ITA No. 171 of 2002 1
In the High Court of Punjab and Haryana, Chandigarh.
ITA No. 171 of 2002
Date of Decision: 26.02.2009
Commissioner of Income Tax, Chandigarh-II.
....Appellant.
Versus
M/s. Oscar Laboratories Pvt. Ltd.
....Respondent.
Coram:- Hon'ble Mr.Justice J.S. Khehar
Hon'ble Mr. Justice Nawab Singh
Present: Ms. Urvashi Dhugga, Advocate
for the appellant.
Mr. V.P. Gupta and
Mr. Pritam Saini, Advocates
for the respondent.
...
J.S. Khehar, J.
1. The respondent – assessee submitted a return for the assessment
year 1988-89, declaring its income at Rs.76,257/-, on 6.2.1990. The
Assessing Officer in exercise of the power vested in him under Section 143
(3) of the Income Tax Act, 1961 (hereinafter referred to as the 1961 Act),
vide his order dated 28.12.1990, determined the income tax liability of the
respondent – assessee at Rs.1,02,518/-. Dissatisfied with the order passed by
the Assessing Officer (dated 28.12.1990), the respondent – assessee
preferred an appeal before the Commissioner of Income Tax (Appeals). The
Commissioner of Income Tax (Appeals), vide his order dated 25.9.1991,
ITA No. 171 of 2002 2
partly allowed the appeal preferred by the respondent – assessee. The
Commissioner of Income Tax (Appeals), arrived at the conclusion, that the
respondent – assessee was an industrial establishment engaged in
manufacturing/processing of goods, and as such, was entitled to a deduction
under Section 80-I of the 1961 Act. The Appellate Authority, accordingly,
directed the Assessing Officer to allow the respondent – assessee’s claim for
a deduction under Section 80-I of the 1961 Act.
2. Dissatisfied with the order passed by the said Appellate
Authority, the Revenue preferred an appeal against the order passed by the
Commissioner of Income Tax (Appeals), dated 25.9.1991, before the
Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal). The
Tribunal allowed the appeal vide an order dated 18.11.1999. The Tribunal
arrived at the conclusion, that the Commissioner of Income Tax (Appeals)
was not justified in arriving at the conclusion, that the respondent – assessee
was an industrial undertaking engaged in the processing of “articles” or
“things”. The Tribunal concluded, that merely on account of the fact, that
the respondent – assessee had been incorporated with the object of
manufacturing drugs, and the mere fact that the drugs in question were sold
in the name of the assessee, would not constitute a sufficient basis for
concluding, that the assessee was an industrial undertaking engaged in the
business of manufacturing of “articles” or ” things”. Accordingly, the
Tribunal held that the assessee was not entitled to deduction under Section
80-I of the 1961 Act.
3. A civil miscellaneous application was filed by the respondent –
assessee against the order passed by the Tribunal dated 18.11.1999 before
the Tribunal itself, requiring the Tribunal to recall its order dated
ITA No. 171 of 2002 3
18.11.1999 on the ground, that the respondent – assessee had not been
served in the proceedings, which had culminated with the order of the
Tribunal dated 18.11.1999, as the respondent – assessee had been deprived
of an opportunity of projecting its claim before the Tribunal. Having
considered the plea raised by the respondent – assessee, the Tribunal vide its
order dated 25.9.2000 re-called the ex-parte order passed by it on
18.11.1999.
4. On a reconsideration of the controversy, the Tribunal vide order
dated 14.3.2002, dismissed the appeal preferred by the Revenue. It is,
therefore, that the Revenue has preferred the instant appeal so as to impugn
the order passed by the Commissioner of Income Tax (Appeals) dated
25.9.1991, as also, the order passed by the Tribunal dated 14.3.2002.
5. When the matter was taken up for hearing on 21.1.2009, a
preliminary objection was raised by the learned counsel for the respondent –
assessee, on the issue of maintainability of the instant appeal. Reliance was
placed on Section 268-A of the 1961 Act, as also, the instructions issued by
the Central Board of Direct Taxes, laying down monetary limits for
regulating the filing of appeals. It was the vehement contention of the
learned counsel for the respondent – assessee, that the instant appeal had
been preferred by the Revenue in clear violation of the mandate of the
instructions issued by the Central Board of Direct Taxes. It was submitted,
that the instructions under reference had acquired statutory status after the
insertion of Section 268-A of the 1961 Act.
6. On 21.1.2009, learned counsel for the appellant sought an
adjournment so as to enable her to obtain instructions and to prepare herself
on the preliminary objection. Thereafter, the matter was taken up for
ITA No. 171 of 2002 4
hearing on 19.2.2009 solely on the preliminary objection raised on behalf of
the respondent – assessee.
7. During the course of hearing, learned counsel for the appellant
vehemently repudiated the preliminary objection raised by the learned
counsel for the respondent – assessee. The claim of the appellant – revenue
is based on instruction No.1777 dated 4.11.1987. A copy of the aforesaid
instruction was made available to us during the course of hearing. Relevant
extract from the aforesaid instruction is being reproduced hereunder: –
“At present Board’s approval is required for filing Reference
Application under section 256(2) before the High Court , where
the application under section 256(1) is rejected by the Tribunal.
Similarly, Board’s approval is required for accepting or
contesting any adverse order of the High Court. Board’s
approval is also required for contesting before the High Court
or the Supreme Court, the adverse orders of the Settlement
Commission of the Appellate Tribunal for forfeited properties.
2. This area of the Board’s functions has been reconsidered. It
has been now decided that the decision to accept or contest
adverse judgements of High Courts/ITAT etc. will be taken by
the concerned, Chief Commissioner.
3. The Board desire that, while deciding the question of filing
an appeal/reference in respect of an adverse judgement of High
Court/ITAT etc., the Chief Commissioner should follow the
following guidelines: –
Monetary Limits: –
Filing of departmental appeal/reference should be selective.
Guidelines were 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 6.4.85). These guidelines should be adhered to, subject to
the exceptions given below. For the purpose of working out
ITA No. 171 of 2002 5
monetary limit, the cumulative revenue effect of the issue in the
assessee’s case for all the years up to the year for which returns
have been filed, should be taken into consideration. There 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 edition/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.
(ii) Question of Law: –
Where a question of law arises for the first time before the
High Court concerned, it should be contested irrespective of
revenue. Where an adverse judgement is delivered by a High
Court in such cases, stay off the operation of the judgement
should be obtained either from the High Court itself or from the
Supreme Court.
(iii) Other adverse judgements need to be contested
irrespective of the revenue effect: –
The judgement relating to the following should be contested
irrespective of revenue effect: –
a) Where prosecution proceedings are contemplated against the
assessee;
b) Where strictures have been passed against the department or
its officers;
c) Where Revenue Audit objection in the case has been
accepted by the Department;
d) Where Board’s order, notification, instruction or circular is
the subject matter of adverse order;
e) where in respect of one assessment year the order is
contested in the case of an assessee for any reason, the adverse
judgement for other years in issue in that case, should also be
contested irrespective of the amount involved so that
ITA No. 171 of 2002 6
Department’s case on the issue is not prejudiced on the ground
that in respect of some year the department has already
accepted the assessee’s case;
A report to the Board should be sent to in respect of the
judgements containing strictures or which are contrary to
Board’s orders, notifications, instructions, circulars etc.
iv) Adverse judgements which need not be contested;
a) where the adverse judgement is in accordance with the view
in the Board’s instruction or circulars etc.
b) where the adverse judgement is in respect of mere
procedural failure of the assessee like non-signing of appeal
memo by the appellant or Form 12 by one of the partners etc.
c) Adverse judgement, in respect of protective order revered the
substantive order made by the Department is upheld, and
becomes final.
v) Adverse judgement where Board’s prior will is necessary for
further contest: –
a) Special leave petitions under Article 136 of the Constitution
are filed before the Supreme Court only in consultation with
Ministry of Law, Delhi, and on the advice of senior law officers
– AG, SG or ASG. Therefore, where the Chief Commissioner
decides contest, the adverse judgement by filing special leave
petition before the Supreme Court, they should send the
proposal to the Board for further processing.
b) where some Chief Commissioners have already accepted an
adverse judgement on an issue but the concerned Chief
Commissioner has some reservations about it and wants to
contest that view, Board’s approval may be obtained.
Similarly, where other Chief Commissioners are contesting the
adverse view, but the concerned Chief Commissioner wants to
accept that view, Board’s prior approval may be obtained.
c) where the assessee involved is a public Sector Undertaking ,
and the Commissioner wants to contest the adverse judgement,
he should make a Reference to the Board. If there is no
ITA No. 171 of 2002 7
agreement between the undertaking and the department at the
Board’s level, the matter will be referred to Ministry of Law,
whose opinion will be binding on the undertaking and the
Department.
d) where the revenue effect of the case is over Rs.5 lakhs and
there is disagreement, the Commissioner and the standing
counsel in regard to acceptance or non-acceptance of the
judgement, Board’s approval may be obtained.
4. Where for exceptional reasons, the Commissioner wants to
deviate from the above guidelines, he must approach the
Board , well in time keeping the period of limitation in mind.
5. An Integrated Judicial Reference System (ITRS) has been set
up in the office of the Chief Commissioner, Hyderabad and is
now operative. The acceptance or otherwise of adverse
judgements of High Court or special benches of Tribunal
should be communicated to this Centre every fortnight so that
this information is available to all other charges, and there is
uniformity in the approach of the Department in different
charges.
6. These instructions will apply to litigation under other direct
taxes also e.g., Wealth-tax, Gift-tax, Estate-duty etc..
7. These instructions may please the brought to the notice of all
the Commissioners in your charge.”
Relying on the aforesaid instruction, it is acknowledged by the learned
counsel for the appellant – revenue, that the instruction vests authority in
the Chief Commissioner of Income Tax to decide, inter-alia, whether or not,
the Revenue should prefer an appeal to the High Court against an order
passed by the Income Tax Appellate Tribunal. According to the learned
counsel, the aforesaid instruction also includes guidelines to be kept in mind
by the Commissioner of Income Tax while deciding whether an appeal
should be filed or should not be filed. Guidelines, according to the learned
ITA No. 171 of 2002 8
counsel, are only directory and never mandatory. For filing a
reference/appeal before a High Court, the monetary limit stipulated under
the instruction referred to above, was that the tax effect should be more than
Rs.30,000/-. The instruction, according to the learned counsel, also
delineated exceptions i.e. circumstances where the monetary limit
prescribed may not be adhered to. Illustratively, it was pointed out that
monetary limits laid down by the instruction were exempt in a case where “a
question of law arises for the first time before the High Court”. Other
adverse judgements, which need to be contested irrespective of the revenue
effect could also be appealed against. Appeals could also be filed in cases
where prosecution proceedings are contemplated, where strictures have
been passed against the Revenue or its officers, where an audit objection
had been accepted by the Revenue, where the order under challenge is
against an order of the Central Board of direct Taxes, and in cases where for
a particular year, the Revenue has challenged an order against the assessee,
and the same issue arises again for a subsequent year.
8. Learned counsel for the appellant – revenue has raised a series
of submissions to repudiate the preliminary objection raised on behalf of the
respondent – assessee. Firstly, it is contended that the instructions issued by
the Central Board of Direct Taxes, laying down limits (on the basis of tax
effect) for preferring appeals, are not mandatory, but are merely directory.
The instruction dated 4.11.1987 laying down monetary limits for regulating
the filing of appeals, according to the learned counsel for the appellant, is
subject to a number of exceptions, which are apparent from the instruction
dated 4.11.1987, reproduced hereinabove. Secondly, it is the contention of
the learned counsel for the appellant, that it is permissible for the Revenue
ITA No. 171 of 2002 9
under Section 260-A of the 1961 Act, to prefer an appeal so as to agitate a
“question of law” arising for determination in a decision rendered by the
Tribunal, irrespective of the tax effect involved, and that, the aforesaid
statutory right cannot be interfered with. In this behalf, it is the contention
of the learned counsel for the appellant, that the admission of the present
appeal by itself, by a Division Bench of this Court, on 29.10.2002,
establishes that a substantial “question of law” arises for determination in
the present appeal, and as such, the right of the Revenue to have an
illegality corrected cannot be objected to. Thirdly, it is submitted that this
Court had already pronounced a verdict on the instant preliminary issue in
the case of Rani Paliwal Vs. Commissioner of Income Tax, (2004) 268 ITR
220, wherein relying on the judgements rendered by other High Courts, as
well as, by the Apex Court, this Court concluded, that the High Court was
obliged to decide an appeal preferred by the Revenue on merits, even
though, the tax effect involved therein was lower than the limit prescribed in
the relevant instruction issued by the Central Board of Direct Taxes,
(requiring the Revenue not to prefer an appeal). It was pointed out, that
besides the judgement of the jurisdictional High Court referred to above,
there were judgements of other High Courts, as well as, of the Supreme
Court, in favour of the proposition being canvassed by the learned counsel
for the appellant – revenue. And fourthly, it is contended by the learned
counsel for the appellant, that an objection of the nature raised by the
respondent – assessee herein, should have been raised by the respondent –
assessee before the Tribunal, and since, the respondent – assessee did not
raise any such objection before the Tribunal, where the Revenue was in
appeal against the same order passed by the Commissioner of Income Tax
ITA No. 171 of 2002 10
(Appeals) dated 25.9.1991, despite the fact that the tax effect on the
respondent – assessee was less than that prescribed under the prevalent
instruction at that time, it is not open to the respondent – assessee to agitate
this issue for the first time before this Court.
9. The submissions advanced by the learned counsel for the
appellant – revenue were vehemently repudiated by the learned counsel for
the respondent – assessee. The first contention advanced by the learned
counsel for the respondent – assessee is that, instructions issued by the
Central Board of Direct Taxes, from time to time stipulating monetary limits
for filing of appeals, were granted statutory status with the insertion of
Section 268-A into the Income Tax Act, 1961, by the Finance Act 2008 with
retrospective effect from 1.4.1999. The second contention advanced by the
learned counsel for the respondent – assessee is based on Instruction
No.1979 dated 27.3.2000, issued by the Central Board of Direct Taxes,
whereby other instructions issued by the Board, as well as, instruction
No.1777 dated 4.11.1987, relied upon by the learned counsel for the
appellant, came to be superseded. The instruction dated 27.3.2000, relied
upon by the respondent – assessee, which was made available to us during
the course of hearing, is being reproduced hereunder: –
“Reference is invited to the Board’s Instruction No.1903 dated
28th October, 1992 (See Clarification FIVE) and InstructionNo.1777 dated 4th November, 1987 (See Clarification Seven),
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 supersession of the above instruction, it has now been
ITA No. 171 of 2002 11
decided by the Board that appeals will be filed only in cases
where the tax effect exceeds the revised monetary limits given
hereunder: –
(i)Appeal before the Appellate Tribunal (in income tax matters) Rs.1,00,000/- (ii) Appeal under Section 260-A/reference under Section 256(2) before the High Court Rs.2,00,000/- (iii) Appeal in the Supreme Court Rs.5,00,000/-
The 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 the Board’s
earlier instruction referred to above.
3. Adverse judgements 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 the 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 the
Ministry of Law. Therefore, where the Chief Commissioner,
decides to contest an adverse judgement by filing special leave
petition before the Supreme Court, they should send the
proposal to the Board for further processing.
5. These instructions 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 April 1, 2000.”
ITA No. 171 of 2002 12
Based on the instruction dated 27.3.2000, it is the contention of the learned
counsel for the respondent – assessee, that the tax effect of the instant
appeal, in case of its success, would be less than Rs.2,00,000/- i.e. less than
the prescribed limit for filing an appeal before this Court. It is also
submitted that the instant case does not fall in any of the exceptions
enumerated in the instruction itself, and as such, the filing of the instant
appeal transgresses the mandate of the instruction dated 27.3.2000. Thirdly,
learned counsel for the respondent – assessee placed reliance on the
judgement rendered by this Court in Commissioner of Income-tax, Rohtak
Vs. M/s. Haryana Telecom Ltd., Rohtak (ITA No.517 of 2007, decided on
16.9.2008), wherein it has been concluded, that appeals filed by the
Revenue overlooking monetary limits prescribed in instructions issued by
the Central Board of Direct Taxes, need not be decided on merits, and as
such, the questions of law raised therein had been left open. It is also
pointed out, that besides the judgement of the jurisdictional Court, referred
to above, there were judgements of other High Courts, as well as, of the
Supreme Court in favour of the proposition being canvassed by the
respondent – assessee. The fourth contention by the learned counsel for the
respondent – assessee is, that the respondent – assessee could not have
objected to the filing of the appeal by the Revenue before the Income Tax
Appellate Tribunal because Section 268-A of the Income Tax Act, 1961 had
not been inserted into the 1961 Act when the said appeal was filed, heard
and disposed of by the Income Tax Appellate Tribunal. All the same, it is
contended that an independent plea is available to the respondent – assessee
on the issue of maintainability of the instant appeal before this Court.
According to the learned counsel, this plea cannot be denied to the
ITA No. 171 of 2002 13
respondent – assessee, even if he had not pressed a plea of a similar nature
available to the respondent – assessee before the Income Tax Appellate
Tribunal.
10. In the sequence of facts noticed hereinabove, reference in the
first instance, must be made to Section 119 of the 1961 Act, whereunder the
Central Board of Direct Taxes was authorised to issue orders, instructions or
directions to Income Tax Authorities for proper administration of the
provisions of the 1961 Act. It is common case of the learned counsel for the
rival parties, that the instructions relied upon by the learned counsel for the
Revenue dated 4.11.1987, as also, the instruction relied upon by the learned
counsel for the respondent – assessee dated 27.3.2000, were atleast in the
first instance, issued under Section 119 of the 1961 Act. Section 119 of the
1961 Act, relied upon by the learned counsel for the parties, is being
extracted hereunder: –
“Instructions to subordinate authorities.
119. (1) The Board may, from time to time, issue such orders,
instructions and directions to other income-tax authorities as it
may deem fit for the proper administration of this Act, and such
authorities and all other persons employed in the execution of
this Act shall observe and follow such orders, instructions and
directions of the Board :
Provided that no such orders, instructions or directions shall be
issued
(a) so as to require any income-tax authority to make a
particular assessment or to dispose of a particular case in a
particular manner; or
(b) so as to interfere with the discretion of the Commissioner
(Appeals) in the exercise of his appellate functions.
(2) Without prejudice to the generality of the foregoing power,
ITA No. 171 of 2002 14
(a) the Board may, if it considers it necessary or expedient so to
do, for the purpose of proper and efficient management of the
work of assessment and collection of revenue, issue, from time
to time (whether by way of relaxation of any of the provisions
of sections 115P, 115S, 115WD, 115WE, 115WF, 115WG,
115WH, 115WJ, 115WK, 139, 143, 144, 147, 148, 154, 155,
158BFA, sub-section (1A) of section 201, sections 210, 211,
234A, 234B, 234C, 271 and 273 or otherwise), general or
special orders in respect of any class of incomes or fringe
benefits or class of cases, setting forth directions or instructions
(not being prejudicial to assessees) as to the guidelines,
principles or procedures to be followed by other income-tax
authorities in the work relating to assessment or collection of
revenue or the initiation of proceedings for the imposition of
penalties and any such order may, if the Board is of opinion
that it is necessary in the public interest so to do, be published
and circulated in the prescribed manner for general
information;
(b) the Board may, if it considers it desirable or expedient so to
do for avoiding genuine hardship in any case or class of cases,
by general or special order, authorise any income-tax authority,
not being a Commissioner (Appeals) to admit an application or
claim for any exemption, deduction, refund or any other relief
under this Act after the expiry of the period specified by or
under this Act for making such application or claim and deal
with the same on merits in accordance with law;
(c) the Board may, if it considers it desirable or expedient so to
do for avoiding genuine hardship in any case or class of cases,
by general or special order for reasons to be specified therein,
relax any requirement contained in any of the provisions of
Chapter IV or Chapter VI-A, where the assessee has failed to
comply with any requirement specified in such provision for
claiming deduction thereunder, subject to the following
conditions, namely:
ITA No. 171 of 2002 15
(i) the default in complying with such requirement was due to
circumstances beyond the control of the assessee; and
(ii) the assessee has complied with such requirement before the
completion of assessment in relation to the previous year in
which such deduction is claimed :
Provided that the Central Government shall cause every order
issued under this clause to be laid before each House of
Parliament.”
Whilst it is the contention of the learned counsel for the appellant – revenue
that proviso (a) under Section 119(1) of the 1961 Act was an embargo on
the Central Board of Direct Taxes, restraining it from issuing any
instruction to any of the Income Tax Authorities, how assessment in a
particular case should be made, or the manner in which a particular
assessment was to be determined. Likewise, proviso (b) under Section 119
(1) was an embargo restraining the Central Board of Direct Taxes, from
interfering in the discretion vested with the Appellate Authority regarding
the manner in which an appeal was to be disposed of. Accordingly, it was
the vehement contention of the learned counsel for the respondent –
assessee based on the words “… and such authorities and all other persons
employed in the execution of this Act shall observe and follow such orders,
instructions and directions of the Board…” incorporated in sub-section (1)
of Section 119 of the 1961 Act, were in the nature of a mandate, and that,
the instructions issued by the Central Board of Direct Taxes, fixing
monetary limits for the purpose of regulating the filing of appeals, were
binding.
11. Even though, learned counsel for the rival parties
acknowledged, that the instructions dated 4.11.1987 (relied upon by the
appellant – revenue) and 27.3.2000 (relied upon by the respondent –
ITA No. 171 of 2002 16
assessee) were issued under Section 119 of the 1961 Act, yet we are
satisfied that it is no longer necessary to treat the instruction dated
27.3.2000, relied upon by the respondent – assessee, and which constitutes
the foundation of the preliminary objection raised on its behalf, as having
been issued under Section 119 of the 1961 Act, because under a deeming
fiction of law, the aforesaid instruction is to be accepted as having been
issued under Section 268-A(1) of the 1961 Act.
12. In so far as the second contention of the learned counsel for the
appellant – revenue is concerned, it is essential to make a reference to
Section 260-A of the 1961 Act. The aforesaid provision is being extracted
hereunder: –
“Appeal to High Court.
260-A. (1) An appeal shall lie to the High Court from every
order passed in appeal by the Appellate Tribunal before the
date of establishment of the National Tax Tribunal, if the High
Court is satisfied that the case involves a substantial question
of law.
(2) The Chief Commissioner or the Commissioner or an
assessee aggrieved by any order passed by the Appellate
Tribunal may file an appeal to the High Court and such appeal
under this sub-section shall be
(a) filed within one hundred and twenty days from the date on
which the order appealed against is received by the assessee or
the Chief Commissioner or Commissioner;
(b) Omitted.
(c) in the form of a memorandum of appeal precisely stating
therein the substantial question of law involved.
(3) Where the High Court is satisfied that a substantial question
of law is involved in any case, it shall formulate that question.
(4) The appeal shall be heard only on the question so
ITA No. 171 of 2002 17formulated, and the respondents shall, at the hearing of the
appeal, be allowed to argue that the case does not involve such
question :
Provided that nothing in this sub-section shall be deemed to
take away or abridge the power of the court to hear, for reasons
to be recorded, the appeal on any other substantial question of
law not formulated by it, if it is satisfied that the case involves
such question.
(5) The High Court shall decide the question of law so
formulated and deliver such judgment thereon containing the
grounds on which such decision is founded and may award
such cost as it deems fit.
(6) The High Court may determine any issue which-
(a) has not been determined by the Appellate Tribunal; or
(b) has been wrongly determined by the Appellate Tribunal, by
reason of a decision on such question of law as is referred to in
sub-section (1).
(7) Save as otherwise provided in this Act, the provisions of the
Code of Civil Procedure, 1908 (5 of 1908), relating to appeals
to the High Court shall, as far as may be, apply in the case of
appeals under this section.”
Based on sub-section (1) of Section 260-A of the 1961 Act, it is the
contention of the learned counsel for the appellant – revenue, that the
provisions of the Income Tax Act, 1961 authorise the Revenue to prefer an
appeal to the High Court “from every order passed in appeal by the
Appellate Tribunal”, subject to the condition that the Revenue can satisfy
the High Court, that the case involves a substantial question of law. This
right, according to the learned counsel, is unbridled and unconditional. It is
also the contention of the learned counsel for the appellant, that the very
fact that the instant appeal was admitted for consideration by this Court,
was sufficient to infer that a substantial question of law was involved in the
ITA No. 171 of 2002 18
instant appeal. It is, accordingly, asserted that the appellant – revenue
cannot be restrained by any instruction(s) issued by the Central Board of
Direct Taxes, from filing an appeal wherein a substantial question of law
arises for consideration. In this behalf, the Court’s attention has been
invited to the fact, that the instant appeal was admitted for regular hearing
by a Division Bench of this Court on 29.10.2002. Another submission of the
learned counsel for the appellant, also based on Section 260-A of the 1961
Act, emerges from sub-section (4), which mandates, that an appeal shall be
heard only on the question formulated by the Court, and that, it is open to
the assessee to argue that “…the case does not involve such question…”. It
is, therefore, the submission of the learned counsel for the appellant, that it
is not even open to the respondent – assessee to raise the instant preliminary
objection, as the only right vested in the assessee is to oppose the appeal on
merits on the questions formulated by the Court. Relying on sub-section
(5) of Section 260-A of the 1961 Act, it is also the contention of the learned
counsel for the appellant, that it is imperative for this Court to deliver a
judgement on all the questions of law formulated, and as such, it is not open
to this Court to excuse itself from rendering a decision on merits. Lastly,
reliance was placed on sub-section (7) of Section 260-A of the 1961 Act in
order to assert, that the provisions of the Code of Civil Procedure relating to
appeals to High Courts, were applicable mutatis-mutandis to appeals
preferred by the Revenue against orders passed by the Income Tax
Appellate Tribunal. In this behalf, the contention of the learned counsel for
the appellant – revenue was, that since there was a bar imposed on the
Revenue based on tax effect (laid down in instruction issued by the Central
Board of Direct Taxes) from preferring an appeal, the respondent – assessee
ITA No. 171 of 2002 19
having not raised a plea based thereon before the Tribunal, was barred from
doing so before this Court in view of the mandate of Order II Rule 2 of the
Code of Civil Procedure.
13. As against the last submission advanced by the learned counsel
for the appellant on the basis of the provisions of the Code of Civil
Procedure, learned counsel for the respondent – assessee has placed reliance
on clause (a) of sub-section (6) of Section 260-A of the 1961 Act.
According to the learned counsel, the aforesaid provision authorizes this
Court to determine any issue, including an issue which “has not been
determined by the Appellate Tribunal”. It is, therefore, the vehement
contention of the learned counsel for the respondent – assessee, that the
preliminary objection raised by the respondent – assessee based on Section
268-A of the 1961 Act, is very much maintainable, and that, the same
cannot be shut out by the appellant – revenue. In this behalf, learned
counsel for the respondent – assessee has raised two further pleas, namely,
that Section 268-A of the 1961 Act was not available on the statute book
when the appeal was decided by the Income Tax Appellate Tribunal, and
that, the instant preliminary objection constitutes a pure question of law
which can be raised at any time.
14. Having given our thoughtful consideration to the issue
advanced by the learned counsel for the rival parties, as has been noticed in
the foregoing paragraph, we are satisfied that the maintainability of the
appeal filed by the Revenue before the Income Tax Appellate Tribunal, was
an issue entirely different from the maintainability of the appeal at the hands
of the Revenue before this Court. Separate and distinct parameters are laid
in the instructions for filing appeals before the Income Tax Appellate
ITA No. 171 of 2002 20
Tribunal, as against the ones prescribed, for approaching this Court in
appeal under Section 260-A of the 1961 Act. As such, we are of the view
that it makes no difference whatsoever to the issue canvassed at the hands of
the respondent – assessee before this Court, whether or not, such an
objection was raised when the Revenue preferred an appeal before the
Income Tax Appellate Tribunal. We are also of the view, that the
submissions advanced by the learned counsel for the respondent – assessee,
as have been noticed in the foregoing paragraph, also deserve to be
accepted. As such, we hereby endorse both the submissions advanced at
the hands of the learned counsel for the respondent – assessee, as have been
noticed hereinabove. Accordingly, we find no merit in the plea raised by
the learned counsel for the appellant – revenue under Section 260-A(7) of
the 1961 Act, read with Order II Rule 2 of the Code of Civil Procedure.
15. Learned counsel for the rival parties have cited before us
judgements rendered by High Courts, as also, by the Supreme Court to
determine the issue of maintainability of the instant appeal. However, none
of the judgements relied upon by the learned counsel for the rival parties
(which will be dealt with in a later part of this order) can be considered as
an exposition on Section 268-A of the 1961 Act, or the effect thereof. It is,
therefore, that we are satisfied that the instant question posed by the learned
counsel for the respondent – assessee cannot be disposed of merely on the
basis of the judgements relied upon by the learned counsel for the rival
parties. Despite the aforesaid factual/legal position, we shall deal with the
judgements relied upon by the learned counsel for the rival parties, and
determine the effect thereof, so as to be able to analyse the direction of the
march of judicial opinion on the issue in hand.
ITA No. 171 of 2002 21
16. Learned counsel for the appellant invited this Court’s attention,
first of all, to the decision rendered by the Rajasthan High Court in
Commissioner of Income Tax Vs. Rajasthan Patrika Ltd. (2002)258 ITR
300. From the aforesaid judgement, learned counsel for the appellant invited
the pointed attention of this Court to the following observations on the issue
in hand: –
“Mr. Ranka further submits that in any case the tax effect is
meagre, i.e., Rs. 30,000, therefore, the appeal is not
maintainable. There is a circular of the Board that when the tax
effect is not more than Rs. 50,000, no appeal should be filed.
He also brought to our notice a latest decision of the apex court
in the case of Tamil Nadu Industrial Investment Corporation
Ltd. v. CIT (1999) 237 ITR 889, wherein their Lordships have
taken the view that in fact the circular clarifies the way in
which these amounts are to be treated under the accounting
practice followed by the lender. The circular, therefore, cannot
be treated as contrary to section 145 of the Income-tax Act or
illegal in any form. It is meant for a uniform administration of
law by all the income-tax authorities in a specific situation and
is, therefore, validly issued under section 119 of the Income-tax
Act. As such the circular would be binding on the Department.
Mr. Mathur, learned counsel for the Revenue, also brought to
our notice the decision of the apex court in the case of CIT v.
Hero Cycles P. Ltd. (1997) 228 ITR 463, wherein their
Lordships have taken the view that the circulars can bind the
Income-tax Officer but will not bind the appellate authority or
the Tribunal or the court or even the assessee.
It is true that in the case of the Supreme Court, which has been
referred to by Mr. Ranka, learned counsel for the assessee, their
Lordships held that a circular has binding effect, but the issue
before the Supreme Court relates to the circular, which
interprets the statute for the uniformity of the decisions in the
ITA No. 171 of 2002 22Department. But the circular before us is as to whether the
appeal is to be filed or not ? These are administratives
instructions and in spite of these administrative instructions if
the department prefers to file an appeal or make a reference to
this court, in our view on such administrative instructions the
appeal of the Department should not be dismissed or the
reference should not be rejected. We do not find any infirmity
in disposing of the appeal on the merits.”
Reliance was then placed on the decision rendered by the Madras High
Court in Commissioner of Income Tax Vs. P.S.T.S Thiruvirathnam and
sons, (2003)261 ITR 406, wherefrom learned counsel for the appellant drew
our attention to the following observations made therein: –
“Counsel for the assessee, however, submitted that the question
should not be answered by us as according to him under the
circular issued by the Central Board of Direct Taxes if the
amount of tax involved is less than Rs. 30,000, the Department
is not to pursue the matters in the higher forum. We have
perused the circular of November 4, 1987. It is not an
unqualified embargo on the Revenue proceeding with the
matter where the amount of tax in issue is Rs. 30,000 or less.
Several exceptions are set out in that circular. If the assessee
wanted the benefit of that circular it should have put the
Revenue on notice when the Revenue applied for having the
question referred so that the Revenue could gather the relevant
material, if any, to show that the matter was within the excepted
category.
After the question has been referred to us, we cannot now
permit the assessee to raise this objection.”
Reference was also made to the decision rendered by this Court in Rani
Paliwal Vs. Commissioner of Income Tax, (2004) 268 ITR 220. Learned
counsel for the appellant invited the Court’s attention to one of the questions
ITA No. 171 of 2002 23
framed for adjudication in Rani Paliwal’s case (supra) as under: –
“(i) Whether the Tribunal, on the facts and in the circumstances
of the case, erred in law in not dismissing the appeals of the
Department/Revenue in view of the Board’s Circular No. F. No.
279/126/98-ITJ, dated March 27, 2000 ?”
The aforesaid question was answered by this Court as under:-
“As regards question No. (i), it is urged that in view of the
Board’s Circular No. F-279/126/98-ITJ, dated March 27, 2000,
the appeals filed by the Department were not maintainable
because the tax effect did not exceed Rs. 1,00,000 in each
assessment year and, therefore, according to the circular, the
Department could not prefer an appeal. From the perusal of the
order of the Tribunal, it is clear that no such plea was raised
before the Tribunal and, therefore, we are not allowing the
assessee to raise this plea for the first time before us. In any
case, the Board’s circular is only an instruction issued to the
income-tax authorities not to file appeals where the tax effect is
less than Rs. 1,00,000. The Tribunal is not bound by any such
instruction and once the Department files an appeal, the
Tribunal was bound to decide the same on the merits. This
question, in our opinion, is not a question of law. ”
Reference was also made to the decision rendered by the Allahabad High
Court in Jugal Kishore Arora Vs. Deputy Commissioner of Income Tax,
(2004) 269 ITR 133, wherein the Allahabad High Court, inter-alia, held 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. The appeal is clearly maintainable before
ITA No. 171 of 2002 24the Tribunal on behalf of the Department under section 253(2)
of the Income-tax Act, and this right to file an appeal is a
statutory right and cannot be taken away or prohibited by
executive instructions. Moreover, the instructions itself state
that an appeal can be filed if the matter is of a recurring nature.
Thus there is no force in these appeals and they are dismissed.”
Learned counsel for the appellant also invited this Court’s attention to a
judgement rendered by this Court in Commissioner of Income Tax Vs.
Abhishek Industries Ltd., (2006) 286 ITR 1, wherein on the issue of
maintainability, it was observed as under:-
“As far as the issue as to whether the circular prescribing limits
for filing appeals before the courts or the Tribunals is
concerned, different courts have taken different views as to
whether in case an appeal is filed, which involves tax effect less
than the amount prescribed in the circular for filing the appeal,
still the court/ Tribunal is bound to reject the same as such or to
dispose of it on merits.
In CIT v. Camco Colour Co. (2002) 254 ITR 565, the Bombay
High Court refused to entertain an appeal which was filed
having tax effect less than what was prescribed in the
instructions for filing appeal in the High Court. The same view
was reiterated by the court in CIT v. Pithwa Engineering Works
(2005) 276 ITR 519 (Bom).
Taking a contrary view, this court in Rani Paliwal v. CIT
(2004) 268 ITR 220, wherein an appeal filed by the assessee,
raising the issue as to whether the Tribunal erred in law in not
dismissing the appeal of the Revenue keeping in view the
Board’s circular dated March 27, 2000, prescribing limits for
filing appeals before the Tribunal, was dismissed holding that
the Tribunal is not bound by any such instructions and once the
appeal is filed, the Tribunal was bound to decide the same on
the merits.
A similar view has been expressed by the Rajasthan High Court
ITA No. 171 of 2002 25in CIT v. Rajasthan Patrika Ltd. (2002) 258 ITR 300, wherein it
was held that the circulars providing for quantum of tax which
is fixed for filing appeals before various forums are
administrative in nature. If the Department prefers to file an
appeal or make a reference to the court, the same should not be
dismissed by relying upon such administrative instructions.
Accordingly, the appeal filed by the Revenue was heard and
decided on the merits.
In CIT v. Blaze Advertising (Delhi) P. Ltd. (2002) 255 ITR
460, the Delhi High Court held that the circular issued by the
Board does not, in any way, prohibit or curtail the power of the
Tribunal for making a reference and in any case, the statutory
right of the Tribunal to refer a case to the High Court for its
opinion under section 256(1) of the Act cannot be taken away
by the Board by issuing a circular or otherwise.
In CIT v. Hero Cycles P. Ltd. (1997) 228 ITR 463, the Hon’ble
Supreme Court held that the circular issued by the Central
Board of Direct Taxes (for short, “the Board”) can bind the
Income-tax Officer, but will not bind the appellate authority or
the Tribunal or the court or even the assessee.
Accordingly, it is held that there is no merit in the plea of the
assessee to the effect that the present appeal filed by the
Revenue should be dismissed. Rather, we hold that the circulars
issued by the Board fixing the quantum of tax for filing appeals
before various forums are not binding on the Tribunal or the
courts and once the matter is before the court or the Tribunal,
the same has to be decided on its own merits.”
17. As against the aforesaid submissions advanced by the learned
counsel for the appellant, learned counsel for the respondent – assessee has
relied upon various judgements rendered by different High Courts in the
country. First of all, reliance was placed on the decision rendered in
Commissioner of Income Tax Vs. Smt. Nayana P. Dedhia (2004) 270 ITR
ITA No. 171 of 2002 26
572, wherein the Andhra Pardesh High Court, relying on the decision
rendered by the Supreme Court in UCO Bank Vs. Commissioner of
Income Tax (1999) 237 ITR 889, held as under:-
“…..The circular had admittedly been issued by the Central
Board of Direct Taxes under section 119(1) of the Act. What is
the scope of such circulars should not detain us because of the
authoritative pronouncement of the Hon’ble Supreme Court
reported in UCO Bank v. CIT (1999) 237 ITR 889. The
Supreme Court noted :
“What is the status of these circulars ? Section 119(1) of the
Income-tax Act, 1961, provides that, ‘the Central Board of
Direct Taxes may, from time to time, issue such orders,
instructions and directions to other income-tax authorities as it
may deem fit for the proper administration of this Act, and such
authorities and all other persons employed in the execution of
this Act shall observe and follow such orders, instructions and
directions of the Board. Provided that no such orders,
instructions or directions shall be issued (a) so as to require any
income-tax authority to make a particular assessment or to
dispose of a particular case in a particular manner ; or (b) so as
to interfere with the discretion of the Appellate Assistant
Commissioner in the exercise of his appellate functions’. Under
sub-section (2) of section 119, without prejudice to the
generality of the Board’s power set out in sub-section (1), a
specific power is given to the Board for the purpose of proper
and efficient management of the work of assessment and
collection of revenue to issue from time to time general or
special orders in respect of any class of incomes or class of
cases, setting forth directions or instructions, not being
prejudicial to assessees, as to the guidelines, principles or
procedures to be followed in the work relating to assessment.
Such instructions may be by way of relaxation of any of the
provisions of the sections specified there or otherwise. The
ITA No. 171 of 2002 27
Board thus has power, inter alia, to tone down the rigour of the
law and ensure a fair enforcement of its provisions, by issuing
circulars in exercise of its statutory powers under section 119 of
the Income-tax Act which are binding on the authorities in the
administration of the Act. Under section 119(2)(a), however,
the circulars as contemplated therein cannot be adverse to the
assessee. Thus, the authority which wields the power for its
own advantage under the Act is given the right to forgo the
advantage when required to wield it in a manner it considers
just by relaxing the rigour of the law or in other permissible
manners as laid down in section 119. The power is given for the
purpose of just, proper and efficient management of the work of
assessment and in public interest. It is a beneficial power given
to the Board for proper administration of fiscal law so that
undue hardship may not be caused to the assessee and the fiscal
laws may be correctly applied. Hard cases which can be
properly categorised as belonging to a class, can thus be given
the benefit of relaxation of law by issuing circulars binding on
the taxing authorities.”
The Supreme Court, in this judgment, which is clear from the
paragraph quoted above, held in no uncertain terms that :
(a) the authorities responsible for administration of the Act
shall observe and follow any such orders, instructions and
directions of the Board ;
(b) such instructions can be by way of relaxation of any of the
provisions of the section specified therein or otherwise ;
(c) the Board has power, inter alia, to tone down the rigour of
the law and ensure a fair enforcement of its provisions by
issuing circulars in exercise of its statutory powers under
section 119 of the Income-tax Act ;
(d) the circulars can be adverse to the Income-tax Department,
but still, are binding on the authorities of the Income-tax
Department, but cannot be binding on the assessee, if they are
adverse to the assessee ;
ITA No. 171 of 2002 28
(e) the authority, which wields the power for its own advantage
under the Act, has a right to forgo the advantage when required
to wield it in a manner it considers just by relaxing the rigour of
the law by issuing instructions in terms of section 119 of the
Act.
This judgment leaves no room to doubt that the Tribunal was
right in holding that the income-tax authorities could have not
selected the case for detailed scrutiny in view of the circular
issued by the Board.”
Based on the judgement rendered by the Supreme Court in UCO Bank’s
case (supra) and the judgement rendered by the Andhra Pardesh High Court
in Smt. Nayana P. Dedhia’s case (supra), it is the vehement contention of the
learned counsel for the respondent – assessee, that instructions issued by the
Central Board of Direct Taxes under Section 119(1) of the 1961 Act, have
binding effect on the Revenue, and have to be followed by the officers of
the Revenue Department. On the pointed issue, learned counsel for the
respondent – assessee also relied upon the decision rendered by the Madras
High Court in Commissioner of Income Tax Vs. Ideal Garden Complex P.
Limited, (2008) 307 ITR 176, wherein the Court opined as under:-
“Thus, following the long line of case law reported in CIT v.
Rajasthan Patrika Limited (2002) 258 ITR 300 (Raj) and CIT v.
P. S. T. S. Thiruvirathnam (2003) 261 ITR 406 (Mad) to which
one of us is a party (K. Raviraja Pandian J.), CIT v. Digvijay
(2007) 292 ITR 314 (MP) and CIT v. Camco Colour Co. (2002)
254 ITR 565 (Bom), this court held that the uniform line of
judicial opinion is that if the tax effect is less than what is
stated in the circular, the Revenue need not agitate the issue on
appeal and that the circular is binding on the Revenue.”
Likewise, reference was made to the decision rendered by the Allahabad
High Court in Commissioner of Income Tax Vs. Smt. Prakashwati, (1994)
ITA No. 171 of 2002 29
210 ITR 567, wherein the Allahabad High Court recorded the following
concluding remarks:-
“There is another aspect of the matter. We have seen earlier that
in these two cases the tax effect involved is very nominal, that
is, Rs.80 for the assessment year 1984-85 and Rs. 475 for the
assessment year 1985-86. In CWT v. Executors of Late D. T.
Udeshi (1991) 189 ITR 319, a Division Bench of the Bombay
High Court rejected an application for reference where the tax
effect was less than Rs. 8,500 in a year saying that no reference
application could be made in view of the policy decision of the
Central Board of Direct Taxes not to file references in the cases
where the tax effect was less than Rs. 30,000 per year,
contained in its Circular F. No. 279/26 of 1983-ITJ, dated July
12, 1984, and Circular F. No. 319/11 of 1987-WT dated July
14, 1987. For that reason also, these two applications are liable
to be rejected.”
Reference was also made to the decision rendered by the Delhi High Court
in Commissioner of Income Tax Vs. Income Tax Appellate Tribunal and
another, (1998) 232 ITR 207, wherein on the same issue, the Delhi High
Court held as under:-
“It was also submitted that though the quantum of the revenue
involved for the year in question, i.e., the assessment year
1985-86, is only Rs. 19,363, the appeal decided against the
Revenue has a recurring effect on revenue for the succeeding
years and, therefore, the instructions would not apply. It was
submitted by learned counsel for the Department, developing
his argument further, that in the event of the question being
answered in favour of the Revenue, the cumulative revenue
effect for all the years up to the year for which returns have
been filed by the assessee would exceed the monetary limit laid
down in the Central Board of Direct Taxes instructions.
Learned counsel for the assessee has disputed the factual
ITA No. 171 of 2002 30correctness of this statement. The fact remains that the
desirability of making a reference has not been examined by the
Tribunal from the abovesaid angle.
Negligible amounts of revenue is one of the relevant
considerations for refusing the reference. (see CIT v. Imperial
Surgical Co. (P.) Ltd. (1991) 192 ITR 646 ; (1992) 63 Taxman
508 (SC) ; CIT v. Smt. Prakashwati (1994) 210 ITR 567 (All) ;
CWT v. Girdhari Lal Saraf (1991) 190 ITR 264 (Raj) ; and
CWT v. Executors of Late D. T. Udeshi (1991) 189 ITR 319
(Bom)).
The Central Board of Direct Taxes instructions are binding on
the Department. If the case at hand is covered by a policy laid
down by the Central Board of Direct Taxes in that case no fault
can be found with the order of the Tribunal refusing to state the
case and there is no reason why the High Court should interfere
with such discretion of the Tribunal as has been exercised
consistently with the uniform policy laid down by the Central
Board of Direct Taxes which binds all the subordinate
authorities of the Income-tax Department. The High Court
would not ordinarily encourage breach of policy decisions and
the Departmental instructions which have a public purpose
behind them. Valuable time of High Courts and highly placed
Tribunals is not to be wasted on petty matters. However, if the
case be not covered by the said instructions or be covered by
one of the exceptions carved out in the instructions themselves
in that event the denial of reference would be failure to exercise
a jurisdiction statutorily vested in the Tribunal. Inasmuch as the
Tribunal has not examined the case from that point of view and
adequate material is not available before us enabling formation
of an opinion either way, we deem the present one to be an
appropriate case, which should be sent back to the Tribunal for
consideration afresh.”
Reference was also made to the decision of the Bombay High Court in
Commissioner of Income Tax Vs. Camco Colour Co., (2002) 254 ITR 565,
ITA No. 171 of 2002 31
which is as under:-
“The issue in the present case being one of some potential
general significance in relation to the policy decision taken by
the Board 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, we propose to
dispose of this appeal on this short contention canvassed by
learned counsel for the respondent without examining the
merits of the question of law sought to be raised in this appeal.
Learned counsel for the respondent also relied upon the
decision in Navnit Lal C. Javeri v. K. K. Sen, AAC of I. T.
(1965) 56 ITR 198 (SC) ; Ellerman Lines Ltd. v. CIT (1971) 82
ITR 913 (SC) and K. P. Varghese v. ITO (1981)131 ITR 597
(SC) to contend that the circular issued by the Central Board of
Direct Taxes is binding on all the officers and Commissioners
and in terms of which he sought to examine the question of
necessity of filing of the present appeal.
In appears that despite the above circular, the Revenue has
chosen to file the present appeal knowing fully 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 instructions
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.”
Our attention was also invited to the decision rendered by the Bombay High
Court in Commissioner of Income Tax Vs. Zoeb Y. Topiwala, (2006) 284
ITR 329, wherein the Bombay High Court dismissed the appeal preferred
by the Revenue by imposing costs on the Revenue, as the Revenue had
ITA No. 171 of 2002 32
ignored the instructions issued by the Central Board of Direct Taxes,
prescribing monetary limits for the purpose of regulating the filing of
appeals. Reference was also made to the decision rendered by the Madras
High Court in Commissioner of Income Tax Vs. Associated Electrical
Agencies, (2007) 295 ITR 496, wherein the Court held as under:-
“The factual issue is undisputed that the tax effect involved in
this appeal is only few thousand rupees. The above referred
judgment was rendered in a reference case and the question of
law therein was referred for the decision of this court. This
court rejected the contention of the respondent therein by
saying that the circular dated November 4, 1987, was not an
unqualified embargo on the Revenue proceeding with the
matter in appeal where the amount of tax in issue was Rs.
30,000 or less. Several exceptions were set out in that circular.
If the assessee wanted the benefit of the circular, it should have
put the Revenue on notice when the Revenue applied for
having the question referred so that the Revenue could have
gathered relevant material, if any, to show the matter was
within the expected category. Incidentally, one of us (K.
Raviraja Pandian J.) was also a party to the said judgment. The
said judgment has not denied the benefit of the circular to the
assessee, but only cautioned the assessee that if the assessee put
on notice the Revenue, the Revenue would have gathered
material and satisfied whether it is a fit case for filing the
appeal with reference to the exception clause contained therein.
Hence, the judgment cannot be regarded as one which decided
the scope and binding nature of the circular and decided in
favour of the Revenue.
In the case of CIT v. Rajasthan Patrika Ltd. reported in (2002)
258 ITR 300, the Rajasthan High Court categorised the circular
as one of administrative instruction and held that the
administrative instruction cannot prevail over the statutory
provision.
ITA No. 171 of 2002 33
In the case of Rani Paliwal v. CIT reported in (2004) 268 ITR
220, the Punjab and Haryana High Court has held that from the
perusal of the order of the Tribunal, it was clear that no plea
was raised before the Tribunal that appeal was not entertainable
because of the tax effect was less than Rs. 1 lakh in each of the
assessment years and therefore the High Court did not allow the
assessee to raise the plea for the first time before the High
Court and further held that the circular was not binding on the
Tribunal and further held that such a plea was not a question of
law.
The circular referred to in the abovesaid judgment has been
subsequently revised in Circular No. F/279. It is not in dispute
in this case that the tax effect is only a few thousand rupees and
not exceeded the monetary limit of Rs. 2 lakhs prescribed in the
abovesaid circular for filing appeal before the High Court. The
exceptions stated in the circular for contesting the case
irrespective of the revenue effect were :
(i) Where Revenue audit objection in the case has been
accepted by the Department.
(ii) Where the 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.
and the monetary limit would not apply to writ matters. The
circular would come into effect from April 1, 2000.
We are of the considered view that none of the exceptions
stated in the circular are applicable to the facts of the present
case. The circular was stated to be issued by invoking the
statutory power under section 119 of the Income-tax Act. The
appeal is filed under section 260-A of the Income tax Act. It is
well-settled principle of law that each and every provision of a
statute has to be given the same importance. One provision
ITA No. 171 of 2002 34
cannot be elevated to a higher pedestal than the other provision,
of course, unless or otherwise specifically stated either in the
scheme, the Act or in the provision itself that a particular
provision is subjected to or qualified by any other provision or
the provision can be given effect to notwithstanding anything
contained in any other provisions by assigning overriding
effect. Hence, the contention that notwithstanding the circular,
which was issued under section 119 of the Income-tax Act, the
appeal could be filed by the Revenue under section 260-A has
to be rejected for the reason that if the contention is accepted,
one of the sections would become virtually otiose and that
cannot be the intention of the law makers. Hence, the above
judgments cannot be taken in aid for non-suiting the
respondent/assessee from taking shelter under the Government
order.
In this case, not only the tax effect involved is nearly Rs. 5,000,
but also the other qualification prescribed in the circular were
also not available or in existence to carve out the case to bring
outside the purview of the circular. Even de hors the circular, if
the facts are considered, the assessee is entitled to claim the
benefit for the next assessment year if the same was negatived
for the assessment year in question. Further, the point in issue
is whether the bonus as claimed by the respondent has been
paid within October 31, 1991, or subsequent to that date, can
no stretch of imagination be considered as a question of law
rather than substantial question of law as provided under
section 260-A of the Income-tax Act.”
Reliance was then placed on a decision rendered by the Madras High Court
in Commissioner of Income Tax Vs. M. Pachamuthu and another, (2007)
1995 ITR 502, wherein it was held as under:-
“It is not argued by counsel for the Revenue that the circular
issued is not binding on the Revenue. However, he relied on the
decision reported in CIT v. Abhishek Industries Ltd. (2006)
ITA No. 171 of 2002 35286 ITR 1 (P&H). The issue involved in these appeals has been
considered by us in the order made in T. C. (A) No. 222 of
2004 (CIT v. Associated Electrical Agencies (2007) 295 ITR
496 (Mad)) dated August 16, 2007, and held against the
Revenue in the sense that if the tax effect is less than as
provided in the Central Board of Direct Taxes circular in F. No.
279/126/98-ITJ and if the case has not come within the
exceptions made in the circular, the appeals filed by the
Revenue in the light of the circular cannot be legally
maintainable.”
Although, learned counsel for the respondent also placed reliance on the
decision rendered by this Court in Commissioner of Income Tax, Rohtak
Vs. M/s. Haryana Telecom Ltd., Rohtak (ITA No.517 of 2007, decided on
16.9.2008) yet we do not desire to make a reference to the same, as the
aforesaid appeal was disposed of without recording any reasons, and as
such, cannot be referred to as a precedent, on the subject under
consideration.
18. As already noticed hereinabove, in none of the judgements
relied upon by the learned counsel for the rival parties, reference was made
to Section 268-A of the 1961 Act. Judicial leaning despite non-reference to
Section 268-A of the 1961 Act, is seen to be tilting in favour of giving
effect to the instructions issued by the Central Board of Direct Taxes
wherein monetary limits were prescribed, by restraining the Revenue from
filing appeals, except when the tax effect would be higher than the
prescribed limits. At the juncture under reference i.e. prior to the
introduction of Section 268-A in the 1961 Act, the object of issuing such
instruction was apparent and obvious, namely, alleviating unnecessary
hardship to assesses. Possibly even to avoid unnecessary financial hardship
ITA No. 171 of 2002 36
and long drawn appellate proceedings even for the Revenue, where likely
gains were negligible. There can be no doubt, that the process of litigation
is a financial hardship. An individual assessee may have to suffer the
hardship far beyond the effect thereof on the Revenue. The Revenue also
incurs financial expense, which when taken to its logical effect, falls on the
shoulders of the general public as the same is incurred out of money collect
from innocent tax-payers. Filing of an appeal should be a fruitful exercise.
An appeal should not be filed only to press a proposition of law, unless it
results in an adverse inference against the Revenue. The veracity of filing
an appeal must be gauged with reference to the tax, which is likely to be
recovered by the Revenue, on the success thereof. If the proportion of the
aforesaid recovery of tax as against the expenses incurred in pursuing the
appellate remedy is negligible, and there is no other adverse effect, the
inference should be, that the remedy of appeal would be an exercise in
futility. In such an eventuality, an appeal should not be filed.
19. Independently of the issue in hand, it would be pertinent to
notice, that in terms of the law laid down by High Courts, as well as, the
Supreme Court, it was imperative for the Revenue to avail of the appellate
remedy, lest it be considered that the Revenue had conceded an important
question of law, in favour of a particular assessee. The Revenue could not
take the risk of suffering a recurring loss of tax-recovery, even though, the
tax effect was negligible. In this behalf, reference may be made to the
decisions rendered by the Supreme Court in Commissioner of Income Tax,
Central, Kanpur Vs. J.K. Charitable Trust, (1992) 196 ITR 31, Berger
Paints India Ltd. Vs. Commissioner of Income Tax, (2004) 266 ITR 99 and
C.K. Gangadharan Vs. Commissioner of Income Tax, (2008) 304 ITR 61.
ITA No. 171 of 2002 37
In all these judgements, the Apex Court concluded, inter-alia, that in case an
assessee succeeds on an issue, which is not assailed by the Revenue (by
availing of the remedy of appeal) the Revenue is precluded from raising the
same issue during a subsequent assessment. Accordingly, even where tax
recoveries were negligible, the Revenue is known to have pursued its
remedy by preferring an appeal, so as to avoid any such adverse conclusion.
20. Aimed at alleviating and remedying the aforesaid predicament
of the Revenue, the Finance Act 2008 inserted Section 268-A into the 1961
Act. This conclusion of ours is clearly derivable from the objects recorded
in the Bill introduced in the Parliament for the promulgation of the Finance
Act 2008. An extract of the objects recorded in the Bill pertaining to the
insertion of Section 268-A into the 1961 Act, is reproduced hereunder:-
“The proposed section seeks to provide that 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 Chapter XX.
It is further proposed to provide that 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.
It is also proposed to provide that notwithstanding that no
appeal or application for reference has been filed by an income-
tax authority pursuant to the orders, instructions or directions
ITA No. 171 of 2002 38issued 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.
It is also proposed to provide that the Appellate Tribunal or
Court, hearing any appeal or reference had filed under this
Chapter, shall have regard to the orders, instructions or
directions issued by the Board from time to time either before
or after the insertion of this section and the circumstances in
which such appeal or application for reference was filed or was
not filed in any case; and accordingly the Tribunal or Court
shall decide the appeal or the reference on the merits of the
issue under consideration.
It is also proposed to provide that every order or 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.
This amendment will take effect retrospectively from Ist April,
1999.”
It is apparent from the objects for the insertion of Section 268-A into the
1961 Act, that all technical objections available to an assessee against
whom the Revenue chose not to file an appeal, came to be rendered
nugatory, in cases where the Revenue had not filed an appeal on account of
the negligible tax effect involved.
21. Before we endeavour upon any further deliberation, it is
important for us to examine and interpret Section 268-A of the 1961 Act.
Section 268-A aforementioned, is being reproduced hereunder:-
“Filing of appeal or application for reference by income-tax
ITA No. 171 of 2002 39authority.
268-A. (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.”
A perusal of sub-Section (1) of Section 268-A of the 1961 Act reveals, that
the Central Board of Direct Taxes has been authorized under the 1961 Act,
ITA No. 171 of 2002 40
to issue orders, instructions or directions to Income Tax Authorities, laying
down monetary limits for purposes of filing appeals. As a consequence of
the insertion of the instant provision in the Income Tax Act, 1961, orders,
instructions or directions issued on the subject of monetary limits for filing
appeals must be deemed to have attained statutory status. There can be no
dispute that every requirement under the mandate of law, leads to a
consequential statutory obligation to comply with the said requirement.
Sub-Section (5) of Section 268-A of the 1961 Act is also relevant for the
determination of the issue in hand, inasmuch as, it mandates that
instructions, orders or directions, even issued earlier i.e. prior to the
insertion of Section 268-A in the 1961 Act, by the Finance Act 2008, fixing
monetary limits for filing of appeals, shall be deemed to have been issued
under sub-Section (1) of Section 268-A of the 1961 Act. This conclusion
emerges from the fact, that Section 268-A of the 1961 Act was introduced
with retrospective effect from 1.4.1999. Accordingly, instructions, orders or
directions issued even prior to the insertion of Section 268-A of the 1961
Act, must be deemed to have statutory status, if they were issued after
1.4.1999. On the basis of the judgements, which were prevalent prior to the
insertion of Section 268-A into the 1961 Act, it may not have been
advisable for the appellant – revenue not to prefer an appeal, since in terms
of the decisions rendered by various High Courts, as well as, by the
Supreme Court, the Revenue would be bound, as against the concerned
assessees, on determinations in favour of the assessee, which had remained
unassailed. In this behalf, reference may be made to the decisions rendered
by the Supreme Court in Income Tax, Central, Kanpur Vs. J.K. Charitable
Trust, (1992) 196 ITR 31, Berger Paints India Ltd. Vs. Commissioner of
ITA No. 171 of 2002 41
Income Tax, (2004) 266 ITR 99 and C.K. Gangadharan Vs. Commissioner
of Income Tax, (2008) 304 ITR 61, wherein it was held, that the decision of
the Department in favour of an assessee will be deemed to have been
accepted by the Revenue, if the Revenue does not assail the same by filing
an appeal. Thereafter, the Revenue was barred from raising the same issue
against the assessee. This position has now been altered, in as much as,
sub-section (3) of Section 268-A of the 1961 Act, leaves the remedy open in
the hands of the Revenue, even though, an appeal had not been filed by the
Revenue on account of the monetary limits prescribed by the Central Board
of Direct Taxes. This emerges from a plain reading of Section 268-A(3) of
the 1961 Act. It is this aspect of the matter, which had constrained the
Revenue to prefer appeals, in cases where a substantial question of law had
arisen for adjudication as against the concerned assessee, even with limited
tax effect. All issues prejudicial to the Revenue, in cases where an appeal
was not filed by the Revenue, must therefore, be deemed to have been done
away with, after the inclusion of Section 268-A into the 1961 Act.
22. Incidentally, all the instructions relied upon by the learned
counsel for the respondent – assessee, were issued after 1.4.1999, and as
such, the instructions relied upon by the respondent – assessee will be
deemed to have been issued under Section 268-A of the 1961 Act. All the
instructions relied upon by the learned counsel for the respondent – assessee
must be deemed to have statutory recognition. The action of the Revenue in
abstaining from filing an appeal under the instructions relied upon by the
respondent – assessee will not be subjected to any adverse inference against
the Revenue so as to preclude it from raising the issue involved therein
against the assessee.
ITA No. 171 of 2002 42
23. In the background of the conclusions drawn by us hereinabove,
we would endeavour to deal with the submissions advanced by the learned
counsel for the appellant – revenue based on Section 260-A of the 1961 Act.
There can be no doubt, whatsoever, that after the introduction of Section
268-A into the 1961 Act, Section 260-A of the 1961 Act, cannot be read
independently. Sections 260-A and 268-A of the 1961 Act will now have to
be interpreted by reading the two harmoniously, so as to give effect to the
aforesaid two provisions keeping in mind the objects and the reasons on the
basis whereof Section 268-A was inserted into the 1961 Act. One cannot
lose sight of the fact, that Section 268-A of the 1961 Act was inserted by the
Finance Act 2008 with retrospective effect from 1.4.1999. The legislature in
its wisdom clearly desired to give statutory effect to all instructions issued
on the subject of monetary limits for regulating filing of appeals
retrospectively. Accordingly, all instructions laying down monetary limits
for filing appeals (which were issued on or after 1.4.1999) by a deeming
fiction of law must be treated as having been issued under Section 268-A(1)
of the 1961 Act. A reading of sub-section (1) of Section 260-A of the 1961
Act, as suggested by the learned counsel for the appellant – revenue, vests a
right in the Revenue to prefer an appeal before an Appellate Authority, in
all such cases involving substantial questions of law. The aforesaid right
will now have to be read along with the mandate of sub-section (1) of
Section 268-A of the 1961 Act, which restricts the remedy of preferring
appeals on the basis of monetary limits stipulated by the Central Board of
Direct Taxes. The Central Board of Direct Taxes is the policy making
agency of the Department of Revenue. The monetary limits prescribed by
the Central Board of Direct Taxes can not be treated as an arbitrary
ITA No. 171 of 2002 43
imposition on the Department of Revenue. The Department of Revenue
having chosen on its own volition, the monetary limits for filing appeals to
challenge orders passed in favour of assessees, cannot be heard to deviate
therefrom. When the Revenue itself lays down the aforestated monetary
limits, a harmonious construction of sub-section (1) of Section 260-A of the
1961 Act, and sub-section (1) of Section 268-A of the 1961 Act, would
inevitably lead to the conclusion, that the Revenue can prefer an appeal, if a
case raises a substantial question of law, subject to the monetary limits
stipulated by the Central Board of Direct Taxes. This conclusion of ours
will have to be kept in mind while examining different pleas raised on
behalf of the appellant – revenue.
24. In view of the conclusion drawn by us in the foregoing
paragraph, the submission advanced by the learned counsel for the appellant
– Revenue, emerging from Section 260-A(1) of the 1961 Act, to the effect
that an appeal can be filed by the Revenue in all cases where a substantial
question of law arises, and that, the right of the Revenue to file an appeal
cannot be restricted, deserves to be rejected, and is accordingly, rejected.
We are also of the view, that the submission of the learned counsel for the
appellant – revenue based on sub-section (4) of Section 260-A of the 1961
Act, is also wholly misconceived. We are one with the learned counsel for
the respondent – assessee, that it is open to the respondent – assessee to
repudiate not only the legal submissions advanced in an appeal on behalf of
the Revenue, but also, any other legal submission that may arise therein.
What seems to have been over-looked by the learned counsel for the
appellant – revenue is, that a plea raised by an assessee under Section 268-A
of the 1961 Act, is also a plea on a proposition of law. Furthermore, under
ITA No. 171 of 2002 44
sub-section (6) of Section 260-A of the 1961 Act, it is also open to this
Court to decide such questions of law, which have not been determined
hitherto before. The aforesaid conclusions drawn by us completely negate
the contentions raised on behalf of the appellant – revenue on the effect
Section 260-A of the 1961 Act.
25. On the basis of the conclusions drawn by us hereinabove, on
the basis of the submissions advanced by the learned counsel for the
appellant – revenue based on Section 260-A of the 1961 Act, and on the
basis of the conclusions drawn by us on the basis of the submissions
advanced by the learned counsel for the respondent – assessee based on
Section 268-A of the 1961 Act; we have no hesitation to conclude that the
instructions issued by the Central Board of Direct Taxes laying down
monetary limits for filing of appeals, are mandatory, and as such, binding on
the Revenue. This conclusion of our also answers the first contention raised
on behalf of the appellant – revenue.
26. It is in the background of the aforesaid conclusions, that we
will now endeavour to deal with the instructions relied upon by the learned
counsel for the rival parties. So far as, learned counsel for the appellant –
revenue is concerned, she has placed reliance on an instruction dated
4.11.1987. It would be pertinent to mention, that the aforesaid instruction
certainly does not fall within the protective umbrella of Section 268-A of
the 1961 Act, in as much as, the aforesaid instruction was issued prior to
1.4.1999. To say the least, the instruction relied upon by the learned counsel
for the appellant – revenue cannot be deemed to have had any
statutory effect, as the same cannot be deemed to have been issued under
Section 268-A of the 1961 Act, inspite of the retrospective operation
ITA No. 171 of 2002 45
thereof.
27. Learned counsel for the respondent – assessee placed reliance
on an instruction dated 27.3.2000. The instruction relied upon by the
learned counsel for the respondent – assessee must be deemed to have been
issued under the mandate of Section 268-A of the 1961 Act, as the aforesaid
provision was inserted with retrospective effect from 1.4.1999. The
aforesaid instruction was issued after Section 268-A of the 1961 Act had
been deemingly introduced into the 1961 Act. The instruction dated
27.3.2000 must therefore, be deemed to have statutory effect. The
instruction under reference dated 27.3.2000, was in force when the instant
appeal was preferred by the appellant – revenue in the year 2002.
28. It would also be pertinent to mention, that the learned counsel
for the respondent – assessee also placed reliance on Instruction No.5 dated
15.5.2008, revising the monetary limits for filing appeals before the Income
Tax Appellate Tribunals, High Courts, as well as, the Supreme Court, in
order to assert, that the instant appeal is also not competent under the latest
instruction issued by the Central Board of Direct Taxes. This instruction
must naturally be deemed to have statutory effect as the same has expressly
been issued under Section 268-A(1) of the 1961 Act. The aforesaid
instruction dated 15.5.2008, is being reproduced hereunder: –
“Reference is invited to Board’s instructions No.1979 dated
27.3.2000, No.1985 dated 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 limits for filing departmental
appeals (in income tax matters) and other conditions were
specified, for filing appeals before Appellate Tribunal, High
Courts and Supreme Court.
ITA No. 171 of 2002 46
2. In supersession of the above instructions, it has been decided
by the Board that departmental appeals will be filed before
Appellate Tribunal, High Courts and Supreme Court as the
monetary limits and conditions specified below.
3. Appeals will henceforth be filed only in cases where the tax
effect exceeds monetary limits given hereunder: –
Sr. Appeals in Income tax matters Monetary limit (in
No. Rs.)
1 Appeal before Appellate Tribunal 2,00,000/-
Appeal under Section 260-A 4,00,000
2 before High 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 remain 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 arises 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 limits 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 the relevant assessment year.
However, in case of a composite order of any High Court or
ITA No. 171 of 2002 47
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.
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
prescribed 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
Department representatives/counsel must make every effort to
bring to the notice of the Tribunal or Court that the appeal in
such cases was not filed or not admitted only by 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
ITA No. 171 of 2002 48
Court that such cases do not have any precedent value.
8. Adverse judgements 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, Notifications, 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.
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, will not
apply to writ matters.
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 Income Tax Act,
1961.”
It is the vehement contention of the learned counsel for the respondent –
assessee, that even as per the aforestated revised instruction issued by the
Central Board of Direct Taxes, under Section 268-A(1) of the 1961 Act, yet
again, limits prescribed are such, that the appellant – revenue should be
prevented from pressing the instant appeal.
29. We have given our thoughtful consideration to the submissions
advanced by the learned counsel for the respondent – assessee on the basis
of the instruction dated 15.5.2008. We are, however, satisfied that the
ITA No. 171 of 2002 49
aforesaid instruction is irrelevant for the purpose of determination of the
present controversy, on account of the fact that paragraph 11 of the
aforesaid instruction, makes the same applicable only in respect of appeals
filed on or after 15.5.2008. The instant appeal was filed in the year 2002 i.e.
well before 15.5.2008. Be that as it may, it is possible for us to draw yet
another inference in favour of the respondent – assessee, namely, that the
instruction prevalent prior to the instruction dated 15.5.2008, has expressly
been made applicable to appeals preferred before 15.5.2008. We, therefore,
must inevitably revert back to the instruction dated 27.3.2000, for
determining the veracity of the filing of the instant appeal.
30. While disposing of the instant controversy, we would like to
expressly notice, that it is not a matter of dispute at the hands of the learned
counsel for the rival parties, that the tax effect in the present appeal is below
the monetary limits prescribed, for preferring an appeal under the
instruction dated 27.3.2000. It would also be pertinent to mention, that it is
not the case of the appellant – revenue, that inspite of the tax effect, the
instant appeal could have been preferred under one of the four exceptions
recorded in paragraph 3 of the instruction dated 27.3.2000. Thus viewed, we
are satisfied that, even though, the instant appeal was filed when Section
268-A of the 1961 Act had not been inserted into the 1961 Act, yet since
Section 268-A was inserted therein with retrospective effect from 1.4.1999,
by a deeming fiction of law, the same must be deemed to have been filed
when Section 268-A was already a part of the 1961 Act.
31. We would be failing in our duty, if we do not make a reference
to the another submission advanced by the learned counsel for the appellant
– revenue on the basis of the instruction dated 4.11.1987 (already extracted
ITA No. 171 of 2002 50
above). Referring to Clauses (ii) and (iii) in paragraph 3 of the instruction
dated 4.11.1987, it was the contention of the learned counsel for the
appellant – revenue, that even though, the tax effect in the present appeal
was below the one stipulated in the aforesaid instruction, yet on account of
the fact that the question of law, which was sought to be adjudicated
through the instant appeal, had arisen for the first time before this Court,
and that, there were other adverse judgements on the subject, which were
required to be contested by way of the present challenge raised in the instant
appeal, the instant appeal should not be thrown out summarily. The instant
submission advanced by the learned counsel for the appellant – revenue
deserves to be declined for two reasons. Firstly, that the instruction dated
4.11.1987 came to be expressly superseded by the subsequent instruction
dated 27.3.2000. This is apparent from paragraph 2 of the instruction dated
27.3.2000 (extracted hereinabove). Secondly, the exceptions carved out in
the instruction dated 4.11.1987, relied upon by the learned counsel for the
appellant – revenue to press the maintainability of this appeal, have been
acknowledged as they do not fall within the exceptional circumstances
mentioned in paragraph 3 of the instruction dated 27.3.2000. We are of the
view that it was open to the Revenue to prefer an appeal only on the four
grounds specified in paragraph 3 of the instruction dated 27.3.2000, and on
no other ground, in cases where the tax effect was less than that prescribed
therein after the supersession of the instruction dated 4.11.1987. Since the
grounds relied upon by the learned counsel for the appellant – revenue did
not subsist at the time of the filing of the instant appeal, at which juncture
the instruction dated 27.3.2000 was applicable, it is not necessary for us
even to examine the instant contention advanced by the learned counsel for
ITA No. 171 of 2002 51
the appellant – revenue on the basis of the instruction dated 4.11.1987.
32. As a consequence of giving the effect to the mandate of Section
268-A of the 1961 Act, in conjunction with the instruction issued by the
Central Board of Direct Taxes dated 27.3.2000, we are satisfied that the
instant appeal was not maintainable in law. The same should not have been
pressed after it had been filed by the appellant – revenue. Accordingly, we
accept the preliminary objection raised by the learned counsel for
respondent – assessee. Having accepted the aforesaid preliminary objection,
we are satisfied that the instant appeal deserves to be dismissed on the basis
of the instruction dated 27.3.2000, read with Section 268-A of the 1961 Act.
Ordered accordingly.
( J.S. Khehar )
Judge
( Nawab Singh )
Judge.
26.02.2009
sk.