Income Tax Appellate Tribunal - Ahmedabad
Jasubhai Chhanabhai Shah, Mehsana vs Department Of Income Tax on 17 February, 2005
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "B"
(BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH)
ITA No.1208/Ahd/2005
(Asstt.Year:- 1999-2000)
The Income-tax Officer, V/s Shri Jasubhai Chhanalal
Ward-1, Mehsana Shah, Jawahar Society,
Mehsana
(Appellant) (Respondent)
Appellant by :- Shri P M Shukla, Sr. DR
Respondent by:- Shri J M Trivedi
ORDER
Per Bench: This Appeal by the Revenue is directed against the Order passed by the Commissioner of Income-tax (Appeals)- XX,Ahmedabad ["CIT(A)" for short] dated 17/02/2005 for the assessment year (AY) 1999-2000. The effective ground raised by the Revenue reads as under:
"1 The learned CIT(A) has erred in law and on the facts of the case in holding that the capital gains arising from the sale of the land has not been proved as pertaining to the AY 1999-2000 and consequently deleting the addition of Rs.8,71,940/- made as Capital Gains."
2. Shri J M Trivedi, the learned AR has contended that in this case the revenue effect in the appeal filed by the Revenue is below Rs.2 lakhs. The learned AR has furnished the following 1 chart showing that the tax effect is below Rs.1,00,000/-, which reads as under:-
Name of Income Gross Tax (Without As Per
Assessee Finally Interest) Demand
Assessed Notice u/s
u/s 154 156 R.W.S.
Income Tax 154
Shri 3,84,020 3,80,000 88,000
Jasubhai C
Shah
4,000 1,200
20 6
---------- ---------
3,84,020 89,206 1,02,878
Though the appeal has been filed when the limit for filing the appeal was prescribed by the CBDT at Rs.1 lakh, the assessee's contention is that the said limit has been increased by the subsequent Circular of the Board dated 24th October, 2005 and, therefore, the appeal should not be entertained in view of the Bombay High Court decision in the case of Pithwa Enggg. Works 276 ITR 519.
3. The learned DR pointed out that neither the Circular nor the decision in the case of Pithwa Engg. Works 276 ITR 519 will have any application. He also relied on the decisions of the Hon'ble Punjab & Haryana High Court in the cases of Rani Paliwal v CIT 268 ITR 220 (P&H) and CIT v. Abhishek Industries Ltd. (2006) 286 ITR 1 (P&H).
24. Further, we find that the appeal is not maintainable in a case where the final assessment has been made on loss and Instruction 1979 dated 27-3-2000 will equally be applied. In this regard we rely on the decision of the ITAT Special Bench in the case of JCIT v Peerless Developers Ltd. (2006) 103 ITD 349 (KOL) (SB). Although different High Courts have taken a different view but there is no decision of the Hon'ble Jurisdictional High Court on this issue. The decision of the Punjab & Haryana High Court has been duly discussed by the Special Bench of ITAT. Thus, the case of the assessee is duly covered in view of the decision of the Special Bench of ITAT in the case of Peerless Developers Ltd. (supra) and accordingly the appeal should be dismissed in limine.
5. After hearing the learned DR and perusing record, we find that the revenue effect involved in the present appeal filed by the Revenue is less than Rs.2 lakhs, and therefore, the appeal is not maintainable in the light of the decision of the ITAT in the case of Asstt. CIT v. Rajoo Engineers Ltd (Rajkot) [2006] 100 lTD 555 (RAJKOT). In the said case the facts are that consequent upon the direction issued by the Commissioner (Appeals) to allow the assessee-company's claim under section 8OHHC without excluding deduction allowed under sections 80-I and 80G, the impugned addition made on that account in excess of Rs. 1 lakh stood deleted. Though the revenue filed the appeal on 21-6-2005 when the monetary limit for filing the appeal was prescribed by the CBDT at Rs.1 lakh, the assessee's contention 3 was that the said limit has been increased by the CBDT's subsequent Circular dated 24-10-2005 and, therefore, the appeal should not be entertained in view of the High Court's decision in the case of CITy. Pithwa Engg. Works (2005) 276 ITR 519 (Bom). The Revenue, however, contended that the new limit applies only to appeals filed after 30-10-2005 and the aforesaid decision of the High Court had no application for the increased limit under the new circular, and that in any case, the instant case was covered by the exception provided in clause 3 of the said circular since there involved a substantial question of law. The ITAT held as under :
"It is true that the High Court decision in CIT v. Pithwa Engg. Works [2005] 276 ITR 519] was not dealing with the new limit of the circular dated24-10-2005. It was with reference to the earlier circular where reference was not required to be filed to the High Court if the tax effect was less than Rs. 2 lakhs. The contention of the revenue in that case was that Rs. 2 lakhs limit was increased by circular dated 27-3 -2000 and prior to that, the limit was only Rs. 50,000 and the contention of the revenue was that the new limit would not be applicable to the old references. The High Court rejected the said contention of the revenue.
In those circumstances, though the said High Court decision did not deal with the circular dated 24-10-2005, but it had dealt with the earlier circular and the limits of that circular were applied even to the cases which were prior to the old circular. Therefore, the ratio of that decision was applicable in the instant case as well. The CBDT has taken a policy decision not to file appeals in such type of cases and the circular is binding on the revenue even to appeals filed before 31-10-2005 and the department would not be justified in proceeding with those appeals 4 within the monetary limit of tax effect prescribed in the circular dated 24-10-2005."
We have also gone through the decision of the Special Bench in the case of Peerless Developers Ltd. (supra). We find that in this case it has been held as under:
"CBDT instruction No.1979, dated 27-3-2000 states that where the tax effect in an appeal is less than Rs.2 lakh, the department should not file any appeal before the Tribunal. The AO in the assessment made for the assessment year 1997-98 had added the sum of Rs.69,84,089 while determining the income of the assessee for the assessment year 1997-98, but in the assessment year 1996-97 had not allowed deduction for the sum of Rs.69,84,089 claimed by the assessee. Thus, if the addition in the year under appeal was upheld and, consequently, the revenue had to delete the addition made in the assessment year 1997-98 or vice versa, the tax effect of the same would be zero, in view of the fact that the income determined in the assessment year 1996-97 was loss of Rs.5,74,69, 643 and the income determined in the assessment year 1997-98 was also a loss of Rs.2,76,81,893. Further, similar issue in the hands of the assessee itself was decided in favour of the assessee for the assessment years 1993-94, 1995-96 and 1997-98 to 1999-2000 and the department had accepted the said decision of the Tribunal, as revenue could not bring any material to show that any appeal was preferred to the High Court against those orders. In the circumstances, as the issue was already a decided issue and coupled with the fact that the tax effect on the same was nil, the issue even if involved a question of law, the same could not be treated as a substantial question of law.
Consequently, the appeal filed by the revenue was not maintainable and was required to be dismissed.
In the result, the appeal of the revenue was to be dismissed in limine."5
Our aforesaid view is also supported by the decision of the Jurisdictional High Court in Tax Appeal Nos.1402 to 1405 of 2007 and others in the case of CIT v Concord Pharmaceuticals, Judgment dated 05-08-2008, wherein it has been held as under:
"17. Having heard learned counsels appearing far the respective parties and having gone through the relevant statutory provisions, judgments of various Courts and Circulars issued by the Board from time to time, we are of the view that subject to certain directions, which are issued hereinafter, all these Tax Appeals deserve to be dismissed and they are accordingly dismissed as no question of law, much less, any substantial question of law arises out of the order of the Tribunal. In almost au cases the Tribunal has dismissed the appeals only on the ground of low tax effect, without entering into merits of the matter. While dismissing the appeals, the Tribunal has referred to the Circular issued by the Central Board of Direct Taxes prescribing the monetary limit. The appeals filed by the Department in contravention of such Circulars prescribing the monetary limit were ordered to be dismissed. Almost all Courts are agreeable on this issue.
18. The real controversy arose when certain exceptions are carved out in the Circulars and despite the fact that many of these cases before the Tribunal are covered by those exceptions, which require the Tribunal to go into the merits of the matter, the Tribunal has straightway dismissed those appeals. There is a cleavage of opinion amongst the different Courts on this issue. One view is that while applying the Circular issued by the Board, the Tribunal has to take into consideration as to whether the exceptions carved out in the Circular apply to the case on hand and if any of those exceptions is applicable in that case the Tribunal will have to ignore the monetary limit and decide the appeal an merits. In Kodanand Tea Estate Co's case (Supra), before the Tribunal, the applicability of the circular was questioned. The Madras High Court, therefore, took the view that the question comes within the ambit of exception and the Tribunal was directed to hear appeal on the merits.
19. Another view is that if any particular Circular is pressed into service seeking dismissal of appeal on the ground of low tax effect 6 and if no objection is raised by the Department either in the appeal memo or at the time of hearing of appeal, the Tribunal is not bound to consider as to whether exceptions are applicable or not. In Smt. Madhu Bai Lodha's case (Supra) the M.P. High Court took the view 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 the circular, the same deserves to be considered.
In A Rajendra Prasad &Ors., case (Supra), the AP. High Court took the view that in case the Department finds a certain matter to be agitated by way of an appeal although it falls within the monetary limits of the circulars, the department should clearly plead in the memo of appeal itself that the appeal fails under the exceptions. In absence of such a pleading in the memo of appeal, normally appeal should not be entertained.
In Kurian Abraham Pvt Ltd's case (Supra) the Hon'ble Supreme Court took the view that whenever any binding circular is issued by the Board granting administrative relief, as long as such circular remains in force, it is not open to the subordinate officers to contend that the circular is erroneous and nat binding on them. If such a contention is to be accepted, ft would lead to chaos and indiscipline in the administration of tax laws.
In Indian Oil Corporation case (Supra) the Hon'ble Supreme Court laid down certain propositions of law in relation to the binding nature of circulars issued by the Board. The Court held that despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board and that it is not open to the Revenue to advance an argument or file an appeai contrary to the circulars.
20. There is also difference of opinion amongst the Courts with regard to the applicability of the Circular. If, on the date of filing of an appeal, a Circular is not in force or certain exceptions are not there or monetary limit is less than what was there at the time of deciding this appeal, in such cases, the Tribunal will have to give due weightage to the provisions contained in the circular prevalent on the date of filing of appeal and not on the date of the decision of the appeal. In Chhagar Packaging & Plastics (P) Ltd.'s case (Supra) the Bombay High Court 7 took the view that circulars / instructions issued by the Board are applicable only prospectively and if there is no reference to their applicability to the pending matters, such pending matters cannot be decided on the basis of circulars/instructions.
In Pithwa Engineering Works' case (Supra) the Bombay High Court took the view that taking judicial notice of the money value having gone dawn and cost of litigation expenses having gone up as well as huge pendency of cases, the Board should evolve a policy of app1ying the circulars even to the old references which are still V undivided. The Department should not have proceeded with the appeals / references wherein the tax impact is minimal, irrespective of their date off filing.
21. There is no dispute about the fact that where substantial question of law of importance is involved or where question of law is repeatedly arising or where the issue is covered by the judgment of territorial High Court or Supreme Court, the Tribunal will have to decide the appeal on merits and in terms of the law declared by the Supreme Court or by the territorial High Court. However, on this ground the matters cannot be remanded to the Tribunal directing the Tribunal to decide the same afresh. If no objections are raised by the departmental representative at the time of hearing of the appeal against the applicability of the Circular despite there being an exception, the Department has missed the bus and second inning cannot be granted far that purpose. However, in matters where such objections are raised and despite those objections or without dealing with those objections if the Tribunal has dismissed the appeal only on the ground of low tax effect, in such matter, an indulgence is required to be shown by this Court and for this limited purpose, the Department is permitted to move an appropriate application before the Tribunal for deciding the appeal on merits.
22. We are of the view that simply because the appeal is flied b the Department in contravention of the Circular the Tribunal is riot bound to decide the. appeal on merits. Due weightage should invariably be given by the Tribunal to the Circular issued by the Board. Even otherwise, the newly inserted provisions contained in Section 268A(4) make it obligatory for the Tribunal to consider such Circular. It is not open for the Department to contend that Circulars are internal matters of the Department and assessee cannot object to filing of an appeal on the basis of such Circular. it is true that filing of an appeal is a 8 statutory right but it can certainly be regulated by the Board by issuance of orders, instructions or Circulars. This would not amount to taking away the right of filing of appeal or that such right is prohibited by executive instructions. Section 268A(1) of the Act now recognizes such right of the Board to regulate the filing of appeal or application before the Tribunal or the Court. It is also true that when the Hon'ble Supreme Court or the territorial High Court have declared the law on a question, it is not open to the Tribunal to direct that the Circular issued by the Board prescribing the monetary limit should be given effect to and not the decision of Hon'ble Supreme Court or the territorial High. Court. It is, however, equally true that the Tribunal's attention must be drawn by the departmental representative to such decision of the Hon'ble Supreme Court or the High Court. An objection must be raised by the Departmental representative.
23. Considering all the aforesaid issues we dismiss all these Ta Appeals reserving liberty to the Department only on those cases to apply to the Tribunal to decide the appeal on merits where the objections were raised before the Tribunal either in the appeal memo or at the time of hearing of appeal raising a specific contention that a particular appeal is covered by an exception and despite this objection the Tribunal has not dealt with the said contention and dismissed the appeal on the ground of low tax effect. It is expected from the Tribunal to consider this broad parameters while applying the relevant Circular to the facts of the case at the time of deciding appeals.
24. So far as Tax Appeal Nos.496, 545, 547, 548, 550 and 704 of 2007 are concerned, this Court while admitting all these appeals on 10.10.2007 has also framed one mare substantial question of law Which is as under -
"Whether in the facts and circumstances of the case, the Tribunal was justified in holding that the excise duty levied an closing stock should not be taken into account for valuation ct the closing stock?
25. Since the Tribunal has dismissed all these appeals filed by the Department only on the ground of low tax effect and has not decided this issue on merits nor the departmental representative had raised any objection on this issue, we do not give any finding on this issue.
26. Subject to the aforesaid clarification and observations all these appeals are accordingly dismissed without any order as to costs."9
The facts being similar, by following the above decision of the Hon'ble Jurisdictional High Court as well as the decision of the Special Bench of ITAT, we dismiss the appeal of the Revenue as not maintainable the revenue effect involved being less than Rs.2 lakhs.
6. In the result, the appeal of the Revenue is dismissed as not maintainable.
Order pronounced in the open court today on 21-08-2009 Sd/- Sd/-
(MAHAVIR SINGH) (P K BANSAL)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date : 21-08-2009
Copy of the order forwarded to :
1. Shri Jasubhai Chhanalal Shah, Jawahar Society, Mehsana
2. The ITO, Ward-1, Mehsana
3. The CIT concerned
4. The CIT(A)-XX, Ahmedabad
5. The DR, ITAT, Ahmedabad
6. Guard File BY ORDER DY.R/AR, ITAT, AHMEDABAD 10 11