Income Tax Appellate Tribunal - Lucknow
The Jt. Cit, Range-Iii vs Shri Dev Raj Agarwal on 24 August, 2004
Equivalent citations: [2005]92ITD249(LUCK), (2005)92TTJ(LUCK)436
ORDER
Keshaw Prasad, A.M.
1. All the three appeals directed by the Revenue and the cross objections directed by the assessee arise out of a consolidated order of the ld. CIT(A) dated 16.7.02 pertaining to assessment years 1998-99, 1999-2000 and 2000-01. For the sake of convenience, we will first take up the appeals directed by the Revenue.
2. In the Revenue's appeal, the deletion of various additions by the ld. CIT(A) has been challenged.
3. Briefly, the facts of the case are that the assessee is an individual and engaged in the trading of hardware in his proprietory concern in the name and style of "M/s. Raj Hardware". The assessee filed the return of income in different years. However, during the course of assessment proceedings, the A.O. asked the assessee as to why the income of Dev Agarwal, HUF, may not be clubbed with the income of the assessee individual. Though the assessee furnished his explanation, the same did not find favour with the A.O. He, therefore, clubbed the income of Dev Raj Agarwal, HUF with the income of the assessee individual. On appeal, the ld. CIT(A) deleted the addition by holding that the HUF's income was separately taxable and the same could not be clubbed with that of individual. IN the assessment year 1998-99, the A.O. had also made an addition of Rs. 25,000/- under the head 'income from other sources', which was reduced by the ld. CIT(A) after allowing a relief of Rs. 20,800/-. The finding of the ld. CIT(A) on both the counts have been challenged before us. While the ld. DR supported the order of the A.O., the learned Counsel raised a preliminary objection regarding the admissibility of appeal directed by the Revenue on the ground that the tax effect involved in these appeals was much less than the monetary limit prescribed by the Board for filing the appeals before the Tribunal. On merits, the learned counsel relied on the order of the ld. CIT(A).
4. We have considered the rival submissions. As an objection has been raised before us regarding the admissibility of the appeals, we though it better to adjudicate this issue first. The filing of the appeals by the Revenue has been of a great concern to the Government. The Board, therefore, issued guidelines to the Department Authorities as to in which cases the appeal should be preferred before the Tribunal or the reference application/appeals should be preferred before the Hon'ble High Court/Supreme Court. Way back in 1968, precisely on 14.10.68, the Board, vide its Circular No. 91/47/68-ITJ(38) has issued certain guidelines. Subsequently, Instruction No. 173 was issued by the Board on 20.5.70 in which a monetary limit for filing the appeal/reference application was specified for the first time. However, the monetary limit as well as the other norms for the purpose of accepting the decisions of the tribunal were revised by the C.B.D.T. vide its Instruction No. 1328 issued on 5.4.80. It was also decided by the Board that no Department appeal on questions of fact be filed against the order of the First Appellate Authorities if the tax effect or reduction in penalty was Rs. 5,000/- or less in respect of income tax appeals and Rs. 2,000/- or less in respect of appeals in other direct taxes. Paras No. 1,3.1 and 4 of the said Circular being relevant in the present context are reproduced below :
"At present the board exercises centralized control in regard to filing of references under the I.T. Act and other tax acts. As per instruction No. 173 (F.No. 277/1/70-ITJ, Dated 20.5.70) the commissioners are expected to send reports to the board only where they recommend a reference or whether they have some doubts. Where the commissioners propose to accept the decisions of the tribunal they are not expected to refer the matter to the board. Where the commissioners propose to accept the decisions of the tribunal they are not expected to refer the matter to the board. The board is generally reluctant to advise reference unless the tax effect is more than Rs. 10,000/- or a general question of law affecting a large number of cases in involved. Further where the board has already authorised reference to a high court on a particular issued in a case from a commissioner charge and it is pending, the commissioner files reference applications on the same issue in all cases from that charge; the board's approval is not required to be taken afresh for every case. If the Commissioner does not propose to file a reference in such a case for reasons other than of low tax effect, he is effected to send a report in the matter for obtaining the board's approval."
3.1 The present monetary limits of Rs. 10,000/- for reference to the high court of Rs. 30,000/- for appeal to the supreme court laid down in instruction No. 284 dated 10th January 1975 will continue. The limit of Rs. 10,000/- for reference to the high court however shall be relaxed where the question of law is repetitive and the cumulative tax effect in a number of cases is bound to be substantial. In such cases whereas the first reference to the High Court may be filed howsoever low, the tax effect may be subsequent references should be filed only if the tax effect in each reference is more than Rs. 5000/-.
4. The board has further decided that no departmental appeal on questions of fact need be filed against the order of the AACs/CITs if the tax effect/reduction in penalty is Rs. 5000/- or less in respect of an income-tax appeal and Rs. 2000/- or less in respect of an appeal under other direct taxes. Repetitive appeals need not be filed on the same legal issue if the tax effect in each such order is Rs. 1000/- or less."
From the perusal of the aforesaid instruction issued by the Board on 5.4.80, it is evident that the expression "tax effect" was specifically and invariably used by the C.B.D.T. in the context of monetary limits specified and revised vide this circular. These monetary limits specified in the Circular dated 5.4.80 were again revised by the Board's vide its Instruction No. 1573 dated 7.12.84 and 1612 dated 6.4.85. It is pertinent to note that in all these instructions issued by the CBDT resting with the Instruction No. 1612 dated 6.4.85 the specific expression "tax effect" was used by the CBDT and there was no mention or reference to the words "revenue effect".
5. Therefore, a fresh Instruction No. 1777 was issued by the Board on 4.11.87 whereby the monetary limits laid down in the earlier guidelines for filing the appeals before the Tribunal was well as before the Hon'ble Supreme Court and for making a reference before the Hon'ble High Court were revised as given in para No.3 of the said instruction which is reproduced below.
"The board desire that while deciding the question of filing an appeal/reference in respect of an adverse judgment of High Court/ITAT etc., the Chief CIT should follow the following guidelines :
Monetary Limits :
Filing of departmental appeal/reference should be selective. Guidelines were issued laying down monetary limits of revenue effect of Rs. 10,000/- for filing appeals before ITAT, Rs. 30,000/- for Reference before High Court and Rs. 60,000/- for appeals to Supreme Court (Instruction No. 1573 dated 12.7.84 and 1612 dated 6.4.1985). These guidelines should be adhered to subject to the exceptions given below. For the purpose of working out monetary limit, the 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 to taken into consideration. Where the same issue is involved in different cases 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 for the purpose of the monetary limit. While applying the monetary limits, the effect of carry forward, effect of consequential addition/deletions in other years should be kept in view. In cases of firms/AOP the revenue effect in cases of partners/members be also taken into account."
In the aforesaid instruction, the expression "revenue effect" was used by the CBDT for the first time while revising the monetary limits. As already discussed, the specific expression "tax effect" was invariably used by the CBDT in its earlier instruction, but the reference made in the Instruction No. 1777 dated 4.11.87 to the expression "revenue effect" gave rise to some controversy. It is worthwhile to note that in the said instruction issued on 4.11.87, reference was made by the Board to the earlier Instruction Nos. 1573 dated 7.12.84 and 1612 dated 6.4.85 and it was categorically stated therein that the guidelines issued in the said instructions should be strictly adhered to subject only to the exceptions given in the instruction issued on 4.11.87. Subsequently, the Board issued another instruction bearing No. 1979 dated 27.3.2000, para No. 2 of which being relevant in the present context is reproduced below :
"2. In supercession of the above instruction, it has now been decided by the board that appeals will be filed only in cases where the tax effect exceeds the revised monetary limits given here under :
(Tax effect)
(i) Appeal before the Appellate Tribunal (in income-tax matters) Rs. 1,00,000/-
(ii) Appeal U/s. 260A/reference u/s. 256(2) Before the High Court. Rs. 2,00,000/-
(iii) Appeal in the Supreme Court Rs. 5,00,000/-
The new monetary limits would apply with reference to each case taken singly. In other words, in group cases, each case should individually satisfy the new monetary limits. The working out of monetary limits will therefore not taken into consideration the cumulative revenue effect as envisaged in Board's earlier Instruction referred to above."
The above instruction is important in two ways. Firstly, the specific expression "tax effect" has been used in this instruction and secondly, the said instruction was issued in supercession of all earlier instruction on this issue. The question, therefore, arises as to whether in view of the latest Instruction No. 1979 issued on 27.3.2000 whether the appeal filed by the Revenue were maintainable or not where the tax effect involved was less than the monetary limit prescribed in that instruction. For facilitation, the full Instruction No. 1979 is reproduced below:
"INSTRUCTION 1979 F.NO. 279/126/98-ITJ Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Dated : March 27, 2000 To All Chief Commissioners of Income-tax Directors General of Income-tax, Sir, Sub : Revising Monetary limits for filing Departmental appeals/references before Income-tax Appellate Tribunal, High Courts and Supreme Court - Measures for reducing litigation - regarding -
Reference is invited to Board's Instructions No. 1903 dated 28th October, 1992 and Instruction No. 1777 dated 4th November, 1987 wherein monetary limits of Rs. 25,000/- for departmental appeals (in Income-tax matters) before the Appellate Tribunal, Rs. 50,000/- for filing reference to the High Court and Rs. 1,50,000/- for filing appeal to the Supreme Court were laid down.
2. In supercession of the above instruction, it has now been decided by the Board that appeals will be filed only in cases where the tax effect exceeds the revised monetary limits given here under :
(Tax effect)
(iv) Appeal before the Appellate Tribunal (in income-tax matters) Rs. 1,00,000/-
(v) Appeal U/s. 260A/reference u/s. 256(2) Before the High Court. Rs. 2,00,000/-
(vi) Appeal in the Supreme Court Rs. 5,00,000/-
The new monetary limits would apply with reference to each case taken singly. In other words, in group cases, each case should individually satisfy the new monetary limits. The working out of monetary limits will therefore not taken into consideration the cumulative revenue effect as envisaged in Board's earlier Instruction referred to above."
3. Adverse judgments relating to the following should be contested irrespective of revenue effect :
(i) Where Revenue Audit objection in the case has been accepted by the Department.
(ii) Where Board's order, notification, instruction or circular is the subject matter of an adverse order.
(iii) Where prosecution proceedings are contemplated against the assessee.
(iv) Where the constitutional validity of the provisions of the Act are under challenge.
4. Special Leave Petitions under Article 136 of the Constitution are filed before the Supreme Court only in consultation with Ministry of law. Therefore, where the chief Commissioner decides to contest an adverse judgments by filing special leave petition before the Supreme Court, they should send the proposal to the Board for further processing.
5. These instruction will apply to litigation under other Direct taxes also e.g. wealth-tax, gift-tax, estate duty etc.
6. These monetary limits will not apply to Writ matters.
7. This Instruction will come into effect from 1.4.2000 Sd/-
(Anuradha Goyal) Dy. Secretary to the Government of India"
6. Though there have been various decisions on this issue, the decision of Hon'ble Bombay High Court in the case of Camco Colour Company reported in 254 ITR 565 was quite detailed decision. Prior to this decision, the Hon'ble Bombay High court in the case of Executors of Late D.T. Udeshi reported in 189 ITR 319 has held that the Board has taken a policy decision not to file references in cases where the tax effect was gong to be less that Rs. 30,000/- par years. That being so, the reference to the Revenue was dismissed. The Hon'ble Allahabad High Court in the case of Smt. Prakashwati reported in 210 ITR 567, while referring to the Board's Circular held that as the tax effect was less than Rs. 30,000/- per year, the applications directed by the Revenue are liable to be rejected. In the case of Shri Padampat Sighania reported in 136 Taxman 200, the Hon'bvle Allahabad High Court reiterated the same view. The Amritsar Bench of the Tribunal in the case of Nand Lal Ishar Dass reported in 79 TTJ 754 and in the case of Dharmvir reported in 251 ITR 1 (AT), ITAT Nagpur Bench in the case of Jagatpal Singh reported in 75 TTJ 401 and in the case of Roopchand Jain reported in 79 TTJ 406, have taken the same view. The Hon'ble Bombay High Court in the case of Camco Colour Co. (supra) has given a very detailed judgment holding that as the instructions of the Board were binding on the tax officials and in case an appeal has been filed against the instructions of the Board such appeal was not maintainable. Though the Hon'ble P&H High Court in the case of Rani Paliwal reported in 268 ITR 220 has held that the Tribunal was not bound by the Circular of the Board and it was justified in admitting appeal ignoring the ceiling of tax effect fixed by the Board, no question of law arose. But we find that similar issue came up for consideration before the Hon'ble Supreme Court in the case of Indian Oil Corporation in respect of the effect of the circular issued by the Customs Department. Vide its decision reported in 267 ITR 272, the Hon'ble Supreme Court, while referring to its decision in the case of Simplex Casting Ltd reported in 5 SCC 528 observed that 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. Despite the decision of the court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. The Hon'ble Supreme Court also observed that it was not open to the Revenue to advance an argument or file an appeal contrary to the circulars.
7. Keeping in view the decision of the Jurisdictional High court mentioned earlier and the decision of the Hon'ble Supreme Court on this very issue, though pertaining to the Central Excise and Customs, we hold that if an appeal has been directed by the Revenue where the tax effect involved was less than the monetary limit prescribed by the Board, such appeal was not maintainable. Respectfully following the decisions mentioned earlier, we find force in the arguments of the learned Counsel regarding his preliminary objection to the maintainability of the appeals directed by the Revenue.
8. We, therefore, dismiss all the appeals directed by the Revenue for the reasons mentioned above.
9. In view of our finding, we are not going into the merits of the additions/relief.
10. In the result, all the three appeals directed by the Revenue are dismissed.
11. Now, we will take up the cross objections directed by the assessee.
12. During the course of hearing, the learned Counsel has fairly conceded that in case the Revenue's appeals were dismissed, the cross objections filed by the assessee are not pressed.
13. In the result, all the cross objections raised by the assessee are dismissed.