Income Tax Appellate Tribunal - Mumbai
Prakash G Mandhana-Huf , Mumbai vs Department Of Income Tax on 20 September, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'C' MUMBAI
BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND
SHRI B. RAMAKOTAIAH (ACCOUNTANT MEMBER)
ITA No. 3909/Mum/2010
Assessment Year- 2006-07
The ACIT, Circle-18(2), Prakash G. Mandhana HUF,
Piramal Chambers, Parel, 338 A to Z Indl. Estate,
Mumbai-400 012 Ganpatrao Kadam Marg,
Vs. Lower Parel,
Mumbai-400 013
PAN-AAHHP 3542B
(Appellant) (Respondent)
Appellant by: Shri Alexander Chandy
Respondent by: Shri Rajan Vora
Date of Hearing : 20.09.2011
Date of pronouncement: 20.9.2011
ORDER
PER B.R. MITTAL, JM :
The Revenue has filed this appeal for assessment year 2006-07 against the order of Ld. CIT(A) dt. 26.02.2010 on the following two grounds:
"1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in adopting Earning Capitalization Method for valuation of shares as against the method adopted by the AO of share valuation method as per Wealth tax Act.
2. On the facts and circumstances of the case and in law, the CIT(A) erred in directing the AO to adopt sale value of Rs. 529/- per share as long term capital gain as against Rs. 365/- per share taken by the AO and Rs. 41/- per share as non compete fees treated as business income as against Rs. 205/- per share taken by the AO."2 ITA No.3909/M/2010
2. At the time of hearing, Ld. Counsel for the assessee submitted that tax effect in this appeal is below Rs. 2 lakhs. He submitted that in view of CBDT Circular No. 279/Misc. 64/05-ITJ dt. 24.10.2005 read with Board's Instruction No. 5/2008 dt. 15th May, 2008, the appeal of the department is not maintainable.
3. The Ld. Departmental Representative has not disputed the above contention of the assessee.
4. We have considered the submissions of Ld. Representatives of the parties and CBDT Instruction No. 5/2008 dt. 15th May, 2008 wherein monetary limits and other conditions for filing departmental appeals (In Income tax matters) before the Income Tax Appellate Tribunal, High Courts and Supreme Court have been specified. It is observed that since 1987, the CBDT has been instructing its officers not to file the appeal where the tax effect is below certain monetary limits. Vide instruction no.1903 dated 28.10.1992 the monetary limit was revised upward and the officers were directed not to file appeal before the Income Tax Appellate Tribunal where the tax effect was below Rs.25,000/-. The above monetary limit was further revised upward by Instruction No.1979 dated 27.03.2000 and the officers were directed not to file the appeal to ITAT where the tax effect is below Rs.1,00,000/-. Thereafter in partial modification of the above instruction, the Board vide Instruction No.2/2005 dated 24.10.2005 has further raised the above monetary limit to Rs.2,00,000/- with the same directions. Thus the C.B.D.T. since 1987 has not only taken a consistent approach of instructing its Officers for not filing the appeal where the tax effect is below the monetary limit, but such monetary limit is also revised upward from time to time. The Circular under Instruction No.1979 dated 27.03.2000 was considered by the Bombay High Court in the case of Camco Colour Co.254 ITR 565 and their Lordships held at page 568 as under:
"It appears that despite the above circular, the Revenue has chosen to file the present appeal knowingly fully;3 ITA No.3909/M/2010
well that the corridors of the courts are flooded with pending litigations. The presentation of this appeal is quite contrary to the instruction issued in the circular, which is binding on the revenue.
In the above view of the matter, considering the Instruction issued by the Central Board of Direct Taxes, we are satisfied that the Board has taken a policy decision not to file appeal in a type of case in hand and the same is binding on the revenue(appellant herein). In the result, we dismiss this appeal on this count in limine with no order as to costs."
5. We find that recently the Apex Court has considered the effect of circular issued by the CBDT in the case of Commissioner of Customs vs. Indian Oil Corporation Ltd. 267 ITR 272. Their lordships examined the earlier decision of the Apex Court with regard to binding nature of the Circular and laid down the following principles at page 277 of the reports-
"The principles laid down by all these decisions are-
1. Although a circular is not binding on a court on 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.
2. Despite the decision of this court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board.
3. A show cause notice and demand contrary to existing circulars of the Board are ab initio void.
4. It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars."
6. It is relevant to state that CBDT vide Instruction No. 3/2011 dt. 9th February, 2011 has further revised the monetary limit for filing of appeals by the department before the Appellate Tribunal, High Courts. It is relevant to reproduce the said CBDT instruction, which reads as under:
4 ITA No.3909/M/2010"INSTRUCTION NO. 3/2011 [F. NO. 279/MISC. 142/2007-ITJ], DATED 9-2-2011 Reference is Invited to Board's instruction No. 5/2008 dated 15- 5-2008 wherein monetary limits and other conditions for filing departmental appeals (In Income-tax matters) before Appellate Tribunal, High Courts and Supreme Court were specified.
2. In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on merits before Appellate Tribunal, High Courts and Supreme Court keeping in view the monetary limits and conditions specified below .
3. Henceforth 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. 260A 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 assessed 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.
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 5 ITA No.3909/M/2010 disputed issues arise in more than one assessment year, appeal, can 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 can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeal shall be filed in respect of all such 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. In case where a composite order/judgment involves more than one assessee, each assessee shall be dealt with separately.
6. In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Commissioner of Income tax shall specifically record that "even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this instruction". Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits.
7. In the past, a number of instances have come to the notice of the Board, whereby an assessee has claimed relief from the Tribunal or the Court only on the ground that the Department has implicitly accepted the decision of the Tribunal or Court in the case of the assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year, by not filing an appeal on the same disputed issues. The Departmental representatives/counsels must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the specified monetary limit and, therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that such cases do not have any precedent value.6 ITA No.3909/M/2010
As the evidence of not filing appeal due to this instruction may have to be produced in courts, the judicial folders in the office of CsIT must be maintained in a Systemic manner for easy retrieval.
8. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect.
a. Where the Constitutional validity of the provisions of an Act or Rule are under challenge, or b. Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or c. Where Revenue Audit objection in the case has been accepted by the Department.
9. The proposal for filing Special Leave Petition under Article 136 of the Constitution before the Supreme Court should, in all cases, be sent to the Directorate of Income-tax(Legal & Research), New Delhi and the decision to file Special Leave Petition shall be in consultation with the Ministry of Law and Justice.
10. The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income- tax, filing of appeals in other direct tax matters shall continue to be governed by relevant provisions of statute and rules. Further, filing of appeal in cases of Income-tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case.
11. This instruction will apply to appeals filed on or after 09.02.2011. However, the cases where appeals have been filed before 09.02.2011 will be governed by the instructions on this subject, operative at the time when such appeal was filed.
12. This issues under section 268(1) of the Income Tax Act, 1961."
7. In view of the above, it is evident that Hon'ble Apex Court has laid down that it is not open to the Revenue to advance an argument or file an 7 ITA No.3909/M/2010 appeal contrary to the Circular. Therefore, this appeal filed by the Revenue is not admitted and is being dismissed in limine.
8. In the result, appeal filed by the department is dismissed.
Order pronounced on this 20th day of September, 2011 Sd/- Sd/-
( B. RAMAKOTAIAH) (B.R. MITTAL )
Accountant Member Judicial Member
Mumbai, Dated 20th September, 2011
Rj
opy to :
1. The Appellant
2. The Respondent
3. The CIT-concerned
4. The CIT(A)-concerned
5. The DR ' C' Bench
True Copy
By Order
Asstt. Registrar, I.T.A.T, Mumbai
8 ITA No.3909/M/2010
Date Initials
1. Draft dictated on: 20.9.2011 Sr.
PS/PS
2. Draft placed before author: Sr.
21.09.2011 PS/PS
3. Draft proposed & placed before JM/AM
the second member:
4. Draft discussed/approved by JM/AM
Second Member:
5. Approved Draft comes to the Sr. Sr.
PS/PS: PS/PS
6. Order pronounced on: Sr.
PS/PS
7. File sent to the Bench Clerk:
8. Date on which file goes to the Sr.
Head Clerk: PS/PS
9. Date on which file goes to AR
10. Date of dispatch of Order: