Income Tax Appellate Tribunal - Nagpur
Ito vs Jagatpal Singh on 25 September, 2001
Equivalent citations: (2002)75TTJ(NAG)401
Order P.M. Jagtap, A.M. This appeal is preferred by the revenue against the order of the learned Commissioner (Appeals)-I, Raipur, dated 2-6-1997.
2. The revenue has raised the following two material grounds in this appeal :
1. On the facts and in the circumstances of the case the learned Commissioner (Appeals) has erred in directing the assessing officer that value of opening work-in-progress of Rs. 3,20,000 and the cost of material supplied by the department be reduced from the net receipts for the purpose of determining the profits under section 44A without considering the facts that section 44AD clearly states that the income shall be estimated at prescribed percentage basis, i.e., at the rate of 8 per cent of the gross receipts, and there is no provision for deduction of work-in-progress.
2. On the facts and in the circumstances of the case the learned Commissioner (Appeals) has also erred in directing the assessing officer to assess the profits from truck-plying business under section 44AE for 5 months as against 9 months taken by the assessing officer thereby deleting the addition of Rs. 8,000 on this account without considering the facts that the truck was on I-Form only for 3 months.
3. At the time of hearing before us nobody appeared on behalf of the assessee but a copy of the decision of Tribunal, Jabalpur Bench in the case of ITO v. S. C. Diwakar 28 ITC 223 has been filed by the assessee in support of his contention that the revenue effect of this departmental appeal being less than Rs. 25,000, the same is liable to be dismissed. The learned Departmental Representative, on the other hand, strongly supported the order of the assessing officer on merits and further contended, relying on the decision of Hon'ble Supreme Court in the case of State Bank of Travancore v. CIT (1986) 158 ITR 102 (SC) that the circulars being executive in character cannot alter the provisions of the Act. He also contended that the Instructions issued by the Central Board of Direct Taxes relate to the internal administrative matters of the department and the outsiders should not be allowed to derive any benefits from the same.
4. We have considered the rival submissions and also perused the relevant material on record including the decisions cited at the Bar. It is observed that the aforesaid decision in (1986) 158 ITR 102 (SC) (supra) cited by the learned Departmental Representative has been explained and distinguished by their Lordships of the Hon'ble Supreme Court in the case of UCO Bank v. CIT (1999) 237 ITR 889 (SC), and we find it worthwhile to reproduce the relevant observations of the Hon'ble Supreme Court as under :
"In the premises the majority decision in the State Bank of Travancore v. CIT (1986) 158 ITR 102 (SC), cannot be looked upon as laying down that a circular which is properly issued under section 119 of the Income Tax Act for proper administration of the Act and for relieving the rigour of too literal a construction of the law for the benefit of the assessee in certain situations would not be binding on the departmental authorities. This would be contrary to the ratio laid down by the Bench of five Judges in Navnit Lal C. Javeri v. K.K Sen (1965) 56 ITR 198 (SC). In fact State Bank of Travancore v. CIT (supra), has already been distinguished in the case of Keshavji Ravji & Co. v. CIT (1990) 183 ITR 1 (SC) by a Bench of three Judges in a similar fashion. It is held only as laying down that a circular cannot alter the provisions of the Act."
After recording the aforesaid observations the Hon'ble Apex Court proceeded to hold that the Central Board Direct Taxes under section 119 of the Income Tax Act, 1961, has power inter alia to tone down the rigour of the law and ensure a fair enforcement of its provision, by issuing circulars in exercise of its statutory powers under section 119 of the Act which are binding on the authorities in the administration of the Act.
5. In the present case it appears from the record that the revenue effect of the departmental appeal does not exceed Rs. 25,000 and this fact has not been disputed by the learned Departmental Representative before us. In this regard the Central Board of Direct Taxes has issued the Instruction No. 1777 on 4-11-1987, providing guidelines to be followed by the concerned departmental authorities while deciding the question of filing of appeal/reference before Tribunal, High Court and Supreme Court. As per the said guidelines, the monetary limit of revenue of Rs. 10,000 was initially laid down for filing appeals before the Tribunal and subsequently the same was revised to Rs. 25,000 as per Instruction No. 1903 issued on 28-10-1992, with effect from 1-11-1992. Again this limit has been increased to Rs. 1,00,000 with effect from 1-4-2000, vide Instruction No. 1979, dt. 27-2-2000, and the requirement of working out the monetory limit of cumulative revenue effect has also been dispensed with. However, in the present case, the appeals having been filed by the revenue in the year 1997 we are at present not concerned with the said Instruction No. 1979, dated 27-3-2000, which has been made operative from 1-4-2000.
6. As regards the Instruction No. 1777, dated 4-11-1987, it appears that the following norms have been specified for the purpose of working out the monetary limit of revenue effect :
(1) Cumulative revenue effect of the issue in the assessee's case for all the. years upto the year for which returns have been filed should be taken consideration.
(2) Where the same issue is involved in different case of a group (e.g., industrial house, family, connected cases, etc.) the revenue effect of the group and not the individual case should be taken into account.
(3) While applying the monetary limits the effect of carry forward and effect of consequential addition/deletions in other years should be kept in view.
(4) In case of firms/Association of Persons the revenue effect in the cases of partners/members be also taken into account.
7. Further, it was also specified that the guidelines laid down in the Instructions should be strictly adhered to by the departmental authorities subject to the exceptions given in the said Instructions and such explanation, which are relevant to the filing of appeals before the Tribunal have been given in para 3(iii) of the said Instructions as follows :
(a) Where prosecution proceedings are contemplated against the assessee.
(b) Where strictures have been passed against the department or its officers.
(c) Where revenue audit objection in the case has been accepted by the department.
(d) Where Board's order, notification, instruction or circular is the subject matter of adverse order.
(e) Where in respect of one assessment year the order is contested in the case of an assessee for any reason, the adverse judgment for other years on the issue in that case should also be contested irrespective of the amount involved so that department's case on the issue is not prejudice on the ground that in respect of some year the department has already accepted the assessee's case.
8. In the present case it appears from the record that the appeal preferred by the revenue is covered by the Instruction No. 1903 dated 28-10-1992, read with Instruction No. 1777, dated 4-11-1987, inasmuch as the revenue effect in any appeal neither exceeds the monetory limit of Rs. 25,000 as specified in the said Instructions nor the same is covered by any of the exceptions given in para 3(iii) enumerated herein above.
9. In the case of CIT v. ITAT & Anr. (1998) 232 ITR 207 (Del) the facts involved were that the Tribunal had rejected the application filed under section 256(1) by the department for referring the question of law without expressing any opinion as to whether questions sought to be answered were, questions of law arising out of the order of the Tribunal, by relying on Circular No. 319/11 issued by Central Board of Direct Taxes, according to which the department would not seek reference to the High Court if a question of law had arisen out of the order of the Tribunal, if the effect involved was less than Rs. 30,000. Aggrieved by the order of the Tribunal, the department filed an application under section 256(2) and while disposing of the same the Hon'ble Delhi High Court held that if the case is covered by a policy laid down by Central Board of Direct Taxes in the revenue Instructions which are binding on the department, no fault could be found in the order of the Tribunal refusing to state such case. Their Lordships, therefore, found no reason to interfere with the discretion exercised by the Tribunal in refusing to state the case under section 256(1) observing that the High Court would not encourage breach of policy decision and the departmental instructions which have the public purpose behind it.
10. As such considering the facts of the case, the guidelines contained in the aforesaid instructions issued by Central Board of Direct Taxes and in view of the decision of Hon'ble Delhi High Court in the case of CIT v. ITAT & Anr. (supra) as well as that of Tribunal, Jabalpur Bench in ITO v. S.C. Diwakar (supra) we find that the present appeal preferred by the revenue having been filed in contravention of the aforesaid Central Board of Direct Taxes Instructions which are binding on the revenue authorities, is not tenable. We, therefore, dismiss the same at the threshold.
11. In the result, this appeal of the revenue is dismissed.