TMI Blog2005 (2) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a view to reducing the pendency of appeals in the Tribunal, the High Court and the Supreme Court and also to redress the difficulties of small assessees in meeting the cost of litigation, the Board has been issuing instructions to the field officers of the Income-tax Department prescribing the monetary limit for filing appeals before the various appellate forums including the Tribunal. In the year 1980, the Central Board of Direct Taxes issued Instruction No. 1328, wherein it was stated that in so far as the wealth-tax appeals are concerned, the appeals to the Tribunal should not be filed if the tax effect was less than Rs. 2,000. For appeals arising from income-tax, such monetary limit was fixed at Rs. 5,000. The main objective was to reduce the litigation and also the costs involved therein. On April 6, 1985, Instruction No. 1612 was issued wherein the monetary limit (tax effect) was fixed at Rs. 5,000 in respect of the appeals to be filed under other direct taxes and Rs. 10,000 for income-tax appeals. On July 3, 1984, the Central Board of Direct Taxes vide F. No. 319/25/84-WT issued a specific circular with regard to the appeals concerning the applicability of rule 1BB of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Government for reducing unnecessary litigation in comparatively small cases. It was, therefore, the duty of the field officers of the Income-tax Department to comply with these instructions, which were binding. Since the appeal in the case was filed against the instructions of the Board, the same was dismissed on this ground. Thereafter, the Income-tax Appellate Tribunal, Amritsar Bench by relying on the order of the Income-tax Appellate Tribunal, Chandigarh Bench in the case of ITO v. Dharmvir [2002] 253 ITR (AT) 1 and the judgment of the Bombay High Court in the case of CIT v. Camco Colour Co. [2002] 254 ITR 565 dismissed the appeal in the case of ITO v. Shri Ravinder Kumar in I. T. A. Nos. 404 and 405/Asr/1994 for the assessment years 1992-93 and 1993-94 and other cases vide consolidated order dated August 1, 2002. On identical facts and for the same reasons, the Income-tax Appellate Tribunal, Amritsar Bench also dismissed appeals in the case of ITO v. Bir Engg. Works, G.T. Road, Jalandhar, in I. T. A. No. 377, 378 and 379 Asr/2002 for the assessment years 1983-84 to 1985-86 and others vide consolidated order dated January 20, 2003. Thereafter, the Revenue filed miscella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of the hon'ble Supreme Court in the case of CIT v. Hero Cycles P. Ltd. [1997] 228 ITR 463. He submitted that intended purpose of instruction is materially different from that of the circular. While instructions are issued for the purpose of proper administration of the Act, these are guidelines for the Departmental officers and these do not have any statutory force. Thus, Instruction Nos. 1903 and 1979 prescribed only the monetary limit of tax effect for filing the appeals before the various appellate forums with a view to minimize pendency of litigation. But there are certain exceptions provided therein where an appeal can be filed even though the tax effect involved is less than the prescribed monetary limit. He submitted that in case the Departmental authority decides to file appeals on the ground that the case is covered by any of the exceptions, the authority is not duty-bound to specify such exceptions in the grounds of appeal because there is no requirement under the law to do so. He further argued that the instructions could not substitute any provisions of law. The power for filing an appeal is conferred on the income-tax authorities by the statute. He submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the hon ble High Court has held that once the jurisdictional High Court or the Supreme Court decides a particular issue, the the judgment of jurisdictional High Court/Supreme Court would relate back to the date when particular section was inserted in the Act. This, according to him, would be a mistake of law apparent from the record which could be rectified under section 154/254(2). Thus, referring to the judgment of the hon ble Punjab and Haryana High Court in the case of Rani Paliwal v. CIT [2004] 268 ITR 220, the learned Departmental Representative submitted that the hon'ble High Court has held that even if appeal filed by the Revenue is below a particular limit, the Tribunal is bound to decide the same on merits. He submitted that, in view of the judgment of the jurisdictional High Court, the miscellaneous applications filed by the Revenue in the aforesaid cases deserve to be allowed. He further submitted that, relying on the judgment of the hon ble Punjab and Haryana High Court in the case of Rani Paliwal v. CIT [2004] 268 ITR 220, the Income-tax Appellate Tribunal Amritsar Bench, has allowed the miscellaneous applications filed by the Revenue in several cases. He particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detail and has held that Instruction No. 1979 issued by the Board prescribing the monetary limit for filing the appeal before the Income-tax Appellate Tribunal was binding on the income-tax authorities and any appeal filed contrary to the instructions of the Board was liable to be dismissed. He submitted that the Revenue has not placed any evidence on record to show that this decision of the Income-tax Appellate Tribunal, Chandigarh Bench, was contested in appeal before the hon'ble High Court. He submitted that this decision of the Income-tax Appellate Tribunal, Chandigarh Bench, has been followed by various Benches of the Incometax Appellate Tribunal including the Income-tax Appellate Tribunal, Amritsar Bench, in several such cases. He particularly referred to the decision of Income-tax Appellate Tribunal, Amritsar Bench, in the case of ITO, Ward-3 v. Partap Builders, Bhatinda, in I. T. A. No. 33/Asr/2001. He submitted that in addition to the decision of the Income-tax Appellate Tribunal, Chandigarh Bench, in the case of ITO v. Dharmvir [2002] 253 ITR (AT) 1, the Income-tax Appellate Tribunal, Amritsar Bench, has also followed the judgment of the hon ble Bombay High Court in cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Hotz Hotels P. Ltd. v. CIT [2001] 248 ITR 647. Sh. Y. K. Sud, CA, appearing for the intervener also adopted the arguments of Sh. K.R. Jain. He submitted that the instructions issued by the Board are binding on all the Income-tax authorities. He also relied on the recent judgment of the hon'ble Punjab and Haryana High Court in the case of Jaswant Singh Bambha v. CBDT in C. W. P 19040 of 2003 [2005] 272 ITR 1 (P H) [FB] where the hon'ble High Court by referring to several judgments of the High Court has taken the view that the instructions issued by the Board are binding on the Income-tax authorities. He also placed a copy of the judgment on our file. He submitted that if instructions issued by the Board are not followed by the Income-tax authorities, this would open flood gates of arbitrariness as some authority might accept the claim of the assessee by relying on such instructions and the same authority or some other authority might decide such matters against the assessee by ignoring such instructions. He submitted that this approach would be contrary to the judgment of the hon'ble Supreme Court in the case of Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed monetary limit is required to be followed by the income-tax authorities. Shri Ashwani Kalia, CA, appearing for the intervener, also adopted the same arguments, which were argued by the earlier counsel and submitted that the instructions of the Board were binding on the Income-tax authorities. We have heard both the sides at length and given our careful consideration to the submissions made by the parties and referred to the various judgments relied upon by both the parties. We feel that this Bench is required to address to the following questions : (i) Whether, instructions issued by the Board are binding on the Income-tax authorities or not ? (ii) Whether the observations made by the hon'ble Punjab and Haryana High Court in the case of Rani Paliwal v. CIT [2004] 268 ITR 220 form part of ratio decidendi and are, therefore, binding on all the authorities working in its jurisdiction or these are only in the nature of passing remarks which are not binding ? (iii) Whether the mistakes pointed out by the Revenue in the miscellaneous applications could be rectified by the Tribunal under section 254(2) of the Income-tax Act or not? Before proceeding to decide these ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : (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. From a plain reading of section reproduced above, it is clear that subsection (1) of section 119 refers to orders, instructions and directions to the income-tax authorities by the Board. The section itself provides that all such authorities and all other persons employed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax authorities in a particular case. Admittedly, instructions issued by the Central Board of Direct Taxes prescribing monetary limit for filing the appeals before the Tribunal, High Court or the Supreme Court are not in nature which could interfere with the discretion of the Commissioner of Income-tax (Appeals) or interfere with the power and jurisdiction of the income-tax authorities to complete the assessment order to dispose of a particular matter in a particular case in a particular manner. Therefore, these instructions are binding on the income-tax authorities. In this regard, we would now like to refer to the various judgments of the hon'ble Supreme Court and the High Courts on the issue of binding nature of instructions issued by the Central Board of Direct Taxes. This issue came to be considered by the hon ble Supreme Court in the case of Navnit Lal C. Javeri v. K. K. Sen, AAC of I. T. [1965] 56 ITR 198, where it was held that the circulars issued by the Central Board of Revenue, would be binding on all officers and persons employed in the execution of the Income-tax Act. This issue was also considered by the hon'ble apex court in the case of UCO Bank v. CIT [1999] 237 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Indian Oil Corporation Ltd. [2004] 267 ITR 272. The hon'ble Supreme Court referred to their several earlier judgments in the case of Collector of Central Excise v. Dhiren Chemical Industries [2002] 10 SCC 64 and Simplex Castings Limited v. Commr. of Customs [2003] 5 SCC 528. After referring to the above referred judgments, the hon'ble Supreme Court observed on page 277 that the principles laid down by the above-referred decisions are as under : (1) Although a circular is not binding on a court or an assessee, it is not open to the Revenue to raise a contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (3) A show-cause notice and demand contrary to existing circulars of the Board are ab initio bad. (4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars. As we have noted the provisions of section 151A are in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in a case where the tax effect was less than Rs. 30,000 and the same was against the Board s circulars dated July 12, 1984 and July 14, 1987 prescribing the said monetary limit of tax effect of Rs. 30,000. The hon'ble Bombay High Court dismissed the reference on the ground that the tax effect being less than the prescribed monetary limit, the appeal could not be filed contrary to the directions of the Central Board of Direct Taxes. (2) CIT v. Camco Colour Co. [2002] 254 ITR 565 (Bom). In this case also the Revenue had filed an appeal contrary to the Board s Instruction No. 1979, dated March 27, 2000 where the tax effect was below the prescribed monetary limit. The hon'ble Bombay High Court dismissed the appeal on the ground that the same was contrary to the Board s instructions which were binding on the income-tax authorities. (3) CWT v. S. Annamalai [2002] 258 ITR 675 (Mad). In this case also, the appeal filed by the Department under section 27A of the Wealth-tax Act, 1957, was dismissed on the ground that tax effect was below the prescribed monetary limit fixed by the Central Board of Direct Taxes and the case was not covered under any of the exceptions mentioned therei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Appellate Tribunal, Chandigarh Bench, in the case of ITO v. Dharamvir [2002] 253 ITR (AT) 1 ; (2) The decision of the Income-tax Appellate Tribunal, Lucknow Bench, in the case of Joint CIT Range III v. Sh. Dev Raj Aggarwal, Kanpur, I. T. A Nos. 812, 813 and 814/Luck/2002 ; (3) The decision of the Income-tax Appellate Tribunal, Amritsar Bench, in the case of ITO v. Partap Builders in I. T. A. No. 33/Asr/2001 for the assessment year 1997-98 and others ; and (4) The decision of the Income-tax Appellate Tribunal, Hyderabad Bench, in the case of Deputy CWT, Circle (9)(i), Hyderabad v. Nb. Syed Jaffar Ali Khan, Hyderabad W. T. A. Nos. 75 and 76/2002 for the assessment years 1993-94 and 94-95. Thus, from the above, it is clear that the instructions issued by the Board including those prescribing the monetary limit of tax effect for filing the appeals before the Tribunal, High Courts and the Supreme Court are binding on the income-tax authorities. This view also finds the support from the commentary of Law and Practice by Kanga, Palkhivala and Vyas where the authors have expressed the view that the instructions of the Board prescribing the monetary limit for filing the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the fact whether such observations are in the nature of ratio decidendi or mere passing remarks. We have carefully and respectfully gone through the judgment of the hon'ble Punjab and Haryana High Court in the aforesaid cases. In order to appreciate the judgment of the hon'ble High Court, it would be appropriate to reproduce hereunder the findings recorded by the High Court (page 221) : Having heard learned counsel for the appellant, we are of the view that none of the questions raised is a question of law much less a substantial question of law, and, therefore, the appeal deserves to be dismissed. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urts including the Tribunal. However, the courts including the Tribunal can certainly refer to these instructions and decide the matters in favour of the parties, if these instructions favour them. This has been done in a number of cases where the hon'ble Supreme Court, High Courts and the various Benches of the Tribunal have decided the matters in favour of the assessee by relying on such instructions of the Board. However, the observations made by the hon'ble High Court that once the appeal is filed before the Tribunal, the Tribunal is bound to decide the same on merits appear to be passing remarks and is not part of the ratio decidendi because in our view, the appeal has been dismissed by the High Court for the reasons that the questions raised in the case did not involve any question of law much less of substantial law and also that no plea was taken before the Tribunal. Their Lordships did not allow the assessee to raise this plea for the first time before the High Court. The observations of the court become part of ratio decidendi, if the parties have been heard and their arguments have been considered. We have referred to the book on Jurisprudence by Salmond at page 148 (12t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgment in Varadaraja Pillai s case [1972] 85 Mad LW 760 nor the reasons recorded therein were gone into by the Supreme Court. The Full Bench of the Madras High Court was fully entitled to go into the merits and decide all controversies and was not to feel inhibited by the fact that the appeals against the decision in Varadaraja Pillai s case [1972] 85 Mad LW 760 were dismissed by the Supreme Court. The hon'ble Supreme Court further observed that a summary dismissal by the Supreme Court, without laying down any law, is not a declaration of law envisaged by article 141. When the reasons are given, the decision of the Supreme Court would be binding on all courts within the territory of India : when no reasons are given, dismissal simpliciter is not a declaration of law by the Supreme Court. It would be appropriate to reproduce hereunder the findings of the hon'ble Supreme Court as recorded on page 659 : Article 141 of the Constitution of India speaks of declaration of law by the Supreme Court : for a declaration of law there should be a speech, i.e., a speaking order. A decision, which is not express and is not founded on reasons nor on consideration of the issues, cannot be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of T. S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50, the hon'ble Supreme Court considered the issue as to what constitutes a mistake apparent from the record. The hon'ble Supreme Court observed that a mistake apparent on the record must be obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. The ratio of this judgment would equally apply to the powers of the Tribunal under section 254(2) of the Act. Their Lordships of the Delhi High Court also considered this issue in the case of Hotz Hotels (P) Ltd. v. CIT [2001] 248 ITR 647 and the hon'ble High Court has held that the computation of relief under section 80M involving question of interpretation of section 71(2) is a debatable question, and, therefore, it was not a mistake apparent from the record which could be rectified under section 154 of the Income-tax Act. The issue regarding the scope of powers of the Tribunal under section 254(2) was also considered by the hon'ble Punjab and Haryana High Court in the case of Popular En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructions issued by the Board from time to time are binding on the income-tax authorities is supported by several judgments of the hon'ble Supreme Court and the High Courts. Thus, the view taken by the Income-tax Appellate Tribunal, Amritsar Bench, was a possible view which could not be substituted by way of miscellaneous petitions. Besides, the issue whether the instructions of the Board are binding or not and whether the appeals could be dismissed by relying on the Board's Instruction No. 1979 dated March 27, 2000 due to smallness of tax effect or not and also whether the judgment of the hon'ble jurisdictional Punjab and Haryana High Court in the case of Rani Paliwal v. CIT [2004] 268 ITR 220 was only an observation in the nature of passing remarks or was binding in nature are highly debatable, contentious and which could be established only through long drawn process of reasoning, arguments and debate. Therefore, the issue would fall outside the purview of the powers of the Tribunal vested under section 254(2) of the Income-tax Act, 1961. Exercise of powers by the Tribunal under section 254(2) in allowing such applications would amount to review of the orders which is not perm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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