TMI Blog2011 (11) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... his context, the circular would be discriminatory, if it is held to be prospective only. It could be saved from such vice of discrimination by holding it as retrospective. It is held that Instruction No. 3/11 is also applicable to the pending appeals. Appeal dismissed as the tax effect in the instant case is less than Rs. 10 lakhs without expressing any opinion on the merits of the claim. - IT Appeal NO. 3191 of 2005 - - - Dated:- 2-11-2011 - N. Kumar and Ravi Malimath, JJ. JUDGMENT This appeal is preferred by the revenue challenging the order passed by the Tribunal deleting the disallowance made under Section 40A(3) of the Income Tax Act, 1961 and accordingly allowing the appeal of the assessee. 2. The total tax effect which is the subject-matter of this appeal is Rs. 4,87,730/-. At the time of hearing, the learned Counsel for the assessee raised a preliminary objection stating that in view of instruction No.3/201 issued on 09.02.2011 the revenue is precluded from filing the appeals where the tax effect does not exceed Rs. 10 lakhs before the High Court. Therefore, it was contended that as the subject-matter of the appeal i.e., the tax effect is Rs. 4,87,730/- whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atters before the Appellate Tribunal, Rs. 50,000/- for filing reference, to the High Court and Rs. 1,50,000/- for filing appeals, to the Supreme Court. Subsequently, the said circular was superseded by the Board's instruction No. 1903 dated 28.10.1992. Subsequently, in supersession of the above instruction, instruction No. 1979, dated 27.03.2000 came to be issued revising the monetary limits prescribing Rs. 1 lakh as the limit before the Appellate Tribunal, Rs. 2 lakhs before the High Court and Rs. 5 lakhs before the Supreme Court. The said circular was issued on 27.03.2000. On 27.05.2004 one more circular was issued clarifying certain aspects of circular No. 1979. Thereafter in partial modification of the above instructions, instruction No.2/2005 was issued on 24.10.2005 revising the monetary limit for prescribing appeals before the Tribunal to Rs. 2 lakhs, to the High Court under Section 260A of the Act to Rs. 4 lakhs and in respect of appeals before the Supreme Court at Rs. 10 lakhs 7. In supersession of the above instructions, the instruction No.5/2008 was issued providing that appeals will henceforth be filed only in cases where the tax effect exceeds monetary limits given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of monetary limit and the very same question arising in future in order to avoid the plea of resjudicata, clause (6) came to be introduced which reads as under: "In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Commissioner of Income-tax shall specifically record that "even though" the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this instruction". Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits." 10. Similarly for the plea of acquiescence or estoppel sought to be set out by the assessee when either the revenue did not file appeal or withdrew the appeal, the interest of the revenue wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious paras in the two circulars are similar to what has been stated above. Now the question for consideration is whether the Instruction No.3/2011 is applicable to pending proceedings or is it only prospective, as expressly stated in clause (11) thereof. 15. The learned Counsel for the revenue brought to our notice the judgments of several High Courts which have taken the view that the circulars issued from time to time by the department prescribing the monetary limit for preferring appeal is only prospective and is not applicable to the pending proceedings. In other words, the circular which is invoked on the date of filing of the appeal is to be taken into consideration which necessarily do not apply to cases which are filed prior to the issue of that instruction. However, the learned counsel for the assessees brought to our notice the judgments of the various High Courts which have taken the contrary view, i.e., it applied to pending appeals also. The judgments relied on by the revenue are as under : - The Madras High Court in the .case of CIT v. Kodananad Tea Estates Co. [2005] 275 ITR Pg 244 (Mad). The Kerala High Court in the ease of CWT v. John L. Chackola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of CIT v. Pithwa Engg. Works reported in [2005] 276 ITR 519 has opined thus: 5. One fails to understand how the Revenue can contend that so far as new cases are concerned, the circular issued by the Board is binding on them and in compliance with the said instructions, they do not file/references if the tax effect is less than Rs. 2 lakhs. But the same approach is not adopted with respect to the old referred cases even if the tax effect is less than Rs. 2 lakhs. In our view there is no logic behind this approach 6. 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 Department have increased; consequently, the burden on the Department has also increased to a tremendous extent. The corridors of the superior courts are choked 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 27th March, 2000, is very mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect Taxes. 9. It would be in the public interest if the Revenue concentrates on the cases wherein tax effect is substantially high rather than running after the assessees wherein the tax impact is less than Rs. 4 lakhs considering the cost of litigation and other administrative cost which may be much more than the tax recovery. 10. At this juncture, it will be relevant to note that the Central Board of Direct Taxes has also issued a Circular on June 5, 2007, directing the Department to examine all appeals pending before this Court on case to case basis with further direction to withdraw cases wherein the criteria of monetary limits as per the prevailing instruction is not satisfied, unless the question of law involved or raised in appeal or referred to the High Court for opinion is of a recurring nature required to be settled by the higher Court. 11. The aforesaid Circular makes it clear that on the date of issuance of Circular, prevailing instructions fixing monetary limit will hold good even for pending cases. Adopting the same approach, we are of the considered view that the Central Board of Direct Taxes Circular dated May 15, 2008, would be very much applicable to the pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 subsections (2), (3) and (4) shall apply accordingly. 19. In the case of CIT v. Oscar Laboraties P. Ltd (STR VOL 324 Pg. 115 at 144) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the issue consideration. It is also proposed to provide that 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. This amendment will take effect retrospectively from 1st April, 1999." 20. Interpreting this provision, the Division Bench of the Punjab and Haryana High Court in the above case of CIT v. Oscar Laboratories (P.) Ltd. [2010] 324 ITR 115 held as under: "Under Section 268A(1) of the Income-tax Act 1961, the Central Board of Direct Taxes has been authorised to issue orders, instructions or directions to the income tax authorities, laying down monetary limits for purposes of filing appeals. As a consequence of the insertion of section 268A in the Act orders, instructions or direction 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 require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: "Introduction Whereas at the National Consultation for Strengthening the Judiciary toward Reducing Pendency and Delays held on the 24th and 25th October, 2009 the Union Minister for Law and Justice, presented resolutions which were adopted by the entire Conference unanimously. And wherein the said Resolution acknowledged the initiative undertaken by the Government of India to frame the National Litigation Policy with a view to ensure conduct of responsible litigation by the Central Government and urges every State Government to evolve similar policies. The National Litigation Policy is as follows: The Vision/Mission 1. The National Litigation Policy is based on the recognition that Government and its various agencies are the predominant litigants in courts and Tribunals in the country. Its aim is to transform Government into an Efficient and Responsible litigant. This policy is also based on the recognition that it is the responsibility of the Government to protect the rights of citizens, to respect fundamental rights and those in-charge of the conduct of Government litigation should never forget this basic principle. "Efficient Litigant" Means - Focusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing industry practice: ( d ) merely because of change of opinion on the part of jurisdictional officers. Review of Pending Cases (A) All pending .cases involving Government will be reviewed. This Due Diligence process shall involve drawing upon statistics of all pending matters which shall be provided for by all Government departments (including PSUs). The Office of the Attorney General and the Solicitor General shall also be responsible for reviewing all pending cases and filtering frivolous and vexatious matters from the meritorious ones. (B) Cases will be grouped and categorized. The practice of grouping should be introduced whereby cases should be assigned a particular number of identity according to the subject and statute involved. In fact, further sub-grouping will be also be attempted. To facilitate this process, standard forms must be devised which lawyers have to fill up at the time of filing of cases. Panels will be set up to implement categorization, review such cases to identify cases which can be withdrawn. These include cases which are covered by decisions of courts and cases which are found without merit withdrawn. This must be done in a time bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it should be withdrawn. Similarly, cases which are covered by the decision of the Courts also have to be withdrawn. For that purpose, a Nodal Officer has to be appointed and all pending cases have to be reviewed and frivolous and vexatious matters have to be filtered from the meritorious cases and the same are withdrawn. In other words, the National Litigation Policy dealt with pending cases and wanted the pending cases to be reduced by way of withdrawal, so that valuable time of the Courts would be spent in resolving other pending cases so as to achieve the goal in the National Legal Mission to reduce average pendency from time from 15 years to 3 years. 24. The National Litigation Policy expressly stated that the Government must cease to be a compulsive litigant. The philosophy, that the matters should be left to the Courts for ultimate decision is to be discarded and the easy approach that 'let the Court decide', must be eschewed and condemned. The Revenue has not applied its mind in this direction. No attempt is made to reduce the pendency of the litigation by filtering frivolous and vexatious matters from meritorious ones and said cases are withdrawn. The only measure taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be revised to reclassify the Single Panel Circuit Breakers under Heading No. 85.37 of the tariff, such re-classification can take effect only prospectively from the date of communication of the show cause notice proposing re-classification. 26. Following this judgment, the Apex Court in the case of Suchitra Components Ltd. v. Commissioner of Central Excise, Guntur reported in 2007 (208) ELT 321 SC, held as under: "The point raised by the learned Counsel for the appellant is covered by the recent judgment of this Court in Civil Appeal No.4488 of 2005, Commissioner of Central Excise. Bangalore v. M/s. Mysore Electricals Industries Ltd. , reported in 2006 (204) E.L.T. 517 (S.C.). In the said judgment, this Court held that a beneficial circular has to be applied retrospectively while oppressive circular has to be applied prospectively. Thus, when the circular is against, the assessee, they have right to claim enforcement of the same prospectively" 27. In the instant case, the instruction No. 3/11 is more beneficial than Instruction No. 2/05. If instruction No.3/11 is also made applicable to the pending appeals before this Court, it would grant relief to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng appeals, where constitutional validity of the provisions of the Act or Rule are under challenge, or where Board's order, notification, instruction or circular has been held to be illegal or ultra vires or whether Revenue Audit Objection in the case has been accepted by the Department, notwithstanding the fact that the tax effect is less then the monetary limit fixed under the aforesaid circular, still it is open to the Department to request the Court to permit them to prosecute such appeals. Thus, the Department has to apply its mind in all the pending appeals and point out to the Court, which are those appeals in which they intend to prosecute. Therefore sufficient safeguards have been made to protect the interest of the public revenue. By this approach we would be saving the time of the Court, the time of the Department and public time in general and giving effect to the National Litigation Policy, 2011, so that it can be used for better and productive purpose. 30. It is our experience that in most of the cases, the levy of tax is made by placing such interpretation on the provision of the Act, so as to defeat the very object of those provisions. The Parliament with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which the assessee is entitled to should not be dependant on the date of the decision, over which neither the assessee nor revenue has no control. In this context, the circular would be discriminatory, if it is held to be prospective only. It could be saved from such vice of discrimination by holding it as retrospective. 32. Though the circular/instruction 3/11 is issued by the Department in pursuance of the power conferred under the statutory provisions while issuing such circular/instruction, the Department has not kept in mind the object with which such circulars/instructions are issued from time to time The object sought to be achieved by such circulars/instructions and also the law declared by the Apex Court, the National Litigation Policy, 2011 as well as the various schemes introduced by the Department granting relief to persons who have not even filed returns and paid taxes, are kept in mind, to bring the circular/instruction in harmony with the National Litigation Policy, it would be appropriate to hold that the benefit of such circular/instruction also applies to the pending cases in appeal in various Courts and Tribunals on the date of the circular/instruction. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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