Gujarat High Court
Commissioner vs Cornerstone on 15 May, 2008
Author: Akil Kureshi
Bench: Akil Kureshi
TAXAP/2090/2010 12/ 12 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 2090 of 2010 ================================================= COMMISSIONER OF INCOME TAX - I - Appellant(s) Versus CORNERSTONE BRANDS PVT LTD - Opponent(s) ================================================= Appearance : MR MR BHATT, SR. ADV. with MRS MAUNA M BHATT for Appellant(s) : 1, MR SAURABH N SOPARKAR, SR. ADV with MRS SWATI SOPARKAR for Opponent(s) : 1, ================================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 17/01/2012 ORAL ORDER
(Per : HONOURABLE MS JUSTICE SONIA GOKANI)
1. For the assessment year 2003-04 the assessee filed its return of income. On scrutiny assessment, the same was finalized by the Assessing Officer, wherein it disallowed certain losses.
2. When challenged before CIT(Appeals), held that the reopening of assessment was invalid. It confirmed the deletion of disallowance of Rs.20,81,373/-.
3. When the Revenue approached the Appellate Tribunal against the deletion of the addition of the amount of Rs.36,84,912/- , the Appellate Tribunal dismissed the appeal on the ground of low tax effect. According to the Tribunal the tax effect involved in the year under consideration was less than Rs.2,00,000/-. Relying on the judgment of Special Judge Bench of Tribunal in the case of JOT vs. Peerless Developers Ltd. reported in (2006) 103 D 349 (Kol) (SB), it dismissed the appeal in limine.
4. The impugned order is challenged proposing the following question of law for our consideration:-
"Whether the Appellate Tribunal is right in law and on the facts in dismissing the appeal of the Department in limine on the ground that the appeal is not maintainable as the tax effect involved is less than Rs.2 lacs?"
5. Heard learned Senior Counsel Mr. M.R. Bhatt for the Revenue and in response to the notice issued on 27.12.2011 for final disposal of the matter, learned Senior Counsel Mr. Saurabh Soparkar appeared for the assessee respondent.
6. On having heard both the learned Senior Counsel and on having examined the material on record, it needs to be noted at the outset that identical question has been examined expensively in the case of Joint Commissioner of Income-Tax Vs. Saheli Leasing & Industries Ltd reported in (2010) 324 ITR 170 and in the decision of this Bench in Tax Appeal No. 1601 of 2009 in case of Commissioner of Income-Tax-II vs. Good Luck Marketing Ltd. It would be apt to reproduce relevant findings of Tax Appeal No.1601 of 2009, which are as follows:-
"16. The question can be approached in two parts. First would be whether in ordinary circumstances, it is necessary to compute with degree of accuracy, declaration of loss made by the assessee in view of the statutory provisions contained in the Act. Second part of our inquiry would be whether by virtue of the Board's circulars issued from time to time, which in view of the Section 268A of Act, have acquired considerable significance, and force the appeal presented to the Tribunal, could be termed as not maintainable only on account of the fact that even if the Assessing Officer's order is restored, net result would be negative income of the assessee. To put it differently, the question is even if the difference of opinion between the Assessing Officer and the CIT (Appeals) in terms of quantum of loss is considerable, whether the Revenue's appeal would be shut out as not maintainable simply because in any case the assessee's income is negative for a particular assessment year. As already noted in Tax Appeal No. 1601 of 2009, the Assessing Officer had disallowed the claim of interest of Rs.27.70 lakhs whereas the CIT (Appeals) deleted such disallowance. In that view of the matter, the loss claimed by the assessee of Rs.35.75 lakhs would vary by a sum of Rs.27.70 lakhs in view of the difference of opinion between the Assessing Officer and the CIT (Appeals).
17. Addressing the first limb of question we may notice few statutory provisions contained in the Act. As already noted, Section 2(24) of the Act provides that income includes profits and gains. Section 70 of the Act pertains to the set off of losses from one source against income from other sources under the same head of income. Section 71 of the Act makes provisions for set off of loss from one head against income from another under certain circumstances. Section 71B of the Act provides for carry forward and set off of loss from house property. Section 72 similarly makes such provisions for set off and carry forward of business losses. Provisions also have been made under Section 72A for carry forward and set off of cumulated losses; in cases of amalgamation and demerger of companies; in cases of reorganization of Co-operative Banks. etc.
18. Section 80 of the Act requires submission of return of loss also and reads as under:-
"80.
Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed [ in accordance with the provisions of sub-section(3) of section 139], shall be carried forward and set off under sub-section(1) of Section 72 or sub-section(2) of section 73 or sub-section (1) [or sub-section(3)] of section 74 [ or sub-section (3) of section 74A]."
19. Section 139(3) of the Act pertains to return of loss and reads as under:-
"(3) If any person who has sustained a loss in any previous year under the head "Profit and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward under sub-section(1) of section 72, or sub-section(2) of section 73, or sub-section(1) [or sub-section(3)] of section 4, [or sub-section(3) of section 74A], he may furnish, within the time allowed under sub-section(1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section(1)."
Section 157 of the Act provides for intimation of loss and reads as under:-
"157. When, in the course of the assessment of the total income of any assessee, it is established that a loss has taken place which the assessee is entitled to have carried forward and set off under the provisions of sub-section(1)] of section 72, sub-section (2) of section 73, [sub-section(1)[ or sub-section(3)] of section 74 or sub-section (3) of section 74A], the [Assessing] Officer shall notify to the assessee by an order in writing the amount of the loss as computed by him for the purposes of sub-section(1) of section 72, sub-section(2) of section 73, [sub-section(1) [ or sub-section(3)] of section 74 or sub-section(3) of section 74A]."
20. Section 143(1) (a) of the Act requires that the total income or loss shall be computed after making the adjustments regarding any arithmetical error in the return or an incorrect claim or any such claim, which is apparent from the information in the return. Section 147 of the Act pertains to income escaping assessment. Sub-clause (iv) of clause (c) of Explanation 2 of Section 147 of the Act provides that for the purpose of the Section even excessive loss or depreciation allowance also shall be deemed to be a case where income chargeable to tax has escaped assessment.
21. From the above statutory provisions, it can be seen that even loss claimed by assessee for a particular year assumes considerable significance in varity of situations. The Act permits set off and carry forward of loss in given circumstances. It is for this reason that Section 80 of the Act provides that no loss which has not been determined in pursuance of a return filed in accordance with the provisions contained in sub-Section (3) of Section 139, shall be carried forward or set off under Sections 72(1) or 73(2) or 74(1) or (3) or under Section 74(3) of the Act. In cases, where the assessee desires to carry forward losses or seek set off in subsequent years' income, it is necessary that a return indicating loss has been filed and the same has been determined pursuant to return filed under sub-Section (3) of Section 139 of the Act. Further, Section 157 of the Act requires that when in the course of assessment of any assessee, it is established that the loss has taken place which the assessee is entitled to have carried forward and set off under the provisions specified therein, the Assessing Officer shall notify to the assessee, by an order in writing, the amount of loss as computed by him for the purpose of such Sections. Thus, not only the computation of loss but different headings under which such loss is allowed, would also have to be judged and intimated by the Assessing Officer.
22. Because the loss suffered can be set off or carried forward in the subsequent years for a specified period, as provided in different provisions the Legislature requires that the assessee should, even while declaring loss, not make unreal claims. It is in this respect that sub-clause
(iv) of clause (c) of Explanation 2 of Section 147 creates a deeming fiction that even a case of excessive loss would be deemed to be a case where income chargeable to tax has escaped assessment.
23. We may recall that in the case of Gold Coin Health Food P.Ltd. Private Limited (supra), the Apex Court while overruling the previous decision in the case of Virtual Soft Systems Ltd. vs. CIT reported in [2007] 289 ITR 83 (SC) held that even in a case where claim of loss is found to have been wrongly made, by virtue of Explanation 4 of Section 271(1)(c) (iii), penalty can be levied.
24. From the above statutory provisions, it can be seen that merely on the ground that even if the Assessing Officer's order is restored, the net result would be a negative income, the issue cannot be treated to be one of academic interest. The extent of loss claimed and allowed would be significant for variety of purposes, particularly, for the purpose of set off and carrying forward of such loss. We fail to see how such an issue can be seen as one of low tax effect. In a given case, an assessee may claim large amount by way of loss, which according to him he suffered during the assessment year. The Assessing Officer, while framing the assessment, may come to a conclusion that the loss is much smaller than what is claimed by the assessee. If in the appeal filed by the assessee, the CIT (Appeals) accepts the assessee's claim and sets aside the Assessing Officer's order, and if such order is allowed to stand merely on the ground that further appeal is not maintainable, it would be the CIT's computation of loss, which will prevail for all times to come without further scrutiny, by the higher forum. In other words, the order of CIT (Appeals) would achieve finality despite contentious issues being involved and the Revenue's disagreement to the order of the CIT (Appeals). Eventually if the assessee declares positive income in future years, the claims of carry forward and set off of loss would be judged on the basis of the order passed by the CIT, which order would not have been scrutinized by the Tribunal only on the ground that the appeal was not maintainable.
25. Under the circumstance can it be stated that the Appeal of the Revenue is on of low tax effect. Our answer has to be in the negative. For an assessee to claim carry forward and set-off of losses, series of provisions have been made in the Act. It is necessary that loss claimed by an assessee is properly computed. Such declaration of negative income just as declaration of positive income should be allowed to go through the entire gamut of Appeals and Revisions.
26. This brings us to the question whether by virtue of the Board's circular, such appeal can be shut out. Section 268A of the Act introduced by Finance Act of 2008 with effect from 1.4.1999 makes provisions with respect to the Board's circulars its effect etc., Section 268A reads as under:-
"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 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 the provisions of sub-sections (2),(3) and (4) shall apply accordingly.]."
27. Combined reading of Section 268A of the Act would reveal that while recognizing Board's power to issue orders and instructions from time to time, particularly with respect to fixing monetary limits for regulating filing of appeals, it also gives a statutory flavour to such circulars. Simultaneously, provisions have also been made to keep an issue open which might not have been carried in appeal only on account of the Board's circulars laying down monetary limits for filing such an appeal. We also find, as pointed out by the counsel for the assessee that sub-Section (4) of Section 268A requires even the Appellate Tribunal or the Court hearing such an appeal or reference to have regard to the instructions and directions issued by the Board under sub-Section (1) of Section 268A of the Act. It was in this background that the Division Bench of this Court in the case of Commissioner of Income-Tax vs. Concord Pharmaceuticals (supra) discussed the issue at length and after referring to series of judgments cited, held and observed as under:-
"28. We are of the view that simply because the appeal is filed by the department in contravention of the circular, the Tribunal is not bound to decide the appeal on the 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 mattes of the Department and the assessee cannot object to filing of an appeal on the basis of such circular. It is true that filing of an appeal is a 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 the 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."
28. It is thus not possible for the Revenue to deny nor was it so done before us that Revenue's appeals before the Tribunal must be regulated by the Board's circulars issued from time to time laying down besides other conditions, monetary limits for preferring such appeals. The question is whether the Board's instructions, prevented the department from preferring appeal in case of loss irrespective of the difference of the quantum between the loss assessed by the Assessing Officer and the CIT(Appeals). To answer this question, it would be necessary to refer to some of the Board's instructions issued from time to time. We may record that all cases in this group involve appeals presented before the Tribunal prior to 15.5.2008. This date assumes significance since by virtue of circular dated 15.5.2008, the position stands on a different footing.
The Board issued its instruction No.1979 vide circular dated 27.3.2000 revising the monetary limits for filing appeals before the Tribunal, relevant portion of the circular reads as under:-
"2. In supercession of the above instructions, 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 hereunder:-
(Tax effect)
(i) Appeal before the Appellate Tribunal (in Income-tax matters.
Rs.1,00,000/-
(ii) Appeals U/s.260 A/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 take into consideration the cumulative revenue effect as envisaged in Board's earlier Instruction referred to above."
29. The said circular dated 27.3.2000 superseded previous instructions of the Board dated 28.10.1992 and 4.11.1987 providing lower limits for filing appeals before the Tribunal. In particular, circular dated 4.11.1987 provided for monetary limits and other conditions for preferring appeals etc before the Tribunal and Courts. It also provided for instances where such appeals be filed irrespective of low tax effect. In particular, in para 3 of the circular provided that " while applying the monetary limits, the effect of carry forward, effect of consequential addition/deletions in other years should be kept in view"
30. A clarificatory circular came to be issued on 29.6.2000 in the form of instruction No.1985 by the Board clarifying principally that while applying monetary limits laid down in Circular dated 27.3.2000, each case shall be taken singly.
31. Fresh circular dated 24.10.2005 came to be issued by the Board revising the monetary limits for filing appeals before the Tribunal and the Courts as under:-
"2. In partial modification of the above instruction, it has now been decided by the Board that appeals will henceforth be filed only in cases where the tax effect exceeds the revised monetary limits given hereunder:-
Sl.No. INCOME-TAX TAX EFFECT
(i) Appeal before Appellate Tribunal Rs.2,00,000/-
(ii) Appeal u/s. 260A Rs.4,00,000/-
(iii) Appeal before the Supreme Court Rs.10,00,000/-
The monetary limits were, however, to be ignored in certain exceptional cases specified in para 3 of the said circular, which reads as under:-
"3. The Board has also decided that in cases involving substantial question of law of importance as well as in cases where the same question of law will repeatedly arise, either in the case concerned or in similar cases, should be separately considered on merits without being hindered by the monetary limits."
Barring above modifications, para 4 of the Circular provided that the instructions dated 27.3.2000 and 29.6.2000 will continue to operate.
32. Yet another circular dated 16.7.2007 came to be issued by the Board. However, with contents of such circular we are not directly concerned.
33. Another circular, which came to be issued by the Board on 15.5.2008 was in supercession of all circulars including ones dated 27.3.2000 and 29.6.2000. Fresh monetary limits for preferring appeals before the Tribunal and Courts were laid down. Fresh guidelines were also issued for governing such appeals. Relevant portion of the circular reads as under;-
"3. Appeals will henceforth be filed only in cases where the tax effect exceeds monetary limits given here under:-
Sl.No. Appeals in Income-Tax matters Monetary Limit (In Rs.)
1.
Appeal before Appellate Tribunal 2,00,000/-
2. Appeal under section 260A before High Court 4,00,000/-
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.
8. Adverse judgments relating to the following should be contested irrespective of the tax effect.
(a) Where the Constitutional validity of the provisions of an Act or Rule are under challenge.
(b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires.
(c) Where Revenue Audit objection in the case has been accepted by the Department.
11. This instruction will apply to appeals filed on or after 15th of May 2008. However, the cases where appeals have been filed before 15th of May 2008 will be governed by the instructions on this subject, operative at the time when such appeal was filed.
12. This issues under Section 268(A)(1) of the Income-tax Act, 1961." (underline supplied) Yet another circular dated 9.2.2011 has since then been issued laying down fresh monetary limits for filing appeals providing as under:-
"3. Hence forth appeals 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.
Appeal before Appellate Tribunal 3,00,000/-
2. Appeal u/s.260 A 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 assessee 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."
34. From the above circulars, two fold questions arise. Firstly, we are required to answer the question if circulars ranging from 27.3.2000 till 16.7.2007, debarred the department from filing appeals in cases of negative income of the assessee. The second aspect of the matter is whether when the Board in its subsequent circular dated 15.5.2008 provided that "
Similarly, in loss cases notional tax effect should be taken into account", did the Board desire for the first time that the appeals be permitted to be presented in cases of loss only on and from 15.4.2008 and not before. In other words, the question is whether above quoted portion in the Board circular dated 15.4.2008 is clarificatory in nature or not?
35. Close perusal of the circulars issued prior to 15.5.2008 noted hereinabove, would reveal that such circulars provided for different conditions on which the Revenue could prefer appeals before the Tribunal and Courts which included the monetary limits specified from time to time. Nowhere do these circulars, specify that irrespective of the degree of divergence between the Assessing Officer and CIT merely because in either case the assessee is held to have suffered loss, appeal before the Tribunal would not be presented. Starting with circular dated 27.3.2000, we find that the said circular provided for limits for preferring appeals to the Tribunal, reference before the High Court and appeal before the Supreme Court as long as the tax effect exceeded Rs.1,00,000/-, Rs.2,00,000/- and Rs.5,00,000/- respectively. Paragraph 3 of the said circular specified the categories where irrespective of the revenue effect, such appeals could be pursued. The term " tax effect" specified in circular dated 27.3.2000 is nowhere defined and explained in any of the preceding and succeeding circulars. We must, therefore, understand this term in the context of the intention of the Board in limiting the Tax Appeals.
36. We must also remind ourselves that Board circulars are not statutes though by virtue of Section 268A, it may have certain statutory force. Common thread running through all the circulars presented before us is that the Board desired that subject to certain exceptions, Tax Appeals in which effect of tax is lower than the prescribed limit such appeals whether before the Tribunal, High Court or the Supreme Court, should not be presented. For example in Circular dated 27.3.2000 it is provided that appeals will be filed only in cases where tax effect exceeds the revised monetary limits i.e.Rs.2,00,000/- for the appeal to be file before the appellate Tribunal Rs.4,00,000/- for the appeal or reference before the High Court and Rs.10,00,000/- in case of appeals to the Supreme Court. Such limit came to be revised by Circular dated 24.10.2005 which provided for monetary limits of tax effect of Rs.2,00,000/-, Rs.4,00,000/- and Rs.10,00,000/- for appeals to the Tribunal, High Court and the Supreme Court respectively. None of these circulars provided that by virtue of assessment of loss by the Assessing Officer, different from that declared by the assessee, even if the possible tax effect is huge, no appeals should be presented before the Tribunal, High Court or the Supreme Court; merely because ultimately the income of the assessee was negative. We have no hesitation in coming to the conclusion that none of the circulars presented before us intended to bar the tax appeals even where potential tax effect would be enormous, simply because in the year in question, the assessee had earned negative income.
37. The issue can be looked from a slightly different angle. In absence of the Board's circulars issued, which now can be stated to be covered under Section 268A of the Act, there are no limitations on Revenue carrying the issue in appeal either before the appellate Tribunal, the High Court, the Supreme Court. To hold that a particular appeal is not maintainable by virtue of the limitations imposed by the Board in its circular, such limitation must be traced into circular itself. In other words unless and until the appeal is found to be opposed to the directives issued by the Board in its different circulars prevailing from time to time, such an appeal cannot be categorized as not maintainable.
38. Circulars of the Board nowhere provide that in case of return of loss automatically per se irrespective of difference in the Assessing Officer's perception and that of the CIT (Appeals) of the computation of loss, further appeal would be shut out.
39. The contention that by virtue of subsequent clarifications contained in circulars dated 15.5.2008 and 9.2.2011 the position prevailing prior to such circulars gets amplified and that therefore in cases of loss returns the Board's instructions did not envisage further appeal also does not impress us. We may recall that in the circular dated 15.5.2008 it is provided that in the case of loss, notional tax effect should be taken into account. This clarification to our mind, contained in circular dated 15.5.2008 and absence of any such clarification in the previous circulars, is of no consequence. Such a clause can, at the best, be seen as clarificatory declaration by the Board to put the controversy beyond any shadow of doubt or debate. It cannot, however, be stated that only on and from 15.5.2008 the Board desired that on the basis of notional tax effect in cases of loss the appeals should be filed. In the previous circulars to reiterate, no such intention emerges. Only because clarification came in the subsequent circular dated 15.5.2008, would not mean that previously the Board desired that such appeals should be filtered out.
40. Reference to the decision of the Delhi High Court in the case of Mangalam Risinus (supra) or subsequent judgment in the case of Nanakram Jaysinghania (upra) would not persuade us to change our view. In the case of Mangalam Risinus (supra), the Delhi High Court simply affirmed the view of the Tribunal making following observations.
"5. We are in agreement with the view of the Tribunal that even if the order of the Assessing Officer is upheld the tax recovery so far as the revenue is concerned would be nil. In the event the question has any impact on subsequent years, we leave it open to the revenue to raise it in the succeeding years, if need arises.
6. Learned counsel for the revenue submits that the tax effect is not required to be seen but the tax effect on the issue involved is to be seen. This is precisely what the Tribunal has done. We do not find any error in the view taken by the Tribunal."
41. We do not find that various provisions and authorities brought to our notice were cited before the Delhi High Court. Similarly, in the case of Nanakram Jaisinghania (supra) Delhi High Court affirmed the view of the Tribunal making following observations:-
"2. Learned counsel for the appellant submits that the Central Board of Direct Taxes has issued OM dated May 15, 2008, which is Instruction No.5 of 2008 and as per these instructions, in loss cases, notional tax effect is to be taken into account. The learned counsel, however, conceded that these instructions are applicable in respect of those appeals preferred after the issuance of these instructions. In fact, it is specifically provided in paragraph 11 of the said instruction as under " this instruction will apply to appeals filed on or after May, 15,2008". However, the cases where appeals have been before May 15, 2008, will be governed by the earlier instructions on this subject, operative at the time when such appeal was filed. In the present case, appeal was filed in the year 2005 before the Income-Tax Appellate Tribunal and it was dismissed on November, 30, 2007, as not maintainable. These instructions cam much thereafter, and in view of the paragraph 11 thereof, has no applicability to the case. The Income-tax Appellate Tribunal and it was dismissed on November 30, 2007, as not maintainable. These instructions came much thereafter, and in view of paragraph 11 thereof, has no applicability to the case. The Income-tax Appellate Tribunal, therefore, rightly dismissed the appeal as non-maintainable. The present appeal preferred thus clearly is a misuse of the process of law and in spite of the aforesaid clear instructions of the Central Board of Direct Taxes itself, we fail to understand as to why this appeal is preferred when the appeal before the Income-tax Appellate Tribunal itself was not maintainable. In these circumstances, we dismiss the appeal with costs quantified at Rs.10,000/- to be paid to the Delhi High Court Mediation and Conciliation Centre."
42. Here also various statutory provisions and judicial pronouncements cited before us were not cited before the High Court. The High Court, therefore, did not have the benefit of examining such judicial pronouncements. Even otherwise we have given detailed reasons for holding the belief that we have expressed in this judgment. We are unable to persuade ourselves to follow Delhi High court in above mentioned cases of Commissioner of Income-Tax vs. Nanak Ram Jaisinghania (supra) and in the case of Commissioner of Income-Tax, Delhi-II vs. Manglam Ricinus Ltd. (supra).
43. In the result common question, framed in all appeals, is answered in favour of the Revenue and against the assessees. It is held that merely because even as per the Assessing Officer's order, ultimately income of the assessee is negative, the Revenue's appeal before the appellate Tribunal would not be barred by the Board's circular under Section 268A of the Act. It is, however, clarified that the notional tax effect would have to be above the limits prescribed by the Board from time to time for presentation of such appeals. In all these cases since it is stated that the notional tax effect would be higher than the limits prescribed by the Board in different circulars, we are of the view that the Tribunal committed an error in dismissing the Revenue's appeals as being not maintainable. We may record that none of the appeals came to be decided by the Tribunal on merits.
44. In the result, all tax appeals are allowed. Judgments of the Tribunal under challenge in respective appeals are set aside. All proceedings are remanded to the Tribunal for entertaining appeals on merits and to decide the issues arising in such appeals in accordance with law after issuing notice to the assessees."
7. Issue being identical without assigning any independent reasons, the same is being decided in favour of the Revenue and against the assessee, setting aside the order of the Tribunal. Resultantly, the matter is remanded back to the Tribunal for it to reconsider it afresh by availing due opportunities to both the sides. Tax Appeal is accordingly disposed of.
(Akil Kureshi, J. ) (Ms. Sonia Gokani, J. ) sudhir