearly
wrong before it is overturned; such a
construction, commonly referred to as practical
construction, although non-controlling, is
nevertheless entitled to considerable weight; it
is highly persuasive." The validity of this rule
was also recognised in Baleshwar Bagarti v.
(16 of 89)
[ITA-575/2008]
Bhagirathi Dass ILR 35 Cal. 701 where
Mookerjee, J. stated the rule in these terms:
It is a well-settled principle of interpretation that
courts in construing a statute will give much
weight to the interpretation put upon it, at the
time of its enactment and since, by those whose
duty it has been to construe, execute and apply
it.
and this statement of the rule was quoted with
approval by this Court in Deshbandhu Guptu &
Co. v. Delhi Stock Exchange Association Ltd.
[1979]3SCR373 . It is clear from these two
circulars that the Central Board of Direct Taxes,
which is the highest authority entrusted with the
execution of the provisions of the Act,
understood Sub-section (2) as limited to cases
where the consideration for the transfer has
been under-stated by the assessee and this
must be regarded as a strong circumstance
supporting the construction which we are placing
on that sub-section.
12. But the construction which is commending
itself to us does not rest merely on the principle
of contemporanea exposition. The two circulars
of the Central Board of Direct Taxes to which we
have just referred are legally binding on the
Revenue and this binding character attaches to
the two circulars even if they be found not in
accordance with the correct interpretation of
Sub-section (2) and they depart or deviate from
such construction. It is now well-settled as a
result of two decisions of this Court, one in
Navnitlal C. Jhaveri v. K.K. Sen
[1965]56ITR198(SC) and the other in Ellerman
Lines Ltd. v. Commissioner of Income-tax, West
Bengal [1971]82ITR913(SC) that circulars
issued by the Central Board of Direct Taxes
under Section 119 of the Act are binding on all
Officers and persons employed in the execution
of the Act even if they deviate from the
provisions of the Act. The question which arose
in Navnitlal C. Jhaveri's case (supra) was in
regard to the constitutional validity of Sections
2(6A)(e) and 12(1B) which were introduced in
the Indian Income Tax Act 1922 by the Finance
(17 of 89)
[ITA-575/2008]
Act 1955 with effect from 1st April, 1955. These
two sections provided that any payment made
by a closely held company to its shareholder by
a way of advance or loan to the extent to which
the company possesses accumulated profits
shall be treated as dividend taxable under the
Act and this would include any loan or advance
made in any previous year relevant to any
assessment year prior to the assessment year
1955-56, if such loan or advance remained
outstanding on the first day of the previous year
relevant to the assessment year 1955-56. The
constitutional validity of these two sections was
assailed on the ground that they imposed
unreasonable restrictions on the fundamental
right of the assessee under Article 19(1)(f) and
(g) of the Constitution by taxing outstanding
loans or advances of past years as dividend. The
Revenue however relied on a circular issued by
the Central Board of Revenue under Section 5(8)
of the Indian Income-tax Act 1922 which
corresponded to Section 119 of the Present Act
and this circular provided that if any such
outstanding loans or advances of past years
were repaid on or before 30th June 1955, they
would not be taken into account in determining
the tax liability of the shareholders to whom
such loans or advances were given. This circular
was clearly contrary to the plain language of
Section 2(6A)(e) and Section 121(B), but even
so this Court held that it was binding on the
Revenue and since "past transactions which
would normally have attracted the stringent
provisions of Section 12(1B) as it was introduced
in 1955, were substantially granted exemption
from the operation of the said provisions by
making it clear to all the companies and their
shareholders that if the past loans were
genuinely refunded to the companies they would
not be taken into account under Section 12(1B)"
Sections 2(6A)(e) and 12(1B) did not suffer
from the vice of unconstitutionality. This decision
was followed in Ellerman Lives case (supra)
where referring to another circular issued by the
Central Board of Revenue under Section 5(8) of
the Indian Income Tax Act 1922 on which
(18 of 89)
[ITA-575/2008]
reliance was placed on behalf of the assessee,
this Court observed:
Now, coming to the question as to the effect of
instructions issued under Section 5(8) of the
Act, this Court observed in Navnit Lal C. Jhaveri
v. K.K. Shah Appellate Assistant Commissioner,
Bombay.
It is clear that a circular of the kind which was
issued by the Board would be binding on all
officers and persons employed in the execution
of the Act under Section 5(8) of the Act. This
circular pointed out to all the officers that it was
likely that some of the companies might have
advanced loans to their shareholders as a result
of genuine transactions of loans, and the idea
was not to affect such transactions and not to
bring them within the mischief of the new
provision.
The directions given in that circular clearly
deviated from the provisions of the Act, yet this
Court held that circular was binding on the
Income-tax Officers.
The two circulars of the Central Board of Direct
Taxes referred to above must therefore be held
to be binding on the Revenue in the
administration or implementation of Sub-section
(2) and this sub section must be read as
applicable only to cases where there is under-
statement of the consideration in respect of the
transfer.
(ii) Commissioner of Central Excise, Bolpur vs. Ratan
Melting and Wire Industries (14.10.2008 - SC), (2008) 13
SCC 1.
5. Learned counsel for the assessee on the
other hand submitted that once the circular
has been issued it is binding on the revenue
authorities and even if it runs counter to
the decision of this Court, the revenue
authorities cannot say that they are not
bound by it. The circulars issued by the
(19 of 89)
[ITA-575/2008]
Board are not binding on the assessee but
are binding on revenue authorities. It was
submitted that once the Board issues a
circular, the revenue authorities cannot take
advantage of a decision of the Supreme
Court. The consequences of issuing a
circular are that the authorities cannot act
contrary to the circular. Once the circular is
brought to the notice of the Court, the
challenge by the revenue should be turned
out and the revenue cannot lodge an appeal
taking the ground which is contrary to the
circular.
6. Circulars and instructions issued by the
Board are no doubt binding in law on the
authorities under the respective statutes,
but when the Supreme Court or the High
Court declares the law on the question
arising for consideration, it would not be
appropriate for the Court to direct that the
circular should be given effect to and not
the view expressed in a decision of this
Court or the High Court. So far as the
clarifications/circulars issued by the Central
Government and of the State Government
are concerned they represent merely their
understanding of the statutory provisions.
They are not binding upon the court. It is
for the Court to declare what the particular
provision of statute says and it is not for
the Executive. Looked at from another
angle, a circular which is contrary to the
statutory provisions has really no existence
in law.
7. As noted in the order of reference the
correct position vis-à-vis the observations in
para 11 of Dhiren Chemical's case (supra)
has been stated in Kalyani's case (supra). If
the submissions of learned Counsel for the
assessee are accepted, it would mean that
there is no scope for filing an appeal. In
that case, there is no question of a decision
of this Court on the point being rendered.
Obviously, the assessee will not file an
appeal questioning the view expressed vis-
a-vis the circular. It has to be the revenue
(20 of 89)
[ITA-575/2008]
authority who has to question that. To lay
content with the circular would mean that
the valuable right of challenge would be
denied to him and there would be no scope
for adjudication by the High Court or the
Supreme Court. That would be against very
concept of majesty of law declared by this
Court and the binding effect in terms of
Article 141 of the Constitution.
(iii) Kalyani Packaging Industry vs. Union of India (UOI)
(06.05.2004 - SC), (2004) 6 SCC 719
4. This Court has, in the case of Collector of
Central Excise, Vadodara v. Dhiren Chemical
Industries reported in
MANU/SC/0787/2001, clarified that when
an exemption Notification uses the words
"has already been paid", the benefit of that
Notification would only be available if duty
has, as a matter of fact, been paid and has
been paid at the appropriate or correct rate.
It is held that where the raw material is not
liable to excise duty or to "nil" rate of duty
then, as a matter of fact, no duty is paid
and to such goods benefit of an exemption
Notification will not be available.
5. It was however sought to be submitted
that in Para 9 of Dhiren Chemical's case
(supra) it has been clarified that in spite of
the interpretation given by this Court, if
there are any circulars issued by the Central
Board of Excise and Customs which place a
different interpretation, that interpretation
would be binding upon the Revenue. It is
submitted that Dhiren Chemical's case thus
lays down that an interpretation given in
Circulars would prevail over the
interpretation given by a Constitution Bench
of this Court. In support of this submission
reliance is placed on a decision dated 22nd
January, 2004 in 2004(164)ELT394(SC)
[Civil Appeal No. 9924 of 1996] entitled
Collector of Central Excise, Meerut v. Maruti
(21 of 89)
[ITA-575/2008]
Foam (P) Ltd. wherein relying upon Para 9
of Dhiren Chemical's case it is held that the
Circular would be binding on the Revenue.
6. We have noticed that Para 9 of Dhiren
Chemical's case is being misunderstood. It
therefore becomes necessary to clarify Para
9 of Dhiren Chemical's case. One of us
(Variava, J.) was a party to the Judgment of
the Dhiren Chemical's case and knows what
was the intention in incorporating Para 9. It
must be remembered that law laid down by
this Court is law of the land. The law so laid
down is binding on all Courts/Tribunals and
Bodies. It is clear that circulars of the Board
cannot prevail over the law laid down by
this Court. However, it was pointed out that
during hearing of Dhiren Chemical's case
because of circulars of the Board in many
cases the Department had granted benefits
of exemption Notifications. It was submitted
that on the interpretation now given by this
Court in Dhiren Chemical's case, the
Revenue was likely to reopen cases. Thus
Para 9 was incorporated to ensure that
cases where benefits of exemption
Notification had already been granted, the
Revenue would remain bound. The purpose
was to see that such cases were not
reopened. However, this did not mean that
even in cases where Revenue/Department
had already contended that the benefit of
an exemption Notification was not available,
and the matter was sub-judice before a
Court or a Tribunal, the Court or Tribunal
would also give effect to circulars of the
Board in preference to a decision of the
Constitution Bench of this Court. Where as
a result of dispute the matter is sub-judice
a Court/Tribunal is, after Dhiren Chemical's
case, bound to interpret as set out in that
judgment. To hold otherwise and to
interpret in the manner suggested would
mean that Courts/Tribunals have to ignore a
judgment of this Court and follow circulars
of the Board. That was not what was meant
by Para 9 of Dhiren Chemical's case.
(22 of 89)
[ITA-575/2008]
(iv) Commissioner of Income Tax (CNTL), Ludhiana vs.
Hero Cycles Pvt. Ltd., Ludhiana (28.08.1997 - SC) [1997]
228 ITR 463 (SC).
13. We have passed similar orders in a
large number of cases but in this case on
behalf of the assessee it has been
contended that there is a circular issued by
Central Board of Direct Taxes, New Delhi
which should conclude the matter. A copy of
the so-called circular dated 9th April,
1981/13th April, 1981 has been handed
over in Court. It does not appear that the
document handed over in Court is a copy of
Circular at all. It is a letter written to one
Shri D'Souza with reference to a letter
written by his predecessor.
14. Moreover, it is well-settled that circulars
can bind the Income-tax Officer but will not
bind the appellate authority or the Tribunal
or the Court or even the assessee. There is
nothing in the alleged circular which
supports the contention of the assessee. It
merely says that each case has to be
examined and the issue would be basically
a find of fact. The assessee had not made
his claim before the Income-tax Officer by
relying on this Circular.
(v) Bengal Iron Corporation and another vs. Commercial
Tax Officer and others (27.04.1993 - SC), AIR 1993 SC
2414.
18. So far as clarifications/circulars issued
by the Central Government and/or State
Government are concerned, they represent
merely their understanding of the statutory
provisions. They are not binding upon the
Courts. It is true that those clarifications
and circulars were communicated to the
concerned dealers but even so nothing
(23 of 89)
[ITA-575/2008]
prevents the State from recovering the tax,
if in truth such tax was leviable according to
law. There can be no estoppel against the
statute, The understanding of the
government, whether in favour or against
the assessee, is nothing more than its
understanding and opinion. It is doubtful
whether such clarifications and circulars
bind the quasi-judicial functioning of the
authorities under the Act. while acting in
quasi-judicial capacity, they are bound by
law and not by any administrative
instructions, opinions, clarifications or
circulars. Law is what is declared by this
Court and the High Court - to wit, it is for
this Court and the High Court to declare
what does a particular provision of statute
say, and not for the executive. Of course,
the Parliament/Legislature never speaks or
explains what does a provision enacted by it
mean. (See Sanjeev Coke Manufacturing
Company v. Bharat Coking Coal Ltd. and
Anr. : [1983]1SCR1000 ).
19. Now coming to G.O. Ms. 383, it is
undoubtedly of a statutorily character but,
as explained hereinbefore the power under
Section 42 cannot be utilised for altering
the provisions of the Act but only for giving
effect to the provisions of the Act. Since the
goods manufactured by the appellant are
different and distinct goods from cast iron,
their sale attracts the levy created by the
Act. In such a case, the government can
not say, in exercise of its power under
Section 42(2) that the levy created by the
Act shall not be effective or operative. In
other words, the said power cannot be
utilised for dispensing with the levy created
by the Act, over a class of goods or a class
of persons, as the case may be. For doing
that, the power of exemption conferred by
Section 9 of the A.P. Act has to be
exercised. Though it is not argued before
us, we tried to see the possibility but we
find it difficult to relate the order in G.O.
Ms. 383 to the power of the Government
(24 of 89)
[ITA-575/2008]
under Section 9, apart from the fact that
the nature and character of the power
under Section 42 is different from the one
conferred by Section 9. As exemption under
Section 9 has to be granted not only by a
notification, it is also required to be
published in the Andhra Pradesh Gazette. It
is not suggested, nor is it brought to our
notice, that G.O. Ms. 383 was published in
the Andhra Pradesh Gazette. This does not,
however, preclude the Government of
Andhra Pradesh from exercising the said
power of exemption, in accordance with
law, if it is so advised. We need express no
opinion on that scores.
6. Mr. Sameer Jain appearing for the department has
relied on the following decisions:
(i) Commissioner of Central Excise, Bolpur vs. Ratan
Melting and Wire Industries, Calcutta (23.02.2005 - SC)
2005 (181) ELT 364 (SC)
3. A disparate view has been taken in CCE v.
Maruti Foam Pvt. Ltd. 2004(164)ELT394(SC) and
Commissioner of Customs, Calcutta and Ors. v.
Indian Oil Corporation Ltd. and Anr.
[2004]267ITR272(SC) . It appears to us that the
law declared by this Court is binding on the
Revenue/Department and once the position in
law is declared by this Court, the contrary view
expressed in the circular should per force lose its
validity and becomes non est.
4. Though the view expressed in Kalyani's case
(supra), and our view about invalidation might
clarify the observations in para 11 of Dhiren
Chemical's case (supra), we feel that the earlier
judgment in Dhiren Chemical's case (supra),)
being by a Bench of five Judges, it would be
appropriate for a bench of similar strength to
clarify the position. In the circumstances, we
refer the matter to a larger bench of five Hon'ble
(25 of 89)
[ITA-575/2008]
Judges. Let the papers be placed before Hon'ble
the Chief Justice of India for constituting an
appropriate Bench.
(ii) CIT, Jaipur-III vs. M/S Saraf Exports, ITA No. 7/2014,
04.02.2016
17. We may reiterate and also hasten to add
that if the initial assessment order is legally
unsustainable & perverse, it need not be
followed though for diverse reasons may have
attained finality. It may be true that consistency
in order is required to be maintained but in our
view the claim allowed by the Tribunal in the
assessment year 2005-06 and 2006-07 is not
sustainable and Tribunal has decided contrary to
the law laid down by Apex Court in Liberty India
(Supra) and as the said judgment was available
before the ITAT who decided the appeals for the
Assessment Year 2005-06 and 2006-07. this
also highlights that it requires extra cautious
approach by the authorities (Revenue) and
standing counsels which should not sweep the
matters under the carpet taking advantage of
monetary limits fixed by CBDT. This Court in
Commissioner of Income Tax vs, M/s Garment
Cradts in DB ITA No.42/2008 decided on
12.01.2016 held that if a substantial question is
covered by the judgment of the Apex Court and
this Court and is no more res integra then the
circular of Central Board of Direct Taxes about
tax effect may not be binding to non-suit the
Revenue.
(iii) CIT vs. M/s Gad Fashion, DB ITA No. 937/2008 decided
on 26.04.2016
7. Insofar as the argument of the learned
counsel for the assessee about the appeals
involving tax effect being less than Rs. 20 lac is
concerned, this bCOurt in Garment Crafts
(supra) and M/s Saraf Exports (supra), has
already taken a view that if an issue/question
issqarely covered by judgment of the Apex Court
(26 of 89)
[ITA-575/2008]
and of this Court directly, then the Circular is
inapplicable. Accordingly the argument of the
learned counsel for the assessee in this regard is
also rejected. Taking into consideration the
above judgments, the question of law is
answered in favour of the Revenue and against
the assessee.
7. Mr. Anuroop Singhi appearing for the Department has
relied upon the following decisions:
(i) CIT vs. Udaipur Mineral Development Syndicate (P) Ltd.,
DB ITR No. 32/1995, decided on 12.11.2014
"12. We would first deal with the
preliminary objection of the ld. counsel for
the assessee as to whether the tax effect
being minimal the reference at the instance
of this Court deserve consideration.
Although the judgments cited by counsel for
the assessee has observed that it is
applicable not only to the appeals but the
old pending references as well, but the
other view is that the position has to be
seen and has to be governed at the time
when the reference application was
moved/filed and is thus inapplicable for the
old pending references/reference
applications. This Court, in the case of CIT
v. Rajasthan Patrika Ltd: [2002] 258 ITR
300/125 Taxman 819 (Raj.), came to the
following:--
"It is true that in the case of the Supreme
Court, which has been referred to by Mr.
Ranka, learned counsel for the assessee,
their Lordships held that a circular, which
interprets the statute for the uniformity of
the decisions in the Department. But the
circular before us is as to whether the
appeal is to be filed or not ? These are
administrative instructions and in spite of
(27 of 89)
[ITA-575/2008]
these administrative instructions if the
department prefers to file an appeal or
make a reference to this Court, in our view,
on such administrative instructions the
appeal of the Department should not be
dismissed or the reference should not be
rejected. We do not find any infirmity in
disposing of the appeal on the merits."
13. This Court again, in the case of CIT v.
Registhan (P.) Ltd [2003] 132 Taxman 894
(Raj.) also came to the said conclusion of
disposal on merits.
14. This Court, in the case of CIT v.
Registhan (P.) Ltd: [2004] 186 CTR 260
(Raj.), again held that if the department
wants to file reference application, this
Court should entertain despite tax amount
involved being minimal and directed the
Tribunal to refer the question at the
instance of this Court.
15. Punjab and Haryana High Court (Full
Bench) also, in the case of CIT v. Varindera
Construction Co.: [2011] 331 ITR 449/,
after analysing the judgments and the
circular of the CBDT, came to the conclusion
that the circular, laying down monetary
limit, controls filing of the appeals but not
their hearing. The appeals, filed as per the
applicable limit, at the time of filing, cannot
be governed by the circular applicable at
the time of hearing and Punjab and
Haryana High Court dissented from the
view of the Bombay High Court and
observed that the object of section 268A is
to govern monetary limit for filing of the
appeals and there is no scope of reaching
the circular as being applicable to pending
appeals. It further expressed that even
Bombay High Court held that the circular
was not retrospective and it only observed
that having regard to the falling money
value and chocking court docket, policy of
monetary limit was needed to be adopted
for pending matters.
(28 of 89)
[ITA-575/2008]
16. The Hon'ble Apex Court, in the case of
CIT v. Surya Herbal Ltd: [2013] 350 ITR
300 has expressed that the circular dt.
09/02/2011 issued by the Board should not
be applied ipso facto, though it also
observed that when the matter has a
cascading effect in which a common
principle may be involved in a subsequent
group of matters or a large number of
matters. In such cases if the attention of
the High Court is drawn, the High Court will
not apply the circular ipso facto for the
purpose.
17. Thus, we are of the view that once
reference has been admitted by this Court
u/s256(1) or 256(2), then the matter
cannot be disposed off merely because the
tax effect is minimal. We dissent with the
view expressed by the Bombay High Court
and M.P. High Court, relied upon by counsel
for the assessee as the judgment rendered
by this Court in Rajasthan Patrika Ltd.
(supra) and Registhan (P.) Ltd. (supra) is
binding on us on the self-same issue and
we would choose to follow the view
rendered by this court. In our view, once a
reference application of the Revenue had
been allowed by this Court and reference
was called at the instance of this Court, the
question of law framed has to be answered
on merits, thus the preliminary objection of
the counsel for the assessee is rejected."
(ii) CIT vs. Surya Herbal Ltd., [2013] 350 ITR 300 (SC)
"2. Liberty is given to the Department to
move the High Court pointing out that the
Circular, dt. 9th Feb., 2011, should not be
applied ipso facto, particularly, when the
matter has a cascading effect. There are
cases under the IT Act, 1961, in which a
common principle may be involved in
subsequent group of matters or large
number of matters. In our view, in such
cases if attention of the High Court is
drawn, the High Court will not apply the
(29 of 89)
[ITA-575/2008]
circular ipso facto. For that purpose, liberty
is granted to the Department to move the
High Court in two weeks."
8. Mr. Sanjay Jhanwar appearing on behalf of the assessee
has relied upon the following decisions:
(i) Commissioner of Income Tax-II and Ors. vs. Shyam Biri
Works (06.05.2015 - ALLHC)
5. In 2009, the Central Government
formulated a National Litigation Policy to
reduce the cases pending in various Courts
of India in an attempt to reduce the
average pendency time from 15 years to 3
years. The National Litigation Policy reads
as under:-
"National Litigation Policy
In this background, it is necessary to notice
the 'National Litigation Policy Document
Released'. The Centre has formulated the
National Litigation Policy to reduce the
cases pending in various courts in India
under the National Legal Mission to reduce
average pendency time from 15 years to 3
years. It reads as under:
'Introduction
Whereas at the National consultation for
strengthening the judiciary toward reducing
pendency and delays held on October
24/25, 2009, the Union Minister of Law and
Justice, presented resolutions which were
adopted by the entire conference
unanimously.
And wherein the said resolution
acknowledged the initiative undertaken by
(30 of 89)
[ITA-575/2008]
the Government of India to frame the
National Litigation Policy with a view to
ensure conduct of responsible litigation by
the Central Government and urges every
State Government to evolve similar policies.
The National Litigation Policy is as follows:
The Vision/Mission
1. The National Litigation Policy is based on
the recognition that the Government and its
various agencies are the pre-dominant
litigants in courts and Tribunals in the
country. Its aim is to transform the
Government into an efficient and
responsible litigant. This policy is also based
on the recognition that it is the
responsibility of the Government to protect
the rights of citizens, to respect
fundamental rights and those in charge of
the conduct of the Government litigation
should never forget this basic principle.
"Efficient litigant" means
Focusing on the core issues involved in the
litigation and addressing them squarely.
Managing and conducting litigation in a
cohesive, co-ordinated and time-bound
manner.
Ensuring that good cases are won and bad
cases are not needlessly persevered with.
A litigant who is represented by competent
and sensitive legal persons: competent in
their skills and sensitive to the facts that
the Government is not, an ordinary litigant
and that a litigation does not have to be
won at any cost.
"Responsible litigant" means
That litigation will not be resorted to for the
sake of litigating.
(31 of 89)
[ITA-575/2008]
That false pleas and technical points will not
be taken and shall be discouraged.
Ensuring that the correct facts and all
relevant documents will be placed before
the court.
That nothing will be suppressed from the
court and there will be no attempt to
mislead any court or tribunal.
That nothing will be suppressed from the
court and there will be no attempt to
mislead any court or tribunal.
2. The Government must cease to be a
compulsive litigant. The philosophy that
matters should be left to the courts for
ultimate decision has to be discarded. The
easy approach, "Let the court decide" must
be eschewed and condemned-
3. The purpose underlying this policy is also
to reduce Government litigation in courts so
that valuable court time would be spent in
resolving other pending cases so as to
achieve the goal in the National Legal
Mission to reduce the average pendency
time from 15 years to 3 years. Litigators on
behalf of the Government have to keep in
mind the principles in corporated in the
National mission for judicial reforms which
includes identifying bottlenecks which the
Government and its agencies may be
concerned with and also removing
unnecessary Government cases.
Prioritization in litigation has to be achieved
with particular emphasis on welfare
legislation, social reform, weaker sections
and senior citizens and other categories
requiring assistance must be given utmost
priority. In respect of filing of appeals in
revenue matter it is stated as under:
"(G) Appeals in revenue matters will
not be filed:
(a) if the stakes are not high and are less
than that amount to be fixed by the
Revenue authorities:
(32 of 89)
[ITA-575/2008]
(b) if the matter is covered by a series of
judgments of the Tribunal or of the High
Court which have held the field and which
have not been challenged in the Supreme
Court:
(c) where the assessee has acted in
accordance with long standing industry
practice:
(d) merely because of change of opinion on
the part of the jurisdictional officers.
Review of pending cases
(A) All pending cases involving the
Government will be reviewed. This due
diligence process shall involve drawing upon
statistics of all pending matters which shall
be provided for by all Government
departments (including public sector
undertakings). The Office of the Attorney
General and the Solicitor General shall also
be responsible for reviewing all pending
cases and filtering frivolous and vexatious
matters from the meritorious ones.
(B) Cases will be grouped and categorized.
The practice of grouping should be
introduced whereby cases should be
assigned a particular number of identity
according to the subject and statute
involved. In fact, further sub-grouping will
also be attempted. To facilitate this process,
standard forms must be devised which
lawyers have to fill up at the time of filing of
cases. Panels will be set up to implement
categorization, review such cases to identify
cases which can be withdrawn. These
include cases which are covered by
decisions of courts and cases which are
found without merit withdrawn. This must
be done in a time bound fashion."
6. This policy was formulated with the
purpose that the Central Government would
be a responsible litigant and would not be
involved in frivolous litigation, especially
(33 of 89)
[ITA-575/2008]
where the stakes were not high. The policy
aimed to transform the government into an
efficient and responsible litigant and urged
every State Government to evolve similar
policies. The policy defined the efficient
litigant to mean that the litigation should
not be resorted to for the sake of litigating
and that the government ceases to a
compulsive litigant. The underlying purpose
of the policy was to reduce the government
litigation in Courts so that valuable court
time was spent in resolving other pending
issues to enable the average pendency of a
case in a court reduced from 15 years to 3
years. The policy, therefore, provided that
the government would identify bottlenecks
and that the appeals would not be filed
where the stakes are not so high and was
less than by the amount fixed by the
revenue authorities. The policy also
formulated that all pending cases involving
the government would be reviewed to filter
frivolous and vexatious matters from the
meritorious one. Such cases so identified
would be withdrawn, which would also
include cases, which are covered by
previous decisions of Courts. Such
withdrawal of the cases would be done in a
time bound fashion.
______
11. Previously, only instructions were issued
by CBDT under Section 119 of the Act and,
in order to give it a legislative measure, a
new Section 268A was inserted by the
Finance Act, 2008 with retrospective effect
from 1st April, 1999 in the Income Tax Act,
1961. For ready reference, the said
provision is extracted hereunder:--
"Filing of appeal or application for reference
by income-tax authority.
268A. (1) The Board may, from time to
time, issue orders, instructions or directions
to other income-tax authorities, fixing such
monetary limits as it may deem fit, for the
(34 of 89)
[ITA-575/2008]
purpose of regulating filing of appeal or
application for reference by any income-tax
authority under the provisions of this
Chapter.
(2) Where, in pursuance of the orders,
instructions or directions issued under sub-
section (1), an income-tax authority has
not filed any appeal or application for
reference on any issue in the case of an
assessee for any assessment year, it shall
not preclude such authority from filing an
appeal or application for reference on the
same issue in the case of-
(a) the same assessee for any other
assessment year; or
(b) any other assessee for the same or any
other assessment year.
(3) Notwithstanding that no appeal or
application for reference has been filed by
an income-tax authority pursuant to the
orders or instructions or directions issued
under sub-section (1), it shall not be lawful
for an assessee, being a party in any appeal
or reference, to contend that the income-
tax authority has acquiesced in the decision
on the disputed issue by not filing an appeal
or application for reference in any case.
(4) The Appellate Tribunal or Court, hearing
such appeal or reference, shall have regard
to the orders, instructions or directions
issued under subsection (1) and the
circumstances under which such appeal or
application for reference was filed or not
filed in respect of any case.
(5) Every order, instruction or direction
which has been issued by the Board fixing
monetary limits for filing an appeal or
application for reference shall be deemed to
have been issued under sub-section (1) and
the provisions of sub-sections (2), (3) and
(4) shall apply accordingly."
12. Sub-clause (4) of Section 268A of the
Act clearly indicates that the Tribunal and
the Court shall have regard to all
(35 of 89)
[ITA-575/2008]
instructions issued under sub-section (1) of
the Act by CBDT and the circumstances
under which such appeal or application for
reference was filed or not filed in respect of
any case. Sub-clause (5) indicates that
instructions issued by CBDT shall be
deemed to have been issued under Section
268 of the Act.
13. The object of introduction of Section
268A of the Act was to regulate the filing of
the appeals by the government. The said
object is extracted hereunder:-
"The proposed section seeks to provide that
the Board may, from time to time, issue
orders, instructions or directions to other
income-tax authorities, fixing such
monetary limits as it may deem fit, for the
purpose of regulating filing of appeal or
application for reference by any income tax
authority under the provisions of Chapter
XX.
It is further proposed to provide that where,
in pursuance of the orders, instructions or
directions issued under sub-section (1), an
income tax authority has not filed any
appeal or application for reference on any
issue in the case of an assessee for any
assessment year, it shall not preclude such
authority from filing an appeal or
application for reference on the same issue
in the case of--
(a) the same assessee for any other
assessment year, or
(b) any other assessee for the same or any
other assessment year.
It is also proposed to provide that
notwithstanding that no appeal or
application for reference has been filed by
an income-tax authority pursuant to the
orders, instructions or directions issued
under sub-section (1), it shall not be lawful
for an assessee, being a party in any appeal
or reference, to contend that the income
tax authority has acquiesced in the decision
(36 of 89)
[ITA-575/2008]
on the disputed issue by not filing an appeal
or application for reference in any case.
It is also proposed to provide that the
Appellate Tribunal or Court, hearing any
appeal or reference had filed under this
Chapter, shall have regard to the orders,
instructions or directions issued by the
Board from time to time either before or
after the insertion of this section and the
circumstances in which such appeal or
application for reference was filed or was
not filed in any case; and accordingly the
Tribunal or Court shall decide the appeal or
the reference on the merits of the issue
under consideration.
It is also proposed to provide that every
order or instruction or direction which has
been issued by the Board fixing monetary
limits for filing an appeal or application for
reference shall be deemed to have been
issued under sub-section (1) and the
provisions of sub-sections (2), (3) and (4)
shall apply accordingly.
This amendment will take effect
retrospectively from 1st April, 1999."
15. Numerous rules of interpretation have
been formulated by courts. If a statutory
provision is open to more than one
interpretation, the Court has to choose that
interpretation which represents the true
intention of the legislature. The duty of the
Court is to expound and not to legislate.
However, at times, there is a marginal area
in which the Court could mould or creatively
interpret legislation. The Court in such a
situation are called refiners or polishers of
legislation. At times there are gaps in the
legislation and Courts are called upon to fill
in the gaps. Lord Due Parco in Cutler Vs.
Wandsworth Stadium Ltd. (1949) 1 All ER
544 was of the view that in some cases it
becomes necessary for the courts "to fill in
such gaps as Parliament may choose to
leave in its enactments".
(37 of 89)
[ITA-575/2008]
19. In the instant case, the question is not
what the words in the relevant provision
mean but what the national litigation policy
meant requiring the Courts to interfere and
fill in the gaps which was excluded by the
legislature. In our view, it is permissible for
the Courts to look into the legislative
intention and go behind the enactment and
take other factors into consideration in
order to give effect to the legislative intent
and to the purpose of the national litigation
policy.
20. The process of construction, therefore,
combines both literal and purposive
approaches, namely, the true meaning of
the words used in the enactment in the
light of any discernible purpose or object
which comprehends the mischief and its
remedy to which the enactment is directed.
Once this is achieved, it would be called
"the cardinal principle of construction".
23. The rule is equally applicable to a large
extent. In order to properly interpret the
provisions of the instructions, it is,
therefore necessary to consider how the
matter stood immediately before the
circular came into existence, what was the
intention and object necessitating the
legislature to issue the impugned circular
and the defect which the circular did not
provide. Consequently, we are of the
opinion that the courts should adopt a
purposive approach in order to give effect
to the true purpose of the legislation by
looking at the National Litigation Policy
which is the relevant material on the basis
of which the circular was issued.
25. The Bombay High Court, being
conscious of the instructions issued by
CBDT dismissed a large number of appeals
on the ground that the instructions issued
by CBDT from time to time were not being
adhered to and that the appeals were being
filed in utter disregard to the monetary
limits. The Bombay High Court insisted that
all the appeals filed by the department
(38 of 89)
[ITA-575/2008]
where the tax effect was below the Board's
prescribed limit should be withdrawn
forthwith. In this regard, CBDT issued
instruction dated 5th June, 2007 directing
the department to examine all appeals
pending before the Bombay High Court on a
case to case basis with further direction to
withdraw cases wherein the criteria of
monetary limits as per the prevailing
instruction was not satisfied unless the
question of law involved or raised in appeal
or referred to the High Court for opinion
was of a recurring nature requiring it to be
settled by the High Court.
35. The legislature in its wisdom clearly
desired to give effect to all instructions
issued on the subject of monetary limits for
regulating filing of appeals retrospectively.
Accordingly, all instructions laying down
monetary limits for filing appeals issued on
or after 1st April, 1999 by a deeming fiction
has to be treated as having been issued
under Section 268(1) of the Act.
36. The contention of the department that
Section 260A of the Act authorises the
department to prefer an appeal to the High
Court from every order passed in appeal by
the appellate authority subject to the
condition that the department should
satisfy the High Court that the case involves
a substantial question of law and,
consequently, this substantive right cannot
be curtailed by the provision of Section
268A of the Act or by the instructions
issued by the CBDT under Section 119 of
the Act cannot be accepted. At the outset,
the instructions issued by the CBDT are
binding on the department. Prior to the
introduction of Section 268A in the Act, the
object of issuing instructions under Section
119 of the Act was apparent and obvious,
namely, to alleviate unnecessary hardship
to the assessee and also to avoid financial
hardship and long drawn appellate
proceedings even for the department. The
objects recorded in the bill while introducing
(39 of 89)
[ITA-575/2008]
Section 268A into the Act was aimed at
alleviating and remedying the hardship
being caused to the assessee as well as to
reduce the financial burden upon the
income tax department in pursuing appeals
where the tax effect was negligible. A
perusal of sub-section (1) of Section 268A
of the Act indicates that CBDT was
authorized to issue orders, instructions or
directions to income tax authorities laying
the monetary limits for the purpose of filing
appeals. As a consequence of the insertion
of Section 268A in the Act, the orders and
instructions or directions issued on the
subject of monetary limits for filing appeals
has attained a statutory status and it has
become mandatory for the department to
comply with the requirement on the subject
of monetary limits for filing appeals. Sub-
section (5) of Section 268A of the Act
indicates that earlier instructions issued by
CBDT fixing monetary limits for filing an
appeal shall be deemed to have been issued
under Section 268A of the Act. After the
introduction of Section 268A into the Act,
Section 260A of the Act cannot be read
independently. Both Section 260A and 268A
of the Act will have to be interpreted by
reading the two provisions harmoniously.
Section 268A was inserted in the Act with
retrospective effect from 1st April, 1999.
The legislature desired to give statutory
effect to all the instructions issued on the
subject of monetary limits in regulating
filing of appeals retrospectively.
37. We are of the view that instructions
issued by CBDT laying down the monetary
limits for filing an appeal is mandatory and
binding on the Revenue. The contention of
the department that the right to file an
appeal under Section 260A of the Act by the
department cannot be restricted or carved
by any instructions of CBDT or by Section
268A is patently erroneous and cannot be
accepted. Similar view was also given by
the Punjab and Haryana High Court in Oscar
Laboratories case (supra).
(40 of 89)
[ITA-575/2008]
47. In the light of the aforesaid, we find
that since the CBDT while issuing
Instruction No. 3 of 2011 had not kept in
mind the object and intention sought to be
achieved by the National Litigation Policy
and, in order to bring harmony with the
National Litigation Policy, we are of the
opinion that the Instruction No. 3 of 2011
would also apply to pending appeals in
various Courts or Tribunals unless it is
pointed out by the department that the
appeal would have a cascading effect in
other assessment years of the assessee or
that it is within the exception provided in
the instructions that was issued at the time
when the appeal was presented."
(ii) CIT, Tamil Nadu-IV, MADras vs. G.K.Enterprises,(2016)
73 Taxmann.com 56 (Madras)
"6. It is appropriate to notice that the
Central Board of Direct Taxes has issued the
instructions contained in the said Circular in
exercise of its power available to it under
Section 268A(i) of the Income-tax Act,
1961 and hence, the Circular has statutorily
enforceable character. In that view of the
matter, we treat this appeal as not pressed
and dismiss it as such. However, it goes
without saying that the questions of law
raised in this appeal for consideration of
this Court in this appeal, are kept open to
be decided on merits in an appropriate
case. No costs."
(iii) Commissioner of Income Tax vs. Associated Electrical
Agencies (16.08.2007 - MADHC) : (2007) 295 ITR 496
10. We are of the considered view that
none of the exceptions stated in the circular
are applicable to the facts of the present
case. The circular was stated to be issued
(41 of 89)
[ITA-575/2008]
by invoking the statutory power under
Section 119 of the IT Act. The appeal is
filed under Section 260A of the IT Act. It is
well-settled principle of law that each and
every provision of a statute has to be given
the same importance. One provision cannot
be alleviated to a higher pedestal than the
other provision, of course, unless or
otherwise specifically stated either in the
scheme, the Act or in the provision itself
that a particular provision is subjected to or
qualified by any other provision or the
provision can be given effect to
notwithstanding anything contained in any
other provisions by assigning overriding
effect. Hence, the contention that
notwithstanding the circular, which was
issued under Section 119 of the IT Act, the
appeal could be filed by the Revenue under
Section 260A has to be rejected for the
reason that if the contention is accepted,
one of the sections would become virtually
otiose and that cannot be the intention of
the law makers. Hence, the above
judgments cannot be taken in aid for non-
suiting the respondent/assessee from
taking shelter under the Government order.
11. In this case, not only the tax effect
involved is nearly Rs. 5,000, b also the
other qualifications prescribed in the
circular were also not available or in
existence to carve out the case to bring
outside the purview of the circular. Even de
hors the circular, if the facts are considered,
the assessee is entitled to claim the benefit
for the next assessment year if the same
was negatived for the assessment year in
question. Further, the point in issue is
whether the bonus as claimed by the
respondent has been paid within 31st Oct.,
1991 or subsequent to that date, can by no
stretch of imagination be considered as a
question of law rather than substantial
question of law as provided under Section
260A of the IT Act.
(42 of 89)
[ITA-575/2008]
(iv) CIT vs. Jugal Kishore Mahanta (09.05.2013 - GUHC)
[2013] 355 ITR 432
10. We have given our anxious
consideration to the rival submissions made
before us. There is no dispute that
Instruction No. 5 of 2008, dated 15-5-2008,
imposes a monetary limit of Rs. 4,00,000
for preferring an appeal under section 260A
of the Act nor is it in dispute before us that
the net tax effect in the case at hand, is
less than Rs. 4,00,000. It is also not in
question before us in view of a catena of
decisions of the Supreme Court on the
issue, that the instructions issued by the
Central Board of Direct Taxes, are binding
on the Revenue except where (a) the
constitutional validity of the provisions of an
Act or Rule is under challenge; (b) the
Boards order, notification, instruction or
circular has been held to be illegal or ultra
vires; and (c) a Revenue audit objection in
the case has been accepted by the
Department.
13. Though what has been indicated above
is sufficient to dispose of the present appeal
as not maintainable inasmuch as the appeal
runs counter to the instructions, which have
been issued by the Central Board of Direct
Taxes, we deem it appropriate to point out
that section 268A has been inserted in the
Act, with effect from 1-4-1999, by the
Finance Bill, 2008. The Memorandum
Explaining the Provisions of the Finance Bill,
2008, while highlighting the underlying
object of section 268A, clearly reflected the
anxiety of Parliament to reduce the
litigation in small cases and regulate the
fight of the Revenue to file or not to file an
appeal under section 260A. Consequently,
there is an inherent limitation on the
Revenues right to file appeal tinder section
260A inasmuch as the condition precedent
for preferring an appeal is existence of a
(43 of 89)
[ITA-575/2008]
substantial question of law. Section 260A
does not, however, contemplate any
monetary limit. This monetary limit has
been imposed a indicated above by the
Central Board of Direct Taxes in exercise of
its power under section 268A.
14. It is worth pointing out that section
268A enjoys the same legislative status as
section 260A, both having been enacted by
Parliament. Undisputedly, section 268A is
later in point of time. Having known and
being conscious of the right of appeal,
which has been provided to the Revenue
under section 260A, Parliament has
nevertheless deemed it necessary to vest in
the Central Board of Direct Taxes, by
enacting section 268A, the power to
regulate appeal by prescribing the
monetary limit.
15. When, thus, the Central Board of Direct
Taxes has prescribed a monetary limit, no
appeal under section 260A can be filed by
the Revenue except in the circumstances,
which we have indicated above. The mere
fact that the assessee-respondent has
taken two distinctly different stands, one,
before the income-tax authority, and the
other, before the Income-tax Appellate
Tribunal, we do not deem it proper that
such a conflict can be of such a grave
nature, which would allow the Revenue to
override the prescription of section 268A.
17. We must, however, point out that in an
appropriate case, the High Court may,
perhaps, not apply the instructions, as
regards the monetary limits, ipso facto and
may choose nevertheless to examine the
substantial questions of law raised in an
appeal. The present one, however, is in our
considered view, not such a case, where the
High Court shall enter into determination of
the substantial question of law, which has
been framed. We are in this regard,
conscious of the Supreme Courts order,
dated 29-8-2011, passed in Special Leave
(44 of 89)
[ITA-575/2008]
to Appeal (CM) No. 24562 of 2011 (13694
of 2011) CIT v. Surya Herbal Ltd. (2013)
350 ITR 300 (SC), wherein the court has
observed:
Delay condoned.
Liberty is given to the Department to move
the High Court pointing out that the Circular
dated February 9, 2011, should not be
applied ipso facto, particularly, when the
matter has a cascading effect. There are
cases under the Income-tax Act, 1961, in
which a common principle may be involved
in subsequent group of matters or large
number of matters. In our view, in such
cases, if attention of the High Court is
drawn, the High Court will not apply the
Circular ipso facto. For that purpose, liberty
is granted to the Department to move the
High Court in two weeks."
(v) Commissioner of Income Tax vs. Camco Colour Co.
(26.11.2001 - BOMHC) [2002] 254 ITR 565
3. The issue in the present case being one of
some potential general significance in
relation to the policy decision taken by the
Board not to raise questions of law where
the effect is less than the amount prescribed
in the instructions issued by the Central
Board of Direct Taxes with a view to reduce
litigations before the High Courts and the
Supreme Court, we propose to dispose of
this appeal on this short contention
canvassed by learned counsel for the
respondent without examining the merits of
the question of law sought to be raised in
this appeal.
4. Learned counsel for the respondent also
relied upon the decision in Navnit Id C.
Javeri v. K. K. Sen, AAC of I.T.
[1965]56ITR198(SC) ; Ellerman Lines Ltd. v.
C1T [1971]82ITR913(SC) and K. P.
Varghese v. ITO [1981]131ITR597(SC) to
contend that the circular issued by the
(45 of 89)
[ITA-575/2008]
Central Board of Direct Taxes is binding on
all the officers and Commissioners and in
terms of which he sought to examine the
question of necessity of filing of the present
appeal.
5. In appears that despite the above circular,
the Revenue has chosen to file the present
appeal knowing fully well that the corridors
of the courts are flooded with pending
litigations. The presentation of this appeal is
quite contrary to the instruction issued in
the circular which is binding on the Revenue.
6. In the above view of the matter,
considering the instructions issued by the
Central Board of Direct Taxes, we are
satisfied that the Board has taken a policy
decision not to file appeal in a type of case
in hand and the same is binding on the
Revenue (appellant herein). In the result,
we dismiss this appeal on this count in
limine with no order as to costs."
(vi) Commissioner of Income Tax vs. Abhinash Gupta
(11.12.2009 - PHHC) [2012] 327 ITR 619 (P&H)
"7. After hearing the arguments of the
learned Counsel for the parties, we find
force in the preliminary objection raised by
the learned Counsel for the assessee with
regard to maintainability of the appeal filed
by the Department. During the course of
arguments, it is not disputed before us that
the tax effect in the instant case is less than
Rs. 4 lakhs. In the present case, the
Assessing Officer disallowed the claim of the
assessee of exemption of Rs. 4,04,664
under Section 54F of the Act on the ground
that the investment made by the assessee
on construction in a residential house was
not made within the specified time of one
year before the date when the long-term
capital gains arose. However, the said
addition was deleted by the Income Tax
Appellate Tribunal while recording a finding
(46 of 89)
[ITA-575/2008]
of fact that the investment by the assessee
on construction in a residential house was
made during the period March 1, 1999 to
March 26,1999. The said finding was
recorded on the basis of the housing loan
account. It has also been held that the
transfer of the long-term capital asset, i.e.,
shares and securities took place on February
1, 2000, therefore, the said investment was
within one year prior to the date of transfer
of the long-term capital asset. In view of the
said fact, it was held that the assessee was
fully eligible for the benefit of Section 54F of
the Act. Though the Income Tax Appellate
Tribunal has deleted the addition on the
basis of the above-said finding of fact, yet,
in our opinion, the dispute arises in this
appeal is not of recurring nature. Even if it is
taken that the alleged substantial question
of law raised in this appeal is of recurring
nature, in our opinion, the Revenue cannot
maintain the instant appeal in view of
Circular No. 5 of 2008 issued by the Central
Board of Direct Taxes, as the cumulative tax
effect involved, in this appeal is less than
Rs. 4 lakhs. In CIT v. Oscar Laboratories P.
Ltd. [2010] 324 ITR 115 (P & H), it was held
that the Instructions/Circulars issued by the
Central Board of Direct Taxes laying down
monetary limits for filing of appeals are
mandatory and binding on the Revenue. The
contention of the learned Counsel for the
Revenue that Circular No. 5 of 2008 is not
applicable on the appeals filed prior to May
15, 2008, cannot be accepted. The similar
issue has been considered by the Bombay
High Court in CIT v. Madhukar K. Inamdar
(HUF) [2009] 318 ITR 149 wherein it was
held that Circular No. 5 of 2008 is also
applicable on the pending appeals,
irrespective of the fact whether the same
were filed before or after May 15, 2008. In
this regard the Bombay High Court made
the following observations (page 150):
It cannot be disputed that the Central Board
of Direct Taxes Circular dated May 15, 2008,
has no retrospective effect. It operates from
(47 of 89)
[ITA-575/2008]
the date of its issuance. As a corollary
thereof, the appeals which come on board
for consideration after the issuance of the
Central Board of Direct Taxes Circular dated
May 15, 2008, needs to be considered in the
light of the said Circular. Application of the
said Circular to the cases coming on board
after May 15, 2008, by no stretch of
imagination can be said to be an application
of Circular with retrospective effect.
In order to consider the issue in its right
perspective, it is necessary to refer to the
Circular of the Central Board of Direct Taxes
dated May 15, 2008, paragraph 5 of which
reads as under:
5. The Assessing Officer shall calculate the
tax effect separately for every assessment
year in respect of the disputed issue in the
case of every assessee. If, in the case of an
assessee, the disputed issues arise in more
than one assessment year, appeal shall be
filed in respect of such assessment year or
years in which the tax effect in respect of
the disputed issue exceeds the monetary
limit specified in paragraph 3. No appeal
shall be filed in respect of an assessment
year or years in which the tax effect is less
than the monetary limit specified in
paragraph 3. In other words, henceforth,
appeals will be filed only with reference to
the tax effect in the relevant assessment
year. However, in case of a composite order
of any High Court or appellate authority,
which involves more than one year, appeal
shall be filed in respect of all assessment
years even if the 'tax effect' is less than the
prescribed monetary limits in any of the
year(s), if it is decided to file appeal in
respect of the year(s) in which 'tax effect'
exceeds the monetary limit prescribed.
(emphasis supplied)
The aforesaid paragraph (5) makes it clear
that no appeals should be filed in the cases
involving tax effect less than Rs. 4 lakhs
notwithstanding the issue being of recurring
(48 of 89)
[ITA-575/2008]
nature.
The aforesaid paragraph (5) was a subject-
matter of the judicial interpretation in the
case of CIT v. Polycott Corporation in
Income Tax Appeal No. 1241 of 2008
decided on January 23, 2009, (since
reported in [2009] 318 ITR 144 (Bom)
wherein this Court ruled as under (page
146):
It would be clear from the above that if in
the case of an assessee if the disputed
issues arise in more than one assessment
year, appeals are to be filed only in respect
of such assessment year or years in which
the tax effect in respect of the disputed
issues exceeds the monetary limit specified
in paragraph 3. In other words, even if in
respect of the same issue in respect of the
same assessee for other assessment years
the monetary limit is not more than Rs. 4
lakhs, appeals need not be filed. Paragraph
6 makes it clear that in such a case if an
appeal is not filed, there will be no
presumption that the Income Tax
Department has acquiesced in the decision
on the disputed issues. The aforesaid judicial
verdict makes it clear that the Circular dated
May 15, 2008, in general and paragraph (5)
thereof in particular lay down that even if
the same issue, in respect of the same
assessee, for other assessment years is
involved, even then the Department should
not file appeal, if the tax effect is less than
Rs. 4 lakhs. In other words, even if the
question of law is of recurring nature even
then, the Revenue is not expected to file
appeals in such cases, if the tax impact is
less than the monetary limit fixed by the
Central Board of Direct Taxes.
One fails to understand how the Revenue,
on the face of the above clear instructions of
the Central Board of Direct Taxes, can
contend that the Circular dated May 15,
2008, issued by the Central Board of Direct
Taxes is applicable to the cases filed after
(49 of 89)
[ITA-575/2008]
May 15, 2008, and in compliance thereof,
they do not file appeals, if the tax effect is
less than Rs. 4 lakhs; but the said circular is
not applicable to the cases filed prior to May
15, 2008, i.e., to the old pending appeals;
even if the tax effect is less than Rs. 4
lakhs. In our view, there is no logic behind
this belief entertained by the Revenue.
This court can very well take judicial notice
of the fact that by passage of time money
value has gone down, the cost of litigation
expenses has gone up, filing of cases at the
instance of the Revenue has increased;
consequently, the burden on the Department
has also increased to a tremendous extent.
The corridors of the superior courts are
choked with huge pendency of cases. The
litigation expenses have also increased
manifold. In this view of the matter, the
Board has rightly taken decision not to file
appeals if the tax effect is less than Rs. 4
lakhs so as to reduce burden of the
Department as well as that of the tribunals
and courts. The same policy for old matters
needs to be adopted by the Department so
as to achieve the object of the policy laid
down by the Central Board of Direct Taxes.
It would be in the public interest if the
Revenue concentrates on the cases wherein
tax effect is substantially high rather than
running after the assessees wherein the tax
impact is less than Rs. 4 lakhs considering
the cost of litigation and other
administrative cost which may be much
more than the tax recovery.
At this juncture, it will be relevant to note
that the Central Board of Direct Taxes has
also issued a Circular on June 5, 2007,
directing the Department to examine all
appeals pending before this Court on case to
case basis with further direction to withdraw
cases wherein the criteria of monetary limits
as per the prevailing instruction is not
satisfied, unless the question of law involved
or raised in appeal or referred to the High
(50 of 89)
[ITA-575/2008]
Court for opinion is of a recurring nature
required to be settled by the higher court.
The aforesaid Circular makes it clear that on
the date of issuance of Circular, prevailing
instructions fixing monetary limit will hold
good even for pending cases. Adopting the
same approach, we are of the considered
view that the Central Board of Direct Taxes
Circular dated May 15, 2008, would be very
much applicable to the pending cases
requiring the Department to withdraw cases
wherein the tax effect is less than the
prescribed monetary limits.
At this juncture, it will also be relevant to
mention that it was necessary for the
Central Board of Direct Taxes to put a
caveat, while issuing instructions, vide its
Circular dated June 5, 2007, that the
appeals involving substantial question of law
of recurring nature should not be withdrawn
since provision like Section 268A of the
Income Tax Act was absent. Now, in view of
the insertion of the provision of Section
268A by the Finance Act, 2008, with effect
from April 1, 1999, in the Income Tax Act,
1961, no prejudice could be caused to the
Revenue even if the cases involving legal
issues of recurring nature are withdrawn,
since the newly inserted provision takes care
of the adverse eventuality which could have
been put against the Revenue.
While agreeing with the view taken by the
Bombay High Court, we are of the view that
Circular No. 5 of 2008 would be applicable to
the cases pending before this Court either
for admission or for final disposal and that
the said Circular is binding on the Revenue.
Since admittedly the tax effect in this appeal
is less than Rs. 4 lakhs, therefore, in our
opinion, the appeal filed by the Revenue is
not maintainable and the same is hereby
dismissed with no order as to costs."
(51 of 89)
[ITA-575/2008]
(vii) CIT vs. Sherno Ltd. (28.03.2013 - GUJHC) [2013] 33
taxmann.com 45 (Gujarat)
4. Revenues case as can be discerned from
question No. 2 noted above is that since
Constitutional validity of the provisions of
the Act ore the Rule are under challenge
the appeal may be entertained. Learned
counsel Shri Parikh for the Revenue was at
a loss to explain in what manner the validity
of statutory provision is involved in the
present appeal. Admittedly vires of
statutory provision is nowhere in question.
He however, strenuously urged that
decision of the Tribunal is palpably
erroneous.
5. This in our view would not enable the
Revenue to ignore the conditions of the
circular dated 9-2-2011 and file appeal
which is other-wise not envisaged in the
said circular. This Court in case of CIT v.
Concord Pharmaceuticals (2009) 25 (I)
ITCL 548 (Guj-HC): (2009) 317 ITR 395
(Guj) held that the instructions issued in
the said circular dated 9.2.2011 are binding
on the department. In other words, an
appeal which is filed ignoring said directives
would not be maintainable. Such is the view
taken by various High Courts. Reference to
all judgments is therefore, not necessary.
(viii) Commissioner of Income Tax vs. Zoeb Y. Topiwala
(22.08.2005 - BOMHC) [2006] 284 ITR 379 (Bombay)
4. This Court in the case of CIT v. Cameo
Colour Co. [2002]254ITR565(Bom) ruled
that the above instructions are binding on
the Department. This judgment is followed
by this Court in CIT v. Pithwa Engg. Works
[2005]276ITR519(Bom) and held that it is
not open for the Department to contend
that this circular is binding only with respect
to the new cases and not with respect to
the old cases even if the tax is less than Rs.
(52 of 89)
[ITA-575/2008]
2 lakhs. The same policy for old matters
needs to be adopted by the Department.
5. The above instructions dt. 27th March,
2000, reflects the policy decision taken by
the Board not to raise questions of law
where the tax effect is less than the amount
prescribed in the instructions with a view to
reduce litigations before High Courts and
Supreme Court. The circular is binding on
the Revenue. There is no justification to
proceed with the appeal having tax effect
less than Rs. 7,000.
6. We, thus, do not think it necessary to
entertain this appeal and answer the
question raised by the appellant-Revenue.
Accordingly, appeal stands dismissed with
no order as to costs."
(ix) CIT vs. Paramount Guest House & Resort Ltd., [2013]
38 taxmann.com 262 (Allahabad)
"5. We find that under Section 268A of the
Act which has been inserted with
retrospective effect from 1.04.1999 the
Board has power to issue circular regarding
fixing monetary limit and no appeal can be
filed by the Revenue. The circular dated
27.03.2000 issued by the Board has thus
been issued in exercise of powers conferred
under section 268A of the Act and has
binding effect on all the authorities. As the
tax in dispute is less than rupees two lakh
the Revenue was not entitled to file appeal
before the Tribunal. The appeal neither
involves any question which had a far
reaching effect nor was of recurring in
nature.
8. None of the above conditions applies in
the present case. In this view of the matter
we are of the considered opinion that the
circular dated 27th March, 2000 issued by
the Central Board of the Direct Taxes was
(53 of 89)
[ITA-575/2008]
binding upon the Department and,
therefore, the appeal preferred by it against
the order of the Commissioner of Income
Tax (Appeals) dated 4th November, 2008
wherein tax effect was less than rupees two
lac ought not to have been filed. The order
of the Tribunal does not call for any
interference."
(x) Commissioner of Income Tax vs. Ramkishore
Nandkishore (12.02.2013 - MPHC)
5. A Division Bench of this Court in Suresh
Chand Goyal (supra) has considered this
aspect and held thus:-
The another question raised by learned
counsel for the respondent is about the
filing of appeal contrary to the circular
issued by the Central Board of Direct Taxes,
according to which, the appeal under
section 260A of the Income-Tax Act on the
tax effect of less than Rs. 2 lakhs should
not be filed by the Revenue and placed
reliance on the decision of the Bombay High
Court in the case of CIT vs. Cameo Colour
Co. [2002] 254 ITR 565]. Learned counsel
for the respondent also relied upon the
decisions of the Supreme Court in the cases
of Navnit Lal C. Javeri v. K.K. Sen, AAC
[1965] 56 ITR 198, Ellerman Lines Ltd. vs.
CIT [1971] 82 ITR 913 and K.P. Varghese
vs. ITO [1981] 131 ITR 597, to contend
that the circular issued by the Central Board
of Direct Taxes is binding on all the officers
and Commissioners and appeal or reference
contrary to the instructions issued in the
circular will not be considered by the courts
and the Division Bench of the Bombay High
Court was satisfied that the Board has
taken a policy decision not to file appeal in
a type of case in hand and the same is
binding on the Revenue and in the result
the appeal was dismissed following the
(54 of 89)
[ITA-575/2008]
circular. The similar view was taken by the
Division Bench of the High Court of Madhya
Pradesh in the case of Asst. CIT v.
Aradhana Oil Mills [2002] 30 ITC 446 and
following the circular of the Central Board of
Direct Taxes, the appeal was dismissed.
6. In Ashok Manibhai Patel (supra) another
Division Bench has also taken similar view.
Justice Dipak Misra, as his Lordship then
was, speaking for the Bench held thus:-
11. The factual scenario can be perceived
from another aspect. Submission of Mr. A.K.
Shrivastava, learned counsel for the
respondent is that the tax impact is Rs.
52,565 and, therefore, as per the circular of
the Central Board of Direct Taxes the
reference need not be adverted to. A
Division Bench of the High Court of Bombay
in the case of CIT v. Pithwa Engg.
Works[2005] 276 ITR 519 (Bom) in
paragraph 6 expressed the view as under
(page 520):
'This court can very well take judicial notice
of the fact that by passage of time money
value has gone down, the cost of litigation
expenses has gone up, the assessees on
the file of Department has also increased to
a tremendous extent. The corridors of the
superior courts are choked with huge
pendency of cases. In this view of the
matter, the Board has rightly taken a
decision not to file references if the tax
effect less than Rs. 2 lakhs. The same
policy for old mattes needs to be adopted
by the Department. In our view, the Board's
circular dated March 27, 2000, is very much
applicable even to the old references which
are still undecided. The department is not
justified in proceeding with the old
references wherein the tax impact is
minimal. Thus, there is no justification to
proceed with decades old references having
negligible tax effect
Judged from both angles we would answer
the reference in the negative in favour of
(55 of 89)
[ITA-575/2008]
the assessee and against the Revenue.
7. A Division Bench of Bombay High Court
in Commissioner of Income Tax vs. Pithwa
Engg. Works [276 ITR 519] held thus:-
3. This Court in the case of Commissioner
of Income Tax V/s. Cameo Colour Co.(2002)
254 ITR 565 ruled that the instructions
issued by the Central Board of Direct Taxes,
New Delhi, dated 27th March, 2000;
wherein monetary limit for the department
for filing reference to the High Court earlier
fixed for Rs. 50,000/- came to be revised
and fresh instructions are issued to file
references only in cases where tax effect
exceeds Rs. 2,00,000/-, are binding on the
Department.
4. The above instructions dated 27th March,
2000 reflect the policy decision taken by the
Board not to raise questions of law where
the tax effect is less than the amount
prescribed in the above circular with a view
to reduce litigations before High Courts and
Supreme Court. The said circular is binding
on the Revenue though learned Counsel
tried to contend that the said circular is not
applicable to the old referred cases.
However, he could not take his submission
to a logical end.
5. One fails to understand how Revenue can
contend that so far as new cases are
concerned, circular issued by the Board is
binding on them and in compliance with the
said instructions, they do not file references
if the tax effect is less than Rs. 2 lakhs. But
the same approach is not adopted with
respect to the old referred cases even if the
tax effect is less than Rs. 2 lakhs. In our
view, there is no logic behind this approach.
6. This Court can very well take judicial
notice of the fact that by passage of time
money value has gone down, cost of
(56 of 89)
[ITA-575/2008]
litigation expenses has gone up, the
assessees on the file of the departments
have increased; consequently, burden on
the department has also increased to a
tremendous extent. The corridors of the
superior courts are chocked with huge
pendency of cases. In this view of the
matter, the Board has rightly taken decision
not to file references if the tax effect less
than Rs. 2 lakhs. The same policy for old
matters needs to be adopted by the
department. In our view, the Board's
circular dated 27th March, 2000 is very
much applicable even to the old references
which are still undecided. The department is
not justified in proceeding with the old
references wherein the tax impact is
minimal. Thus, there is no justification to
proceed with the decades old references
having negligible tax effect.
8. The aforesaid judgments specifically lays
down that any appeal, if tax effect less then
Rs. 2 lakhs, could not have been filed by
the Department.
9. From the perusal of the instructions
issued by the Board, we find that the Board
had issued directions that the appeals will
be filed only in cases where the tax effect
exceeds Rs. 2 lakhs in the matter of High
Court in appeals U/s. 260A or Reference
U/s. 256(2). The aforesaid circular is
binding on all the authorities under the
Board including the appellant Commissioner
of Income Tax, Jabalpur. The Board had
taken this decision in continuation to earlier
directions issued by the Board on
28.10.1992 where the monitory limit was
Rs. 50,000/-. Now in view of the changed
circumstances, as directed by the Board by
instruction dated 27.3.2000, it is apparent
that the appeal or reference below Rs. 2
lakhs, could not have been filed. The
instructions of the Board are binding to all
the authorities working under the Board
including the appellant. This appeal which
was filed on 10.1.2005 is fully covered by
(57 of 89)
[ITA-575/2008]
the instructions issued by the Board on
27.3.2000, and this appeal could not have
been filed. The aforesaid position has been
clarified by two Division Bench of this Court
in Suresh Chand and Ashok Manibhai
(supra). In the result, this appeal is found
incompetent and is dismissed with no order
as to costs."
(xi) Commissioner of Income Tax vs. Ramkishore
Nandkishore (12.02.2013 - MPHC), [2013] 32
taxmann.com 89
5. A Division Bench of this Court in Suresh
Chand Goyal (supra) has considered this
aspect and held thus:-
The another question raised by learned
counsel for the respondent is about the
filing of appeal contrary to the circular
issued by the Central Board of Direct
Taxes, according to which, the appeal
under section 260A of the Income-Tax Act
on the tax effect of less than Rs. 2 lakhs
should not be filed by the Revenue and
placed reliance on the decision of the
Bombay High Court in the case of CIT vs.
Cameo Colour Co. [2002] 254 ITR 565].
Learned counsel for the respondent also
relied upon the decisions of the Supreme
Court in the cases of Navnit Lal C. Javeri v.
K.K. Sen, AAC [1965] 56 ITR 198,
Ellerman Lines Ltd. vs. CIT [1971] 82 ITR
913 and K.P. Varghese vs. ITO [1981] 131
ITR 597, to contend that the circular issued
by the Central Board of Direct Taxes is
binding on all the officers and
Commissioners and appeal or reference
contrary to the instructions issued in the
circular will not be considered by the courts
and the Division Bench of the Bombay High
Court was satisfied that the Board has
taken a policy decision not to file appeal in
a type of case in hand and the same is
binding on the Revenue and in the result
(58 of 89)
[ITA-575/2008]
the appeal was dismissed following the
circular. The similar view was taken by the
Division Bench of the High Court of Madhya
Pradesh in the case of Asst. CIT v.
Aradhana Oil Mills [2002] 30 ITC 446 and
following the circular of the Central Board
of Direct Taxes, the appeal was dismissed.
6. In Ashok Manibhai Patel (supra) another
Division Bench has also taken similar view.
Justice Dipak Misra, as his Lordship then
was, speaking for the Bench held thus:-
11. The factual scenario can be perceived
from another aspect. Submission of Mr.
A.K. Shrivastava, learned counsel for the
respondent is that the tax impact is Rs.
52,565 and, therefore, as per the circular
of the Central Board of Direct Taxes the
reference need not be adverted to. A
Division Bench of the High Court of
Bombay in the case of CIT v. Pithwa Engg.
Works [2005] 276 ITR 519 (Bom) in
paragraph 6 expressed the view as under
(page 520):
'This court can very well take judicial notice
of the fact that by passage of time money
value has gone down, the cost of litigation
expenses has gone up, the assessees on
the file of Department has also increased
to a tremendous extent. The corridors of
the superior courts are choked with huge
pendency of cases. In this view of the
matter, the Board has rightly taken a
decision not to file references if the tax
effect less than Rs. 2 lakhs. The same
policy for old mattes needs to be adopted
by the Department. In our view, the
Board's circular dated March 27, 2000, is
very much applicable even to the old
references which are still undecided. The
department is not justified in proceeding
with the old references wherein the tax
impact is minimal. Thus, there is no
justification to proceed with decades old
references having negligible tax effect
Judged from both angles we would answer
(59 of 89)
[ITA-575/2008]
the reference in the negative in favour of
the assessee and against the Revenue.
7. A Division Bench of Bombay High Court
in Commissioner of Income Tax vs. Pithwa
Engg. Works [276 ITR 519] held thus:-
3. This Court in the case of Commissioner
of Income Tax V/s. Cameo Colour Co.
(2002) 254 ITR 565 ruled that the
instructions issued by the Central Board of
Direct Taxes, New Delhi, dated 27th March,
2000; wherein monetary limit for the
department for filing reference to the High
Court earlier fixed for Rs. 50,000/- came to
be revised and fresh instructions are issued
to file references only in cases where tax
effect exceeds Rs. 2,00,000/-, are binding
on the Department.
4. The above instructions dated 27th
March, 2000 reflect the policy decision
taken by the Board not to raise questions
of law where the tax effect is less than the
amount prescribed in the above circular
with a view to reduce litigations before
High Courts and Supreme Court. The said
circular is binding on the Revenue though
learned Counsel tried to contend that the
said circular is not applicable to the old
referred cases. However, he could not take
his submission to a logical end.
5. One fails to understand how Revenue
can contend that so far as new cases are
concerned, circular issued by the Board is
binding on them and in compliance with
the said instructions, they do not file
references if the tax effect is less than Rs.
2 lakhs. But the same approach is not
adopted with respect to the old referred
cases even if the tax effect is less than Rs.
2 lakhs. In our view, there is no logic
behind this approach.
6. This Court can very well take judicial
notice of the fact that by passage of time
money value has gone down, cost of
(60 of 89)
[ITA-575/2008]
litigation expenses has gone up, the
assessees on the file of the departments
have increased; consequently, burden on
the department has also increased to a
tremendous extent. The corridors of the
superior courts are chocked with huge
pendency of cases. In this view of the
matter, the Board has rightly taken
decision not to file references if the tax
effect less than Rs. 2 lakhs. The same
policy for old matters needs to be adopted
by the department. In our view, the
Board's circular dated 27th March, 2000 is
very much applicable even to the old
references which are still undecided. The
department is not justified in proceeding
with the old references wherein the tax
impact is minimal. Thus, there is no
justification to proceed with the decades
old references having negligible tax effect.
8. The aforesaid judgments specifically lays
down that any appeal, if tax effect less
then Rs. 2 lakhs, could not have been filed
by the Department.
9. From the perusal of the instructions
issued by the Board, we find that the Board
had issued directions that the appeals will
be filed only in cases where the tax effect
exceeds Rs. 2 lakhs in the matter of High
Court in appeals U/s. 260A or Reference
U/s. 256(2). The aforesaid circular is
binding on all the authorities under the
Board including the appellant
Commissioner of Income Tax, Jabalpur. The
Board had taken this decision in
continuation to earlier directions issued by
the Board on 28.10.1992 where the
monitory limit was Rs. 50,000/-. Now in
view of the changed circumstances, as
directed by the Board by instruction dated
27.3.2000, it is apparent that the appeal or
reference below Rs. 2 lakhs, could not have
been filed. The instructions of the Board
are binding to all the authorities working
under the Board including the appellant.
This appeal which was filed on 10.1.2005 is
(61 of 89)
[ITA-575/2008]
fully covered by the instructions issued by
the Board on 27.3.2000, and this appeal
could not have been filed. The aforesaid
position has been clarified by two Division
Bench of this Court in Suresh Chand and
Ashok Manibhai (supra).
(XII) Commissioner of Income Tax vs. Smt. Madhu Bai
Lodha (13.09.2007 - MPHC) (2008)_ 169 Taxmann 147
(Madhya Pradesh)
4. We have considered the contention
raised by the learned senior counsel. Before
considering the cases: cited by the learned
senior counsel, we may point out that a
Division Bench of [this Court has held in CIT
v. Suresh Chand Goyal (2007) 209 CTR
(MP) 410 that in cases where tax effect is
below Rs. 2,00,000, Revenue cannot file
appeal contrary to the terms of circular
which is binding on the Department. The
relevant discussion contained in para 16 of
the said Report reads as extracted below:
16. The another question raised by learned
Counsel for the respondent is about the
filing of appeal contrary: to the circular
issued by the CBDT, according to which, the
appeal under Section 260A of the IT Act on
the tax effect of less than Rs. 2 lacs should
not be filed by the Revenue and placed
reliance on the decision of the Bombay High
Court in the case of CIT v. Camco Colour
Co. [2002]254ITR565(Bom) . Learned
Counsel for the respondent also relied upon
the decision of the Supreme Court in the
cases of Navnit Lal C. Javeri v. K.K. Sen,
AAC [1965]56ITR198(SC) ; Ellerman Lines
Ltd. v. CIT [1971]82ITR913(SC) and K.P.
Varghese v. ITO [1981]131ITR597(SC) , to
contend that the circular issued by the
CBDT is binding on all the officers and CITs
and appeal or reference contrary to the
instructions issued in the circular will not be
considered by the Courts and the Division
Bench of the Bombay High Court was
satisfied that the Board has taken a policy
(62 of 89)
[ITA-575/2008]
decision not to file appeal in a type of case
in hand and the same is binding on the
Revenue and in the result the appeal was
dismissed following the circular. The similar
view was taken by the Division Bench of the
High Court of Madhya Pradesh in; the case
of Asstt. CIT v. Aradhana Oil Mills (2002) 30
ITC 446 (MP) and following the circular of
CBDT, the appeal was dismissed.
5. We may point out that the circular issued
by the CBDT as referred to above carves
out only one exception with regard to the
permissibility of filing of appeals, etc.,
notwithstanding the embargo contained in
the circular of the monetary limit. It is only
in cases involving substantial question of
law of importance as well as cases where
the same question of law will repeatedly
arise either in the case concerned or in
similar cases that the Department will not
be hindered by the monetary limits. The
question, therefore, arises as to whether
the Department can be left at liberty to
defeat the circular of CBDT restraining its
power to file appeal in case of the tax effect
being below the monetary limit by
capriciously taking subterfuge under the
specious plea that the case is one of the
excepted categories of cases. It has not
been brought to our notice that the IT
Department has devised any procedure to
consider whether a particular case falls
within the excepted category thus,
permitting the Revenue to agitate the
matter before the higher forums. In cases
where no such procedure has been devised,
it is expected that while filing appeal in
non-adherence of the circular, the
Department would place material before the
appellate forum that the case falls within
the excepted category and, therefore, is not
covered by the restraint contained in the
circular. The learned senior counsel for the
appellants has also invited attention to the
decision of the Punjab & Haryana High
Court in Rani Paliwal v. CIT
MANU/PH/0780/2003, of Delhi High Court
(63 of 89)
[ITA-575/2008]
in CIT v. Blaze Advertising (Delhi) (P) Ltd.
(2002) 173 CTR 482 : (2002) 255 ITR 460
and of Madras High Court in CIT v.
Kodananad Tea Estates Co.
[2005]275ITR244(Mad) . We are, however,
of the view that, as held by this Court in
CIT v. Suresh Chand Goyal (supra), where
tax liability of the assessee is below the
monetary limit prescribed, Revenue cannot
file an appeal in transgression of the
circular by which it is bound. However, we
may add that in a case which falls within
the excepted category, it would always be
open to the Department to bring it to the
notice of the forum approached and to
insist that the question being covered by
the exceptions contained in Clause 3 of the
Circular dt. 24th Oct., 2005 as modified by
the Instruction No. 5 of 2007, dt. 16th July,
2007, the same deserves to be considered
by the superior forum, the circular of the
CBDT notwithstanding.
6. In view of the above, we answer the
question raised in these appeals against the
Department subject to the liberty that if a
case falls within the excepted category, it
would be open to the Department to bring
the said fact to the notice of the Court or
the Tribunal so that the appropriate
authority/Court applies its mind to the
necessity of formulating the question for
rendering decision thereon.
(xiii) Commssioner of Customs vs. Indian Oil Corporation
Ltd., [2004] 267 ITR 272 (SC)
10. The principles laid down by all these
decisions are:
(1) Although a circular is not binding on a
Court or an assessee, it is not open to the
Revenue to raise the contention that is
contrary to a binding circular by the Board.
When a circular remains in operation, the
Revenue is bound by it and cannot be
(64 of 89)
[ITA-575/2008]
allowed to plead that it is not valid nor that
it is contrary to the terms of the statute.
(2) Despite the decision of this Court, the
Department cannot be permitted to take a
stand contrary to the instructions issued by
the Board.
(3) A show-cause notice and demand
contrary to existing circulars of the Board
are ab initio bad.
(4) It is open to the Revenue to advance an
argument or file an appeal contrary to the
circulars.
(xiv) The Commissioner of Income Tax vs. Ranka and
Ranka (02.11.2011 - KARHC), [2013] 352 ITR 121
(Karnataka)
18. The circular No. 1/2009 dated
27.03.2009 states that there is a prescribed
dispute resolution mechanism in the
Income Tax Act. In this regard the Central
Board of Tax cases has issued instructions
from time to time directing the
departmental officers not to file appeals if
the tax effect is less than the monetary
limit prescribed by it. The Hon'ble Supreme
Court of India in Berger Paints Limited vs.
CIT reported in (2004) 266 ITR 99, held
that if the Revenue has not challenged the
correctness of the law laid down by the
High Court and has accepted it in the case
of one assessee, then it is not open to the
Revenue to challenge the correctness in the
case of other assessee without just cause.
The department's appeals are being
dismissed by judicial authorities on the
consideration that the disputed issue was
not agitated in the case of the same
assessee or in the case of any other
assessee. The underlining object of the
Board's resolution is to reduce litigation in
similar cases with a view to bring the
Revenue's right to file or not to file appeal.
(65 of 89)
[ITA-575/2008]
The new Section 268A of the Income Tax
Act was inserted by Finance Act, 2008 with
retrospective effect from 01.04.1999. The
said provision reads as under:
268A. Filing of appeal or application for
reference by income-tax authority. (1) The
Board may from time to time, issue orders,
instructions or directions to other income-
tax authorities, fixing such monetary limits
as it may deem fit for the purpose of
regulating filing of appeal or application for
reference by any income-tax authority
under the provisions of this Chapter. (2)
Where, in pursuance of the orders,
instructions or directions issued under sub-
section (1), an income-tax authority has
not filed any appeal or application for
reference on any issue in the case of an
assessee for any assessment year, it shall
not preclude such authority from filing an
appeal or application for reference on the
same issue in the case of.
(a) the same assessee for any other
assessment year; or
(b) any other assessee for the same or any
other assessment year.
(3) Notwithstanding that no appeal or
application for reference has been filed by
an income-tax authority pursuant to the
orders or instructions or directions issued
under sub-section (1), it shall not be lawful
for an assessee, being a party in any appeal
or reference, to contend tat the income-tax
authority has acquiesced in the decision on
the disputed issue by not filing an appeal or
application for reference in any case.
(4) The Appellate Tribunal or Court, hearing
such appeal or reference, shall have regard
to the orders, instructions or directions
issued under sub-section (1) and the
circumstances under which such appeal or
application for reference was filed or not
filed in respect of any case.
(66 of 89)
[ITA-575/2008]
(5) Every order, instruction or direction
which has been issued by the Board fixing
monetary limits for filing an appeal or
application for reference shall be deemed to
have been issued under sub-section (1) and
the provisions of sub-sections (2), (3) and
(4) shall apply accordingly.
19. In the case of CIT Vs. OSCAR
LABORATIES P. LTD (STR VOL 324 Pg. 115
at 144) the Punjab and Haryana High Court
has referred to the objects for enacting
Section 268A of the Act, which reads as
under:
36. Aimed at alleviating and remedying the
aforesaid predicament of the Revenue, the
Finance Act, 2008, inserted section 268A
into the 1961 Act This conclusion of ours is
clearly derivable from the objects recorded
in the Bill introduced in Parliament for the
promulgation of the Finance Act, 2008. An
extract of the objects recorded in the Bill
pertaining to the insertion of section 268A
into the 1961 Act, is reproduced hereunder:
(2008) 298 ITR(st) 170
The proposed section seeks to provide that
the Board may, from time to time, issue
orders, instructions or directions to other
income-tax authorities, fixing such
monetary limits as it may deem fit, for the
purpose of regulating filing of appeal or
application for reference by any income-tax
authority under the provisions of this
Chapter XX.
It is further proposed to provide that where,
in pursuance of the orders, instructions or
directions issued under sub-section (1), an
income-tax authority has not filed any
appeal or application for reference on any
issue in the case of an assessee for any
assessment year, it shall not preclude such
authority from filing an appeal or
application for reference on the same issue
in the case of - (a) the same assessee for
any other assessment year; or (b) any
(67 of 89)
[ITA-575/2008]
other assessee for the same or any other
assessment year.
It is also proposed to provide that
notwithstanding that no appeal or
application for reference has been filed by
an income-tax authority pursuant to the
orders or instructions or directions issued
under sub-section (1), it shall not be lawful
for an assessee, being a party in any appeal
or reference, to contend that the income-
tax authority has acquiesced in the decision
on the disputed issue by not filing an appeal
or application for reference in any case.
It is also proposed to provide that the
Appellate Tribunal or Court, hearing any
appeal or reference had filed under this
Chapter, shall have regard to the orders,
instructions or directions issued by the
Board from time to time either before or
after the insertion of this section and the
circumstances in which such appeal or
application for reference was filed or was
not filed in any case; and accordingly the
Tribunal or Court shall decide the appeal or
the reference on the merits of the issue
consideration. It is also proposed to provide
that every order, instruction or direction
which has been issued by the Board fixing
monetary limits for filing an appeal or
application for reference shall be deemed to
have been issued under sub-section (1) and
the provisions of sub-sections (2), (3) and
(4) shall apply accordingly.
This amendment will take effect
retrospectively from 1st April 1999.
20. Interpreting this provision, the Division
Bench of the Punjab and Haryana High
Court in the above case of CIT VS. OSCAR
Laboratories P. Ltd. (2010) 324 ITR 115
(P&H) held as under:
"Under Section 268A(1) of the Income Tax
Act, 1961, the Central Board of Direct Taxes
has been authorised to issue orders,
instructions or directions to the income-tax
(68 of 89)
[ITA-575/2008]
authorities, laying down monetary limits for
purposes of filing appeals. As a
consequence of the insertion of section
268A in the Act orders, instructions or
direction issued on the subject of monetary
limits for filing appeals must be deemed to
have attained statutory status. There can
be no dispute that every requirement under
the mandate of law, leads to a
consequential statutory obligation to
comply with the requirement. Subsection
(5) of Section 268A mandates that
instructions, orders or directions, even
issued earlier, i.e., prior to the insertion of
section 268A in the 1961 Act, by the
Finance Act, 2008, fixing monetary limits
for filing of appeals, shall be deemed to
have been issued under sub-section (1) of
section 268A of the 1961 Act. This
conclusion emerges from the fact that
section 268A of the 1961 Act was
introduced with retrospective effect from
April 1, 1999. Accordingly, instructions,
orders or directions issued even prior to the
insertion of section 268A of the 1961 Act
must be deemed to have statutory status, if
they were issued after April 1, 1999. All
issues prejudicial to the Revenue, in cases
where an appeal was not filed by the
Revenue must, therefore, be deemed to
have been done away with, after the
inclusion of section 268A into the 1961 Act.
After the introduction of section 268A into
the 1961 Act, section 260A of the 1961 Act
cannot be read independently. Sections
260A and 268A of the 1961 Act will now
have to be interpreted reading the two
harmoniously, so as to give effect to the
two provisions keeping in mind the objects
and the reasons on the basis whereof
section 268A was inserted into the 1961
Act. The Department of Revenue having
chosen on its own volition, the monetary
limits for filing appeals to challenge orders
passed in favour of assessee cannot be
heard to deviate there from when the
(69 of 89)
[ITA-575/2008]
Revenue itself lays down the monetary
limits. A harmonious construction of sub-
section (1) of section 260A of the 1961 Act,
and sub-section (1) of section 268A of the
1961 Act would inevitably lead to the
conclusion that the Revenue can prefer an
appeal if a case raises a substantial
question of law, subject to the monetary
limits stipulated by the Central Board of
Direct Taxes. It is open to the Revenue to
prefer an appeal only on the four grounds
specified in paragraph 3 of the instruction
dated March 27, 2000, and on no other
ground, in cases where the tax effect was
less than that prescribed therein.
29. It is also not out of place to mention
herein that the Parliament wanted to grant
statutory recognition to these
Orders/Instructions/Circulars, issued by the
Department from time to time
retrospectively to take care to protect the
interest of the Revenue by introducing sub-
section (2) and (3) in Section 268A of the
Act. This benefit conferred on these
assessees would be only in the nature of
one time settlement because if the same
issue arises for consideration in the
subsequent years and the tax effect is more
than Rs. 10 lakhs, it is not open to them to
plead that either the department is
estopped from claiming such amount or
that the order passed by this Court
dismissing the appeals on the ground that
the tax effect being within the monetary
limit would come in the way of the
Department proceeding against the
assessee. The circular also makes it clear
that in the pending appeals, where
constitutional validity of the provisions of
the Act or Rule are under challenge, or
where Board's order, notification, instruction
or circular has been held to be illegal or
ultra vires or whether Revenue Audit
Objection in the case has been accepted by
the Department, notwithstanding the fact
that the tax effect is less then the monetary
limit fixed under the aforesaid circular, still
(70 of 89)
[ITA-575/2008]
it is open to the Department to request the
Court to permit them to prosecute such
appeals. Thus, the Department has to apply
its mind in all the pending appeals and
point out to the Court, which are those
appeals in which they intend to prosecute.
Therefore sufficient safeguards have been
made to protect the interest of the public
revenue. By this approach we would be
saving the time of the Court, the time of
the Department and public time in general
and giving effect to the Nation Litigation
Policy, 2011, so that it can be used for
better and productive purpose.
(xv) Commissioner of Income Tax vs. Ideal Garden
Complex P. Ltd. (19.08.2008 - MADHC), [2008] 307 ITR
176 (Madras)
11. It may be noted that this court
considered a similar issue in the decision
rendered on August 16, 2007, in T. C. No.
222 of 2004 (CIT v. Associated Electrical
Agencies [2007] 295 ITR 496). Based on
Instruction 1979 in Circular F. No.
279/126/98 ITJ, dated March 27, 2000,
referring to the statutory power under
Section 119 of the Income Tax Act, 1961
under which the circular was issued, this
court held that (page 500)
10. We are of the considered view that
none of the exceptions stated in the circular
are applicable to the facts of the present
case. The circular was stated to be issued
by invoking the statutory power under
Section 119 of the Income Tax Act. The
appeal is filed under Section 260A of the
Income Tax Act. It is well-settled principle
of law that each and every provision of a
statute has to be given the same
importance. One provision cannot be
elevated to a higher pedestal than the other
provision, of course, unless or otherwise
specifically stated either in the scheme, the
(71 of 89)
[ITA-575/2008]
Act or in the provision itself that a particular
provision is subjected to or qualified by any
other provision or the provision can be
given effect to notwithstanding anything
contained in any other provisions by
assigning overriding effect. Hence, the
contention that notwithstanding the circular,
which was issued under Section 119 of the
Income Tax Act, the appeal could be filed by
the Revenue under Section 260A has to be
rejected for the reason that if the
contention is accepted, one of the sections
would become virtually otiose and that
cannot be the intention of the law makers.
12. Thus, following the long line of case law
reported in CIT v. Rajasthan Patrika Limited
MANU/RH/0420/2002 and CIT v. P.S.T.S.
Thiruvirathnam [2003]261ITR406(Mad) to
which one of us is a party (K. Raviraja
Pandian J.), CIT v. Digvijay
[2007]292ITR314(MP) and CIT v. Camco
Colour Co. [2002]254ITR565(Bom) , this
court held that the uniform line of judicial
opinion is that if the tax effect is less than
what is stated in the circular, the Revenue
need not agitate the issue on appeal and
that the circular is binding on the Revenue.
13. In the light of the said view expressed
by this court and on the admitted fact that
the tax effect is also negligible and less
than Rs. 1,00,000 and the case not falling
under any of the stipulations of the circular,
we do not find any justification to admit
these appeals. Consequently, the same are
dismissed.
(xvi) CIT, Kolkata-I vs. Indo Tossa (P.) LTd., [2016] 66
taxmann.com 182 (Calcutta)
4. Since the tax effect in this appeal is Rs.
15,32,504/- and since the monetary limit of
Rs. 20 lakhs is fixed for filing appeals before
(72 of 89)
[ITA-575/2008]
the High Court by the Department as per
Circular which has been issued with
retrospective effect and as Mr. Dudhoria
submits that he has no written instruction
from the Department for withdrawing this
appeal, as the said Circular, in view of
Section 119(1) is binding on the
departmental authority, the appeal is
treated to be dismissed as withdrawn.
(xvii) Commissioner of Income Tax vs. Manbhar Devi
Meena (04.05.2016 - RAJHC) [2016] 70 taxmann.com 275
(Rajasthan)
A Circular No. 21/2015 has been issued by
the Central Board of Direct Taxes dated
10.12.2015 in exercise of its power u/sec.
268A (1) of the Income-tax Act 1961 in
supersession of the Boards Instruction No.
5/2014, Dt. 10.7.2014 regularising the
monetary limits for filing the appeals by the
Revenue before the Tribunal, High Courts
and Apex Court with an object for reducing
litigation. Relevant para Nos. 3, 8, 9 and 10
reads ad infra:--
"3. Henceforth, appeals/SLPs shall not be
filed in cases where the tax effect does not
exceed the monetary limits given
hereunder:--
It is clarified that an appeal should not be
filed merely because the tax effect in a case
exceeds the monetary limits prescribed
above. Filing of appeal in such cases is to
be decided on merits of the case.
4 to 7** ** **
8. Adverse judgments relating to the
following issues should be contested on
merits notwithstanding that the tax effect
entailed is less than the monetary limits
specified in para 3 above or there is no tax
effect:
(73 of 89)
[ITA-575/2008]
(a) Where the Constitutional validity of the
provisions of an Act or Rule are under
challenge, or
(b) Where Board's order, Notification,
Instruction or Circular has been held to be
illegal or ultra vires, or
(c) Where Revenue Audit objection in the
case has been accepted by the Department,
or
(d) Where the addition relates to
undisclosed foreign assets/bank accounts.
9. The monetary limits specified in para 3
above shall not apply to writ matters and
direct tax matters other than Income tax.
Filing of appeals in other Direct tax matters
shall continue to be governed by relevant
provisions of statute & rules. Further, filing
of appeal in cases of Income Tax, where the
tax effect is not quantifiable or not involved,
such as the case of registration of trusts or
institutions under section 12A of the IT Act,
1961, shall not be governed by the limits
specified in para 3 above and decision to
file appeal in such cases may be taken on
merits of a particular case.
10. This instruction will apply
retrospectively to pending appeals and
appeals to be filed henceforth in High
Courts/Tribunals. Pending appeals below the
specified tax limits in para 3 above may be
withdrawn/not pressed. Appeals before the
Supreme Court will be governed by the
instructions on this subject, operative at the
time when such appeal was filed."
The extract of the paragraphs referred to
supra, clearly indicates that the limits
specified in para 3 may not apply to certain
exceptions specified in para 8, at the same
time para Nos. 9 and 10 of the Circular if
read conjointly, clearly envisages that the
present instructions will apply
retrospectively to all the pending appeals
and appeals to be filed henceforth in High
(74 of 89)
[ITA-575/2008]
Courts/Tribunals, subject to exceptions
where the tax effect even if is less than Rs.
20 lac, can be preferred in High Courts.
2. Taking note of the CBDT Circular Dt.
10/12/2015 and the tax effect which
indisputably in the instant case is less than
Rs. 20 lac, much less than what has been
prescribed for filing appeal before the High
Courts, deserves to be dismissed as not
pressed. However, it is made clear that the
substantial questions of law raised in the
instant appeals, if any, are left open to be
examined in an appropriate proceeding, if
arises in future. At the same time we
consider it appropriate to observe that if the
appeal falls in any of the exceptions as
referred to in the Circular Dt. 10/12/2015,
the Revenue will be at liberty to move an
application for recalling of the order if so
advised."
(xviii) Commissioner of Income Tax vs. Garment Crafts
and Ors. (12.01.2016 - RAJHC) ITA No. 42/2008 & Ors.
"9. Counsels in some of the cases also
contended that in few of the appeals
preferred by the Revenue, the tax effect is
less than Rs. 20 lac and therefore, in the
light of the latest circular of the Central
Board of Direct Taxes bearing No. 21/2005
dt. 10/12/2015, the board has instructed
that the Circular be applied to appeals to be
filed and also to pending in High Court and
such appeals either are required to be
withdrawn/not pressed by the Revenue and
therefore, such of the appeals where the tax
effect being below 20 lac, deserve to be
dismissed in view of the Circular which is
binding on the revenue.
-----
17. We may also deal with the issue raised by learned counsel for the assessees that in some of the appeals the tax effect being below Rs. 20 lac such appeals deserve to be (75 of 89) [ITA-575/2008] dismissed in view of the Circular of the Central Board of Direct Taxes No. 21/2015 dated 10.12.2015. We have gone through the Circular which states (para 3) that where the monetary limit is below Rs. 20 lac insofar as the High Courts are concerned, and that it applies to all pending appeals (para 10) below the specified tax limits, which may be withdrawn/not pressed. However, in view of Article 141 of the Constitution, we are bound by the judgment of the Hon'ble Apex Court and bound to follow such an issue/question which is squarely and directly covered on the issue being law of the land, and the Circular may not be applicable at-least in such matters and even otherwise the Circular of CBDT is not binding on this Court. Thus, we hold that when an issue/question is directly covered by a binding judgment of the Hon'ble Apex Court or of this Court, the Circular supra insofar as such an issue/question is concerned, is not binding on this count and in our opinion if an issue/question is directly or squarely covered as aforesaid by a judgment and is no more res integra, the Circular (supra) would be inapplicable."
9. Mr. Pandey has relied on the following decisions:
(i) 2008(3) SCC 582 State of Kerala and Ors. vs. Kurian Abraham Pvt. Ltd. and Anr. (08.02.2008 - SC)
23. Tax administration is a complex subject.
It consists of several aspects. The Government needs to strike a balance in the imposition of tax between collection of revenue on one hand and business-friendly approach on the other hand. Today, Governments have realized that in matters of tax collection, difficulties faced by the business have got to be taken into account. Exemption, undoubtedly, is a matter of (76 of 89) [ITA-575/2008] policy. Interpretation of an Entry is undoubtedly a quasi-judicial function under the tax laws. Imposition of taxes consists of liability, quantification of liability and collection of taxes. Policy decisions have to be taken by the Government. However, the Government has to work through its senior officers in the matter of difficulties which the business may face, particularly in matters of tax administration. That is where the role of the Board of Revenue comes into play. The said Board takes administrative decisions, which includes the authority to grant Administrative Reliefs. This is the underlying reason for empowering the Board to issue orders, instructions and directions to the officers under it.
(ii) 2004(10) SCC 1, Union of India & Anr. vs. Azadi Bachao Andolan & Anr. (07.10.2003 - SC) "47. It was contended successfully before the High Court that the circular is ultra vires the provisions of section 119. Sub-section (1) of section 119 is deliberately worded in general manner so that the Central Board of Direct Taxes is enabled to issue appropriate orders, instruction or direction to the subordinate authorities "as it may deem fit for the proper administration of the Act". As long as the circular emanates from the Central Board of Direct Taxes and contains orders, instructions or directions pertaining to proper administration of the Act, it is relatable to the source of power under section 119 irrespective of its nomenclature. Apart from sub-section (1), sub-section (2) of section 119 also enables the Central Board of Direct Taxes "for the purpose of proper and efficient management of the work of assessment and collection of revenue, to issue appropriate orders, general or special in respect of any class of income or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income tax authorities in the work relating to assessment or collection of revenue or (77 of 89) [ITA-575/2008] the initiation of proceedings for the imposition of penalties". In our view, the High Court was not justified in reading the circular as not complying with the provisions of section 119. The circular falls well within the parameters of the powers exercisable by the Central Board of Direct Taxes under Section 119 of the Act."
(iii) Union of India & others Vs. Arviva Industries India Limited and others- 2014 (3) SCC 159 "4. This Court in Commr. Of Customs Vs. Indian Oil Corpn. Ltd.- (2004)3 SCC 488, after examining the entire case law, culled out the following principles: (SCC p.497, para 12) "(1) Although a circular is not binding on a court or an assessee, it is not open to the Revenue to raise a contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board.
(3) A show-cause notice and demand contrary to the existing circulars of the Board are ab inititio bad.
(4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars."
5. In this particular case, the Board's Circular No.39/99- Cus. Dated 25.6.1999 extends the benefit of the brand rate of drawback to compensate exporters for the re-rolled steel products and processed fabrics. The High Court has rightly come to the conclusion that the circulars issued by the Board are binding on the Department. An effort was made by the learned Solicitor General to get this case referred to a larger Bench. We do not accept this contention in view of a number of decisions and especially the Constitution Bench decision in Dhiren Chemical Industries- (2002)2 SCC
127."
(78 of 89) [ITA-575/2008]
10. The provisions which are important are as under:
10.1 Article 141 of the Constitution of India
141. Law declared by Supreme Court to be binding on all courts The law declared by the Supreme Court shall be binding on all courts within the territory of India 10.2 Section 263 of the Income Tax Act
263. Revision of orders prejudicial to revenue (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the 2 Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 3Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub- section,-of the Commissioner under this sub- section shall extend 1 and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] (2) No order shall be made under sub-
section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.] (3) Notwithstanding anything contained in sub- section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the (79 of 89) [ITA-575/2008] purposes of sub- section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.
10.3 Section 154 of the Income Tax Act "154. Rectification of mistake.- (1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,--
(a) amend any order passed by it under the provisions of this Act ;
(b) amend any intimation or deemed intimation under sub-section (1) of section
143.
(1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.
(2) Subject to the other provisions of this section, the authority concerned--
(a) may make an amendment under sub- section (1) of its own motion, and
(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the Commissioner (Appeals), by the Assessing Officer also.
(3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.
(4) Where an amendment is made under this section, an order shall be passed in (80 of 89) [ITA-575/2008] writing by the income-tax authority concerned.
(5) Subject to the provisions of section 241, where any such amendment has the effect of reducing the assessment, the Assessing Officer shall make any refund which may be due to such assessee.
(6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly.
(7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under this section shall be made after the expiry of four years [from the end of the financial year in which the order sought to be amended was passed. (8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee on or after the 1st day of June, 2001 to an income-tax authority referred to in sub-section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,--
(a) making the amendment; or
(b) refusing to allow the claim."
10.4 Section 151-A of the Customs Act "151A. Instructions to officers of customs.-- The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of goods or with respect to the levy of duty thereon, issue such orders, instructions and directions to officers of customs as it may deem fit and such officers of customs and all the other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board: Provided that no such orders, instructions or directions shall be issued--
(81 of 89) [ITA-575/2008]
(a) so as to require any such officer of customs to make a particular assessment or to dispose of a particular case in a particular manner; or
(b) so as to interfere with the discretion of the Collector of Customs (Appeals) in the exercise of his appellate functions.]"
10.5 Section 37-B of the Excise Act [37B. Instructions to Central Excise Officers.
--The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and such officers and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the said Board: Provided that no such orders, instructions or directions shall be issued--
(a) so as to require any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner; or
(b) so as to interfere with the discretion of the [Commissioner of Central Excise (Appeals)] in the exercise of his appellate functions."
11. While inaugurating a five day National Legal Workshop on 23.12.2001, Mr. Justice S.P. Bharucha (the then Chief Justice of India), made the following statement:
"The principle cause of arrears in the courts does not lay with the Judges or the Bar but with the State Governments. Fast Track Courts or amendments to the Civil and Criminal Procedure Code were of no real cure to the problem unless the Governments acted responsibly."
(82 of 89) [ITA-575/2008]
12. In view of the contentions which have been raised by learned counsel for the parties, an apprehension which has been put forward by the Department that in spite of Supreme Court decision the authority may take contrary view. In that view of the matter, the appeal may be allowed to be filed irrespective of monetary limit.
12.1. In our considered opinion, the intention is not to allow to file appeal up to the monetary limit fixed by the Board which has statutory force and apprehension is misconceived in view of observation made in para 21.
13. We have also heard learned counsel for the parties on the issue.
14. To give a comparison of Clause 11 of the Instruction No.3/2011 issued in reference to Board's Instruction No.5/2008 dated 15.5.2008 and Clause 10 of Circular No.21/2015 dated 10.12.2015, they are required to be reproduced again independently in a tabular form, which read as under:
Clause 11 Clause 10 This instruction will apply to This instruction will apply
appeals filed on or after 9 retrospectively th to pending February 2011. However, the appeals and appeal be filed cases where appeals have been henceforth in High Courts/ filed before 9th February, 2011 Tribunals. Pending appeals below will be governed by the the specified tax limits in para 3 instructions on this subject, above may be withdrawn/ not operative at the time when such passed. Appeals before the appeal was filed. Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.
(83 of 89) [ITA-575/2008]
15. Even on a plain comparison of two clauses, referred to above, it is very clear that the notification which was issued on 9 th February, 2011 could not achieve the results which were envisaged by the Government. Therefore, after almost four years, they have come out with more liberal clause to make it retrospective so that the pendency could be reduced and genuine litigation can be decided on merits.
16. The reasons and objects for which Section 268-A of the Income Tax Act was introduced, reads as under:
"The underlying objective of the Board's instruction is to reduce litigation in small cases. With a view to protecting the Revenue's right to file or not to file an appeal, a new Section 268A of the Income- tax Act has been inserted so as to provide that-
The Board may issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit. Such fixing of monetary limit is to be for the purpose of regulating filing of appeal or application for reference by any income tax authority under the provisions of this Chapter.
Where an income-tax authority has not filed any appeal or application for reference on any issue in the case of an assessee for any assessment year, due to abovementioned order/instruction/direction of the Board, such authority shall not be precluded from filing an appeal or application for reference on the same issue in the case of -
(a) the same assessee for any other assessment year; or
(b) any other assessee for the same or any other assessment year.
Where no appeal or application for reference has been filed by an income tax authority pursuant to the above mentioned orders/ instructions/ directions of the Board, it shall not be lawful for an assessee to contend that the income tax authority (84 of 89) [ITA-575/2008] has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case. The Appellate Tribunal or Court shall have regard to the above mentioned orders/ instructions/directions of the Board and the circumstances under which such appeal or application for reference was filed or no filed in respect of any case.
Every order/instruction/direction which has been issued by the Board fixing monetary limits for filing an appeal or application for reference shall be deemed to have been issued under sub-section (1) of this new section and all the provisions of this section shall apply to such order/instruction/direction.
Applicability: This amendment has been made applicable with retrospective effect from 1st April, 1999."
17. From the policy which has been referred by different High Courts and the intention of the legislation to reduce the pendency of the tax appeal and to have a uniform policy for the department through-out the Country, therefore, the direction issued by the CBDT is binding on all subordinate officers and Section 268A(4) which has been amended with retrospective effect is applicable with all force in pending matters.
18. The intention of the legislation is very clear to prohibit the appeal analogous to the provisions of Code of Civil Procedure where there is a prohibition that appeal upto the value will not be entertained by the Court.
19. Under Section 260A of the Act only question of law is required to be decided, therefore, on analogous principle of Section 96(4) of the CPC, if the legislation has thought it fit to prohibit the department to file appeal, the instruction of CBDT to (85 of 89) [ITA-575/2008] delegate the power, in our considered opinion, the appeal is prohibited. In view of sub-section (4) of Section 96 of the CPC where it has been prohibited that no appeal shall lie, except on a question of law, from a decree in any suit of the nature cognizable by Courts of Small Causes, when the amount or value of the subject matter of the original suit does not exceed Rs.10,000/-.
20. In view of majority of High Court decisions where the view is in favour of the assessee and in view of all the judgments referred by counsel for the assessee-respondent, if two views are possible, then one view which is in favour of the assessee is required to be upheld and the same is upheld.
21. The contention which has been envisaged is of the decision of the Supreme Court. There are ample powers under Section 263 and 154, which will meet the ends of justice and it will not be out of place to mention that the writ can also be filed by the department if it is a gross case decided by any officer or authority but to that extent the appeal is not maintainable and would amount to give over riding effect to the statutory provisions.
22. It is well known that the Courts are flooded with litigation where the State Government and Central Government or the Department or Corporation are the largest litigants, therefore, frivolous litigation is curb for larger interest of avoiding more Tribunals or Courts to decide the matters on merits.
23. In that view of the matter, when the legislation had thought it fit to put some prohibition on the department, in our considered opinion the issue is required to be answered in favour (86 of 89) [ITA-575/2008] of the assessee and against the department inasmuch as the circular of the CBDT is binding on the subordinate officers.
(INDERJEET SINGH),J. (K.S.JHAVERI),J.
Per Hon'ble M.N. Bhandari, J.
24. The issue for our consideration is as to whether the Department can act contrary to the Circular issued by the Central Board of Direct Taxes (for short "the CBDT") in pursuance of Section 268A of the Income Tax Act, 1961 (for short "the Act of 1961").
25. It is admitted by learned counsel for the parties that the Department cannot act contrary to the Circular issued by the CBDT for reduction of arrears of the cases in different courts. It is more specifically after amendment in Section 268A of the Act of 1961. It is, however, urged by learned counsel appearing for the Department that if the Tribunal takes a view contrary to the judgments of the Apex Court then the appeal should be held maintainable irrespective of value of the tax effect.
26. Learned counsel appearing for the Department submits that Article 141 of the Constitution of India provides law declared by the Supreme Court to be binding on all the Courts within the territory of India. In a case where ratio propounded by the Supreme Court is not followed then irrespective of value of tax effect, appeal should be held maintainable. It is even otherwise (87 of 89) [ITA-575/2008] required for the judicial discipline. The binding effect of the judgments of the Supreme Court has to be maintained. The Appellate Tribunals are not at liberty to take their own view contrary to the judgments of the Supreme Court on the same issue for the reason that no appeal can be preferred considering tax effect involved therein. The clarification is thus necessary to that extent.
27. Learned counsel for the non-appellant/s has contested the issue. It is submitted that when the Circular has been issued under Section 268A of the Act of 1961 then it takes statutory character, hence, no direction or liberty can be sought contrary to it. Accordingly, the arguments raised by learned counsel for the Department may not be accepted even in reference to Article 141 of the Constitution of India.
28. We have considered the submissions made by learned counsel for the parties and perused the record as well as the judgments cited at Bar.
29. Various High Courts have considered the issue raised before us. The Circular issued by the CBDT under Section 268A of the Act of 1961 is binding on the Department thus the appeal cannot be preferred contrary to the instructions given therein. This Court, however, cannot lose sight of the only issue raised by the Department in reference to Article 141 of the Constitution of India.
If an issue has been decided by the Apex Court then the ratio propounded therein is to be applied as a precedence. If the Tribunal or the CIT (Appeals) takes a view contrary to the settled (88 of 89) [ITA-575/2008] law then rider imposed by the CBDT on filing of appeal cannot be applied. If we hold that appeal would not be maintainable even if the Tribunal or the CIT (Appeals) has taken view contrary to the judgment of the Supreme Court then Article 141 of the Constitution of India would be violated. No statutory provision can stand or be read contrary to the constitutional provision.
30. In view of the above, theory of reading down needs to be applied for making Circular of the CBDT in consonance to the provisions of the Constitution of India otherwise it would not only cause judicial indiscipline but give rise to the anarchy, leading to serious consequences.
31. Accordingly, the Circular issued by the CBDT under Section 268A of the Act of 1961 is held binding on the Department thus appeal cannot be filed, if it is barred. It is, however, with a clarification that if the issue decided by the CIT (Appeals) or Tribunal is contrary to the judgments of the Supreme Court, the Department can prefer an appeal, however, care would be taken to file it only in those cases where the order passed by the CIT (Appeals) or the Tribunal is contrary to the ratio propounded by the Supreme Court on the same issue. In doing so, sanctity of Article 141 of the Constitution of India would be maintained, thereby, serious consequences of taking different view would also be avoided.
32. The Department may incorporate it in the Circular to avoid further controversy.
(89 of 89) [ITA-575/2008]
33. The question framed before the Larger Bench is answered accordingly.
(M.N. BHANDARI,J.
B.M. Gandhi/Preeti