Income Tax Appellate Tribunal - Ahmedabad
Rameshbhai K.Prajapati,, Surat vs Assessee on 22 September, 2004
1
IN THE INCOME TAX APPELLATE TRIBUNAL : C' BENCH : AHMEDABAD
(Before Hon'ble Shri T.K. Sharma, J.M. & Hon'ble Shri N.S. Saini, A.M.)
I.T.A. No. 3527/AHD./2004
Assessment Year : 2001-2002
Income Tax Officer, Ward-7(3), Surat -vs.- Shri Ramehbhai K. Prajapati, Surat
(Appellant) (Respondent)
&
C.O. No. 11/AHD/2005
(arising out of I.T.A. No. 3527/Ahd./2004)
Assessment Year : 2001-2002
Shri Rameshbhai K. Prajapati, Surat -vs.- Income Tax Officer, Ward-7(3), Surat
(Cross Objector) (Respondent)
Assessee by : None
Department by : Smt. Neeta Shah, Sr. D.R.
ORDER
Per Shri T.K. Sharma, Judicial Member :
This appeal by the Revenue and Cross Objection by the assessee are against the order dated 22.09.2004 of Learned Commissioner of Income Tax(Appeals)-V, Surat for the assessment year 2001-02.
2. The various grounds raised by the Revenue in its appeal are as under :-
1. The Ld. CIT(A) erred on facts and in law in directing the A.O. to delete addition of Rs.1,36,000/- made on account of unexplained cash credit,
2. The Ld. CIT(A) erred on facts and in law in directing the A.O. to delete the addition of Rs.2 lacs made on account of unsubstantiated unloading expenses.
3. The Ld. CIT(A) erred on facts and in law in directing the A.O. to delete the addition of Rs.1 lacs made on account of unsubstantiated salary expenses.
4. The Ld. CIT(A) erred on facts and in law in directing the A.O. to delete the addition of Rs.1,10,565/-, made on account of unsubstantiated Tempo charges expenses.
5. The Ld, CIT(A) erred on facts and in law in directing the A.O. to restrict the addition of Rs.43,985/- to Rs.21,992/- made on account of unsubstantiated and unvouched travelling expenses.2
3. On the date fixed for hearing, neither anybody appeared from the side of assessee nor any application for adjournment received. However, on earlier date of hearing, the ld. counsel of the assessee placed on record the working of tax effect, which is less than Rs.2 lakhs. The said working is as under :-
1. Cash credit Rs.1,36,000/-
2. Unloading expenses Rs.2,00,000/-
3. Salary expenses Rs.1,00,000/-
4. Tempo expenses Rs.1,10,565/-
5. Travelling expenses Rs. 21,992/-
TOTAL Rs.5,68,557/-
Tax @ 30% Rs.1,70,567/-
Surcharge @ 17% Rs. 28,996/-
_____________
Rs.1,99,563/-.
_____________
4. On the basis of aforesaid working, the assessee made a request that since the tax effect is less than Rs.2 lakhs, in view of the Board's Circular, the appeal of the Department be dismissed.
5. The aforesaid working was shown to the ld. Departmental Representative. She fairly conceded that tax effect is less than Rs.2 lakhs.
6. We have heard the ld. Departmental Representative and perused the material available on record. We have also perused the orders of authorities below. Admittedly, the tax effect in this case is below Rs.2 lakhs. At the outset, it was noted that the tax effect in the Department's appeal is less than Rs.2 lakhs. This Bench, vide its order dated 10.6.2008 in I.T.A.Nos.335, 338 to 341/Luc/08 in the case of Dy. CIT vs Shri Brahmanand Bhasin, has held that where tax effect in Department's appeal is less than Rs.2 lakhs, Department could not have filed the appeal as per instructions of the Government. In this regard, we refer to following portion from that judgment:
"10. It is undisputed fact that in all these appeals the tax effect involved in respect of dispute in each year is less than Rs.2 lakhs. Therefore, as per monetary limit, this is covered by the latest instructions issued by the C.B.D.T. as mentioned above and also Board's instructions No 1979 dated 27.3.2000, No.1985 dated 3 29.6.2000, No.6 of 2003 dated 17.7.2003, No.19 of 2003 dated 23.12.2003, No.5/2004 dated 27.5.2004, No.2/2005 dated 24.10.2005 and No.5/2007 dated 16.7.2007 wherein monetary limit for filing departmental appeal in Income-tax matter and other conditions were specified for filing appeal before the Tribunal, High Courts and Supreme Court. All these instructions were superceded and fresh monetary limits were fixed for this purpose. These limits contained in instruction No 5/2008 dated 15.5.2008. In this regard, the relevant part of instructions contained in paras 3, 4 & 5 are reproduced below:-
"3. Appeals will henceforth be filed only in cases where the tax effect exceeds monetary limits given hereunder:-
Sl. No. Appeals in Income-tax matters Monetary Limit (in Rs.)
1. Appeal before Appellate 2,00,000/-
Tribunal
2. Appeal u/s. 260A before High 4,00,000/-
Court
3. Appeal before Supreme Court 10,00,000/-
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 issue against which appeal is intended to be filed (hereafter referred to as "disputed issues"). However, the tax will not include any interest thereon. Similarly, in loss cases notional tax effect should be taken into account. In the cases 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 shall 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 will be filed only with reference to the tax effect in 4 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."
11. Earlier the Hon'ble Allahabad High Court in Jugal Kishore Arora vs. Dy C.I.T., [2004] 269 I.T.R. 133 (All.) held that instructions of C.B.D.T. are internal matters of the Department and assessee cannot object to the filing of appeal despite such instructions. In this regard, we reproduce from the judgement as under:-
"As regards the contention that the appeal should not have been entertained in view of the direction of the Central Board of Direct Taxes dated March 27, 2000, we are of the opinion that the instructions of the Central Board of Direct Taxes regarding filing of appeals are only internal matters of the Department, and the assessee cannot object to filing of an appeal despite such an instruction."
12. However, other High Courts have taken a different view and they have held that instructions of C.B.D.T. are binding on the Officers and that monetary limits fixed by the C.B.D.T. for filing appeal should have been followed. On that basis, appeals filed by the Revenue were dismissed. In this regard, we consider it proper to reproduce relevant part from the following judgements.
13. In the case of Joint C.I.T. vs. Peerless Developers Ltd., [2006] 287 I.T.R. (AT) 153 (SB), the Special Bench of I.T.A.T., Calcutta observed as under:-
"that since 1987 the Central Board of Direct Taxes had not only been taking a consistent approach of instructing its officers not to file the appeal where the tax effect is below the monetary limit, but such monetary limit is also revised upwards from time to time. The monetary limit for the year under consideration was one lakh of rupees. The instructions of the Board prescribing monetary limit for filing appeal before various forums are binding on the income-tax authorities.5
14. In the case of C.I.T. vs. Camco Colour Co., [2002] 254 I.T.R. 565, the Hon'ble Bombay High Court observed as under:-
"Circular F. No. 279/126/98-ITJ, dated March 27, 2000, reflected the policy decision taken by the Central Board of Direct Taxes 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. The circular is binding on the Revenue. An appeal or reference contrary to the instructions issued in the circular will not be considered by the courts."
15. In the case of C.I.T. vs. Pithwa Engg. Works, [2005] 276 I.T.R. 519, the Hon'ble Bombay High Court observed as under:-
"The Central Board of Direct Taxes by its circular dated March 27, 2000, has taken a policy decision not to file references if the tax effect is less than Rs.2 lakhs. The circular is applicable even to the old references which are still undecided. The Department cannot contend that the circular is binding only with respect to the new cases and not with respect to the old referred cases even if the tax is less than Rs.2 lakhs. The same policy for old matters needs to be adopted by the Department."
16. In the case of C.I.T. vs. Digvijay Singh, [2007] 292 I.T.R. 314, the Hon'ble M.P. High Court observed as under:-
"Counsel for the respondent raised a preliminary objection about the maintainability of the appeals. According to him the total tax effect in every appeal is around Rs. 2,000. He invited the attention of his court to notification issued under section 10 of the Wealth-tax Act, which provides that appeal could be preferred to the High Court in cases where a debt of wealth-tax does not exceed Rs. 25,000. He invited the attention of this court to the judgment of the Bombay High Court in the case of CIT v. Zoeb Y. Topiwala [2006] 284 ITR 379 ; [2005] 199 CTR 656 wherein the Bombay High Court has held that the directions issued by the Board dated March 27, 2000, directing the Department not to raise questions of law where the tax effect is less than Rs. 2 lakhs is binding on the Revenue. The appeal which was filed having tax effect less than Rs. 7,000 was dismissed as not maintainable by the Bombay High Court by holding that the directions issued by the Board are binding on the Department. The next case relied upon by him is in the case of CIT -vs.- Camco ColourCo. [2002] 254 ITR 565 ; [2002] 173 CTR 255 in which the Bombay High Court has reproduced the circular 6 issued by the Ministry of Finance dated March 27, 2000, in which it is directed that appeals under section 260A of the Income-tax Act with tax effect less than Rs. 2 lakhs should not be preferred. In paragraph 5 of the said circular it is mentioned that the said circular is applicable to wealth-tax, gift-tax, estate duty, etc. In that case also the appeal was dismissed by the Bombay High Court by holding the same as not maintainable. A number of other judgments were relied upon by counsel for the appellant for supporting his arguments on the said question, including CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1, which is a Full Bench judgment of the Delhi High Court, UCO Bank v. CIT [1999] 237 ITR 889 (SC) ; [1999] 4 SCC 599 and CIT v. Pithwa Engineering Works [2005] 276 ITR 519 (Bom). In all these cases appeals were dismissed on the ground that the tax effect involved in the appeals is very low. In the present case also the tax effect is less than Rs.5,000 per year hence the appeals are not maintainable. However, to complete the judgment we proceed to decide other grounds."
17. In the case of C.I.T. vs. Zoeb Y. Topiwala, [2006] 284 I.T.R. 379, the Hon'ble Bombay High Court observed as under:-
"The instruction of the Central Board of Direct Taxes dated March 27, 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 litigation before the High Courts and the Supreme Court. The circular is binding on the Revenue."
18. The Hon'ble Rajasthan High Court in the case of C.I.T. vs. Rajasthan Patrika Ltd. [2002] 258 I.T.R. 300, held that though no appeal should have been filed where tax effect is less than limit prescribed, but the High Court ought not to dismiss the appeal or reject reference. The relevant portion of head notes are as under:-
"Held _ also, that if, in spite of administrative instructions in a circular of the Central Board of Direct Taxes to the effect that no appeal should be filed when the tax effect is not more than Rs.50,000, the Department prefers to file an appeal or take a reference to the High Court, on such administrative instructions the High Court ought not to dismiss the appeal or reject the reference. There is no infirmity in disposing of the appeal or reference on the merits."7
19. But now in the latest judgment, the Hon'ble Allahabad High Court has held that where tax liability is less than Rs.5 lakhs, such matter need not be carried in appeal before the Hon'ble Allahabad High Court. In this regard, we refer paras 2, 3, 4 & 5 from that judgement as under:-
"2. The appeal raises the following substantial question of law:-
"Whether, on the facts and in the circumstances of the case, the learned I.T.A.T. was justified in deleting the addition of Rs.90,000/- claimed as gifts received from 8 parties even though the assessee failed to prove genuineness of the aforesaid gifts ?"
3. The respondent herein is stated to be a colonizer in assessment year 1986- 87, he returned the income of Rs.29,890. He further showed the cash credit of the aggregate amount of Rs.90,000 being shown as gifts. They were the amounts supposed to be donated by some eight persons. The Assessing Officer, therefore, made an addition of Rs.90,000 and consequent tax liability increased would be Rs.53,312. The appeal preferred by the assessee was dismissed by the Commissioner of Income Tax (Appeals). However, the Tribunal entertained the appeal preferred by the assessee. The appellate Commissioner took the view that the donors had not shown these amount in their balance sheet which was at least seen in the case of one of the donors and the persons concerned were not produced before the Assessing Officer and, therefore, he had confirmed the addition. As against that, the Tribunal had noted that the memorandum for gift were filed in each of these cases and gift tax assessment was made in the same ward where the assessee was being assessed. The Tribunal, therefore, observed that there was no difficulty for the Income-tax Officer to know from the record whether these persons were existing or not. Besides that affidavits were also filed. In the circumstances, the Tribunal interfered with the addition made by the Assessing Officer and set aside his order as well that of the Commissioner of Income Tax (Appeals).
4. It is a case where perhaps two views were possible and it is noted above that the tax liability is Rs.53,312. The Central Board of Direct Taxes has come out with a circular that where the tax liability is less than Rs.5,00,000 such matters should not be carried in appeal.
5. In view of the above, we do not think that this Court should interfere. Otherwise also, we do not find that this is a case involving substantial question of law which ought to be entertained."
20. Since in the latest decision, the Hon'ble Allahabad High Court has held that appeal involving tax effect of less than prescribed monetary limit as per 8 instructions issued by the C.B.D.T. need not be pursued, this judgmenet of the Hon'ble Allahabd High Court being latest in time would be binding on the Tribunal and therefore we hold that the appeals in the cases involving tax effect less than prescribed limit for filing appeal before the Tribunal should not have been filed by the Department.
21. It is undisputed fact that circular issued by the C.B.D.T. are binding on subordinate authorities. In this regard, we refer to the decisions of the Hon'ble Supreme Court of India in Ellerman Lines Ltd. vs. C.I.T. [1971] 82 I.T.R. 913 (S.C); UCO Bank vs. C.I.T. [1999] 237 I.T.R. 889 (S.C); C.I.T. vs. Kelvinator of India Ltd. [ 2002] 256 I.T.R. 1 (Full Bench - Delhi); C.I.T. vs. Soundararaja Finance Ltd. [2006] 283 I.T.R. 559 (Mad.); Bharat Construction Co. vs. C.I.T. [2002] 258 I.T.R. 140 (Raj.); C.I.T. vs. Blaze Advertising (Delhi) Pvt. Ltd., [2002] 255 I.T.R. 46 (Delhi) and Harshendu Upendre Kaka vs. I.T.O. and Others [2001] 249 I.T.R. 612 (Bom.).
22. As a result, we dismiss all the appeals filed by the Revenue being against latest executive instructions of 2008 issued by the C.B.D.T. and below mandatory monetary limit prescribed therein for filing appeals. However, it is not to be construed as a decision on merits or on legal contentions involved in these appeals."
7. Since in the present case also tax effect in Department's appeal is less than Rs.2 lakhs, Department ought not have filed the appeal. As the appeal so filed is against the executive instructions, which are binding on the Department. Therefore, we dismiss the appeal in limine.
8. In the Cross Objection, the assessee has raised the following grounds :-
1. That the learned CTT(A) has thoroughly discussed and appellant has also submitted various details during the course of assessment proceeding as well as appellate proceeding and thereafter the alleged unexplained Cash Credit have been deleted.
I
2. That the learned CIT(A) has allowed unloading expenses amounting to Rs.2,00,000/- considering the nature of business and branches of the business and method and manner in which the business is being run and disallowance made by learned A.O. amounting to Rs.2,00,000/- have been deleted and in Para 3, the Learned CIT(A) has thoroughly discussed with the citation and therefore this ground of the appellant be dismissed.9
3. That the learned A.O. has disallowed the salary of Rs. 1,00,000/- out of provisions of Rs. 1,50,000/ and the same has been allowed by the learned CIT(A) and discussed in Para 4 of the appellate order and considering the nature of business, the same has been allowed against which the appellant has filed appeal be dismissed.
4. The learned C1T(A) had adhoc disallowed tempo charges of Ra.1,10,565/-
being 1/5th of total tempo charges of Rs.5,07,824/- on unwarned grounds and findings, has been allowed by the learned CTT(A) and appeal filed on this ground be summarily rejected.,
5. That the learned CIT(A) has allowed Rs,2l,992/- being half of traveling expenditure and halt amounting to Ra.21,992/- retained by die learned CIT(A) be deleted considering the facts and circumstances of the case, nature of business and branches of business and part and subsequent records, the claim of the respondent be allowed in full.
6. That there is no any allegation or finding that the travelling expenditure has not been incurred and in absence of that disallowance made by learned A.O. and confirmed by CIT(A) amounting to Rs.21,992/- be deleted.
9. Grounds No. 1 to 4 of the Cross Objection are in support of the order of Learned Commissioner of Income Tax(Appeals). In view of our decision in Revenue's appeal (supra), these are rendered infructuous, therefore, dismissed.
10. Grounds No. 5 & 6 are against the order of Learned Commissioner of Income Tax(Appeals) confirming half of travelling expenses amounting to Rs.21,992/-. In the grounds of C.O. itself, it is mentioned that looking to the nature of business and branches of business and past and subsequent records, the Learned Commissioner of Income Tax(Appeals) ought to have allowed the claim in full. As against this, the ld. Departmental Representative submitted that the Learned Commissioner of Income Tax(Appeals) has given cogent reason for confirming the disallowance to the extent of Rs.21,992/-, therefore, his order be upheld.
11. After hearing the ld. Departmental Representative, we have carefully gone through the orders of authorities below. In the impugned order, the Learned Commissioner of Income Tax(Appeals) restricted the disallowance to Rs.21,992/- vide para 10.4, which reads as under :-
"10.4. After going through the findings of the Assessing Officer and the submission as made by the authorized representative of the appellant, I am of the view that no doubt that lot of travelling as required to look after the business interest in this kind of trade but it was the duty of the 10 appellant to maintain at least some vouchers such as relating to tickets purchased or accommodation availed by the people who travelled. In this way, it is found that the contention of the appellant cannot be accepted completely. I, therefore, restrict the disallowance at 10% of the total expenses which comes to Rs.21,993/-. In this way, the addition made by the Assessing Officer is restricted to Rs.21,992/- and the appellant gets relief of an amount of Rs.21,993/-".
12. From the reasoning given by the Learned Commissioner of Income Tax(Appeals), it is clear that the assessee has not maintained some vouchers relating to tickets purchased or accommodation availed by the people who travelled. Therefore, the Learned Commissioner of Income Tax(Appeals) is legally and factually correct in restricting the disallowance at 10% of total expenses, which comes to Rs.21,992/-. We, therefore, decline to interfere. Grounds No. 5 & 6 of Cross Objection are rejected.
13. In the result, the appeal of the Revenue as well as Cross Objection by the assessee both are dismissed.
The Order was pronounced in the Court on 08.01.2010
Sd/- Sd/-
(N.S. Saini) (T.K. Sharma)
Accountant Member Judicial Member
DATED : 08 / 01 / 2010
Copy of the order is forwarded to :
1) The Assessee
(2) The Department.
3) CIT(A) concerned, (4) CIT concerned, (5) D.R., ITAT, Ahmedabad.
True Copy
By Order
Laha/Sr.P.S. Deputy Registrar, ITAT, Ahmedabad