2009 (4) TMI 818 - HC - Income Tax

Rectification application rejected - Held that - The tax effect in these cases is less than Rs. 2 lakhs the limit prescribed under the above said Circular dated March 27 2000. The appeals are filed on May 19 2005. Hence the circular is binding on the Revenue. The appeals are dismissed.

Summary

Issues involved:
Appeal against order of Income-tax Appellate Tribunal regarding tax effect limit for filing appeals.

Analysis:
The case involves appeals by the Revenue against the order of the Income-tax Appellate Tribunal for the assessment years 1994-95 and 1995-96. The Tribunal dismissed the Departmental appeal due to the tax effect being less than Rs. 1 lakh, citing previous decisions. The Revenue contended that the decisions relied upon were rendered in a different context and filed a miscellaneous petition, which was rejected. The substantial questions of law admitted for consideration included the rejection of the Revenue's application for rectification based on monetary limits at the time of filing the appeal. The Tribunal's decision was challenged on the grounds of the applicable instructions and the need for rectification based on the circular issued by the Central Board of Direct Taxes.

A Division Bench precedent highlighted the Central Board of Direct Taxes' circular refixing monetary limits for appeals to reduce litigation. Exceptions were outlined, including cases where revenue audit objections were accepted, adverse orders on Board's instructions, prosecution proceedings against the assessee, and constitutional validity challenges. The Revenue failed to establish that the appeal issue fell within these exceptions. The court referred to a similar case where it was held that the circular's exceptions did not apply, emphasizing the importance of statutory provisions and the binding nature of circulars issued under the Income-tax Act.

Citing various judicial opinions, the court reiterated that if the tax effect is below the prescribed limit in the circular, the Revenue is not required to pursue the issue on appeal. The uniform judicial opinion supported the binding nature of the circular on the Revenue. The Gujarat High Court and the apex court's decisions further emphasized the binding nature of circulars issued by the Central Board of Direct Taxes on the Revenue. As the tax effect in the present cases was below the prescribed limit, the circular dated March 27, 2000, was deemed binding on the Revenue. Consequently, the appeals were dismissed, and no costs were awarded.