Shamim Yahya, Member (A) -
(1.) THIS appeal by the revenue is directed against the order of CIT(A), XXXIII, Kolkata dated 23.05.2012. and pertains to Assessment Year 2007 -08.
(2.) AT the outset, it was stated by Ld. Counsel for the assessee that tax effect in this appeal of Revenue is below the prescribed monetary limits for filing of appeals before ITAT. In this appeal of Revenue quantum of addition is Rs. 10,56,967/ - and the tax effect is Rs. 3,73,835/ -. The appeal relates to Assessment Year 2007 -08 and filed before the Tribunal on 23.07.2012. Ld. Counsel for the assessee stated that in view of the recent Instruction No. 5/2014 issued by CBDT on 10.07.2014 revising monetary limits for filing of appeal before ITAT fixing the tax effect limit of Rs. 4 lacs, the same is not maintainable and liable to be dismissed in limine. The only issue now remains before us is, whether, this appeal of revenue, which is below the prescribed limit of tax effect in view of the Board's Instruction No. 5/2014 issued on 10.07.2014 revising the monetary limits for filing of appeals by the Department before ITAT is maintainable or not. Ld. CIT -DR has drawn our attention to para -11 of the Instruction and argued that this will apply to the appeals filed on or after 10.07.2014 and not to the appeal filed prior to 10.07.2014. Hence, he vehemently opposed the argument of Ld. counsel for the assessee and stated that this instruction is prospective and not retrospective. We have heard rival contentions and gone through the facts and circumstances of the case. At the outset, it is seen that Hon'ble Delhi High Court in the case of CIT Vs. M/s. P.S. Jain & Co. in ITA No. 179/1991 dated 02.08.2010 has held as under::
This court can very well take judicial notice of the fact that by passage of time money value has gone down, the cost of litigation expenses has gone up, the assessees on the file of the Departments have been increased consequently, the burden on the Department has also increased to a tremendous extent. The corridors of the superior courts are chocked with huge pendency of cases. In this view of the matter, the Board has rightly taken a decision not to file references if the tax effect is less than Rs. 2 lakhs. The same policy for old matters needs to be adopted by the Department. In our view, the Board's circular dated March 27, 2000 is very much applicable even to the old references which are still undecided. The Department is not justified in proceeding with the old references wherein the tax impact is minimal. Thus, there is no justification to proceed with decades old references having negligible tax effect.
Similarly, Hon'ble Gujarat High Court in the case of CIT v. Sureshchandra Durgaprasad Khatod (HUF) : (2012) 253 CTR 492 (Guj) has specifically considered instruction No. 3/2011 and held that the same would apply to pending cases as well even though there was a specific condition in that instruction also that the same would apply to appeals filed on or after February, 2011. Hon'ble High Court has considered this issue as under: -
6. The question about applicability of Instruction No. 3 of 2011 had been considered and decided by the Aurangabad Bench of the Bombay High Court in Tax Appeal No. 78 of 2007, The Commissioner of Income Tax v. Smt. Vijaya V. Kavekar decided on 29.7.2011. The Division Bench, after considering earlier Instructions and various decisions of the Courts on Instructions, relying on the decision in Commissioner of Income Tax vs. Madhukar K. Inamdar (HUF) reported in : (2010) 229 CTR (Bom) 77, has held in paragraphs 9, 10, 11, 14 and 17 as under:
9. As stated earlier, the Income Tax Act was amended and Section 268A has been introduced on the Statute book with retrospective effect. Section 268A carves out an exception for filing of appeals and References under Section 260A of the Act. The legislature has prescribed that the CBDT is empowered to issue circulars and instructions from time to time, with regard to filing of appeals depending on the tax effect involved.
Thereafter, in 2008, CBDT Instruction No. 5 of 2008 dated 15th May, 2008 was issued. This Court in the case of "Commissioner of Income Tax V/s Madhukar K. Inamdar (HUF)" reported in : (2010) 229 CTR (Bom) 77, interpreted the aforesaid Circular. The Circular was issued in supersession of all earlier instructions issued by the Board. The monetary limit was increased and appeals were to be filed under Section 260A, thereafter, only in cases where the tax effect exceeded Rs. 4 Lacs. Paragraph 11 of that instruction stipulated that it was applicable to appeals filed on or after 15th May, 2008. It was further provided that in cases, where appeals were filed before 15th May, 2008, they would be governed by the instructions on this subject which were operative at the time when such appeals were filed. The instruction was issued under Section 268A(1) of the Act. The argument of the learned Counsel for the revenue in that case was, that the instruction issued on 15th May, 2008 did not preclude the department from continuing with the appeals and/or Petitions filed prior to 15th May, 2008, if they involved a substantial question of law of a recurring nature, notwithstanding the fact that the total cumulative tax effect involved in the appeals was less than Rs. 4 Lacs. It was submitted, such appeals which were filed prior to the issuance of Instruction and where substantial questions of law were raised, were required to be decided on merits. The Court, while considering the issue observed that paragraph 5 of the Circular made it clear that no appeals would be filed in the cases involving tax effect less than Rs. 4 Lacs notwithstanding the issue being of recurring nature. Relying on the judgment in CIT V/s Polycott Corporation, the Court observed as follows:
6 The aforesaid judicial verdict makes it clear that the circular dt. 15th May, 2008 in general and para (5) thereof in particular lay down that even if the same issue, in respect of same assessee, for other assessment years is involved, even then the Department should not file appeal, if the tax effect is less than Rs. 4 Lakhs. In other words, even if the question of law is of recurring nature even then, the revenue is not expected to file appeals in such cases, if the tax impact is less than the monetary limit fixed by the CBDT."
7. One fails to understand how the Revenue, on the face of the above clear instructions of the CBDT, can contend that the circular dt. 15th May, 2008 issued by the CBDT is applicable to the cases filed after 15th May, 2008 and in compliance thereof, they do not file appeals, if the tax effect is less than Rs. 4 Lakhs; but the said circular is not applicable to the cases filed prior to 15th May, 2008 i.e. to the old pending appeals, even if the tax effect is less than Rs. 4 Lakhs. In our view, there is no logic behind this belief entertained by the Revenue.
The Court has further held that the prevailing instructions fixing the monetary limit for the tax effect would hold good even for pending cases. Accordingly, the Court dismissed all the appeals having a tax effect of less than Rs. 4 Lacs.
10. The new CBDT instructions have been issued on 9th February, 2011, being Instruction no. 3 of 2011. The monetary limit has been raised again and clause 3 of the instructions provides that appeals shall not be filed in cases where the tax effect does not exceed the monetary limits prescribed, henceforth. The monetary limits prescribed for filing an appeal under Section 260A before the High Court has been raised to Rs. 10 Lacs. This instruction is identical to the CBDT Instruction no. 5 of 2008. Clause 10 of this circular indicates that monetary limits would not apply to writ matters and direct tax matters other than income tax. It further provides that where the tax effect is not quantifiable, the Department should take a decision to file appeals on merits of each case. Clause 11, again provides that the instruction would apply to appeals filed on or after....2011 and appeals filed before........ 2011 would be governed by the instructions on this subject, operative at the time when such appeals were filed.
11. In our opinion, when a similar clause has been interpreted by the Division Bench of this Court in CIT vs. Madhukar Inamdar (Supra), the same principles must apply in the present also, as we have found that the instructions of 15th May, 2008 is para -material with the instruction of 9th February, 2011.
14. Similarly, the Delhi High Court in the case of "Commissioner of Income Tax V/s Delhi Race Club Ltd.", decided on March 03, 2011, by relying on its earlier Judgment "Commissioner Income Tax Delhi -III V/s M/s. P.S. Jain and Co. decided on 2nd August, 2010 has held that the CBDT circular raising the monetary limit of the tax effect to Rs. 10 Lacs would be applicable to pending cases also.
17. It is true that this judgment in Chhajer's case (supra) was not brought to the notice of the Division Bench, while deciding either Madhukar's case (supra) or the case of Polycot Corporation (supra). However, the instruction of 2005 which was considered in Chhajer's case has also been interpreted in Polycot Corporation (supra). The consistent view of the Court has been that the CBDT instruction would apply to pending cases as well. The main objective of such instructions is to reduce the pending litigation where the tax effect is considerably small. Therefore, in our opinion, the tax appeals are required to be dismissed, as they are not maintainable in view of the provisions of Section 268A of the Income Tax, and the CBDT Instruction No. 3 of 2011.
7. The same view has been taken by the Karnataka High Court in ITA No. 3191 of 2005 in The Commissioner of Income -Tax vs. M/s. Ranka & Ranka decided on 2.11.2011, wherein the Division Bench has considered Instruction No. 3 and the National Litigation, Policy, had held as under:
(i) Instruction No. 3/11 is also applicable to the pending appeals.
(ii) As the tax effect in the instant case is less than Rs. 10 lakhs, the appeal stands dismissed on the ground of monetary limit, without expressing any opinion on the merits of the claim, making it clear that the Department is at liberty to proceed against the assessee in future, if there is any amount due from the assessee, on similar issue and if it is above the monetary limit prescribed.
(3.) WE find from the above case law of Hon'ble Gujarat High Court in the case of Sureshcahandra Durgaprasad Khatod (HUF), (supra) that in the similar situation and exactly identical instructions were applied to the appeals filed retrospectively. Hon'ble Gujarat High Court has discussed that almost all High Courts are of the unanimous view, considering the main objective of such instructions that to reduce the pending litigation, where the tax effect is considerable low or small, the appeal is not maintainable. The recent instruction revising the monetary limit to Rs. 4 lakh for filing appeal before ITAT on income tax matters, as issued vide Instruction No. 5/2014 F. No. 279/Misc.142/2007 -ITJ(Pt) dated 10th July, 2014 will apply to pending appeals also for the reason that the same is exactly identical to earlier instructions. The relevant circular issued by CBDT reads as under:
1. Reference is invited to Board's instruction No. 3/2011 dated 09/02/2011 wherein monetary limits and other conditions for filing departmental appeals (in income -tax matters) before Appellate Tribunal, High Courts and Supreme Court were specified.
2. In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on merits before Appellate Tribunal, High Courts and Supreme Court keeping in view the monetary limits and conditions specified below.
3. Henceforth appeals shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder: -
It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.
4. For this purpose, "tax effect" means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter referred to as "disputed issues"). However the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against.;