Income Tax Appellate Tribunal - Hyderabad
Dcit, Circle-3(2), Hyderabad, ... vs Sitara Technologies Private Limited, ... on 23 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" SMC : HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
ITA.No.361/Hyd/2017
Assessment Year 2007-2008
DCIT, vs. M/s. Sitara Technologies Private
Circle-3(2), Limited,
Hyderabad. 103, Surabhi Nest,
3-6-361/16, Himayat Nagar,
Hyderabad-29.
(Appellant) (Respondent)
For Assessee: Shri P.S.R.V.V. Surya Rao
For Revenue : Shri Phani Raju, DR
Date of Hearing : 23.06.2017
Date of Pronouncement : .06.2017
ORDER
PER D. MANMOHAN, VP.
This appeal is filed at the instance of the Revenue and it pertains to the assessment year 2007-2008. Admittedly, the appeal was filed on 28.03.2017 on the ground that the decision of the ITAT, Special Bench, Visakhapatnam was placed under Interim Suspension by the Hon'ble High Court of Judicature at Hyderabad and it did not lay down the correct law. It is also not in dispute that the total income assessed in this case is Rs. 15,00,865/- and the tax thereon, including Surcharge and Education Cess, is only Rs. 5,05,192/- and on the disputed amount, the tax effect is less than Rs. 4 lakhs.
2. At the outset, Ld Counsel for the assessee submitted that as per the CBDT Circular No.21/2015, dated 10.12.2015, as modified by the Circular No.5/2017, dated 23.01.2017, the Tax Authorities are not entitled to file an appeal, if the tax effect is less than Rs. 10 lakhs, before the Tribunal and even if an appeal is filed, the same has to be withdrawn. Ld Counsel for the assessee submitted that the Hon'ble Bombay High Court in number of decisions observed that the Circulars are binding on Revenue and it has to scrupulously follow the guidelines issued by the CBDT since, the intention 2 of the Government was to reduce the tax litigation, having noticed the fact that the majority of the cases pending before the Appellate Authorities are filed at the instance of the Revenue leading to litigation explosion / clogging of courts with appeals. In fact, the Circular has gone on to the extent of mentioning that latest Circular applies even to the pending appeals. It also puts an end to otherwise prevailing an uncertainty for a bona fide assessee. The hanging sword of tax demand for large number of years and uncertainty inherent in the determination thereof affects the trade as also the Income Tax Department. If it has to collect properly, the atmosphere of uncertainty need not continue. Thus, going by the fundamental objective of not filing an appeal based on tax effect, the appeal filed by the Revenue in this case deserves to be withdrawn.
3. On the other hand, Ld DR submitted that in the case of CIT vs. Shivaji Works Ltd (IT Appeal No. 1241 of 2000, dated 06.07.2007), the Hon'ble Bombay High Court has considered the Circular dated 24.10.2005 and in particular Para 3 thereof, while holding that the law decided by the Hon'ble Supreme Court is binding on all the authorities below in which event, Circular should not come in the way of disposing of the appeals. Para 3 of the said Circular 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 case, should be separately considered on merits without being hindered by the monetary limits."
4. Joining the issue, Ld Counsel for the assessee submitted that this paragraph has been omitted in the subsequent Circular, which implies that even if it is a case involving substantial question of law or question which repeatedly arise, so long as the tax effect is below Rs. 10 lakhs, the Revenue should not prefer an appeal as per the new Circular. The decision of the Bombay High Court in the case of Shivaji Works Ltd (supra) was based on the phraseology used in the para which does not apply in the instant case.
5. I have carefully considered rival submissions and perused the material on record. It is well settled that the Circulars issued by the CBDT u/s 119 of the Income Tax Act, 1961 are binding on the Revenue though not on the assessees. With regard to the binding nature of the Circulars vis-à-vis the low tax effect, the 3 Hon'ble Bombay High Court in the case of CIT vs. M/s. Sunny Sounds P. Ltd in Income Tax Reference No. 213 of 1997, dated 08.01.2016 and also in the case of CIT vs. M/s. Ferro Alloys Corporation Ltd, dated 28.01.2016, wherein the Court referred to earlier decisions of the Hon'ble Bombay High Court in the case of CIT vs. Pithwa Engineering Works [2005] 276 ITR 519 etc., held that the Revenue should not prefer an appeal if the tax effect is below the prescribed limit and even if the same is filed, the Department should proceed to withdraw it. As rightly pointed out by the Ld Counsel for the assessee, the Circular No.21 of 2015 does not empower the Revenue to prefer an appeal merely because a substantial question of law arises in a particular matter. Further, as rightly pointed by the Ld Counsel for the assessee, the decision of the Hon'ble Bombay High Court in the case of Shivaji Works Ltd (supra) was rendered based on the language employed in para 3 by the CBDT in its Circular dated 24.10.2005, whereas the said paragraph was omitted in the subsequent Circular, whereby merely because there is substantial question of law, the Revenue should not prefer an appeal and Income Tax Authorities, who are functioning under the CBDT, cannot bypass the Circular under any circumstance and rather they are bound to follow and comply with the policies laid down by the CBDT. As stated earlier, the main object was to avoid unnecessary litigations in small cases and the smallness is referred to in terms of tax effect involved as otherwise even in small matters appeals are filed in a routine manner, leading to unnecessary harassment to an ordinary assessee. Since, the Circular is issued by Revenue to take care of the general interest of the tax paying public, the same has to be followed scrupulously, in which event, the appeal filed in this case deserves to be dismissed as withdrawn. Having regard to the circumstances, the appeal filed by the Revenue is dismissed.
6. Order pronounced in the open court on 23rd June, 2017.
Sd/-
(D. MANMOHAN) VICE PRESIDENT Hyderabad, Dated: 23rd June, 2017 4 OKK, Sr.PS Copy to
1. M/s. Sitara Technologies Private Limited, 103, Surabhi Nest, 3-6-361/16, Himayat Nagar, Hyderabad-29.
2. DCIT, Circle-3(2), Hyderabad.
3. CIT(A)-3, Hyderabad.
4. Pr. CIT-3, Hyderabad.
5. D.R. ITAT "A" Bench, Hyderabad.
6. Guard File