TMI Blog2012 (4) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... me, the issue cannot be treated to be one of academic interest - It is, however, clarified that the notional tax effect would have to be above the limits prescribed by the Board from time to time for presentation of such appeals. In all these cases since it is stated that the notional tax effect would be higher than the limits prescribed by the Board in different circulars, we are of the view that the Tribunal committed an error in dismissing the Revenue's appeals as being not maintainable - Appeal is allowed by way of remand to Tribunal - TAX APPEAL NO. 2363 OF 2010 - - - Dated:- 18-1-2012 - AKIL KURESHI AND ms. SONIA GOKANI, JJ. Mrs. Mauna M. Bhatt for the Appellant. Mrs. Swati Soparkar for the Respondent. ORAL ORDER Ms. Sonia Gokani, J. Assessee filed the return of income declaring its income as Nil for the Assessment Year 2004-05. Assessing Officer made certain additions and the total business income was assessed at Rs. 1,76,32,251/-. It allowed set off business loss and unabsorbed depreciation to the tune of Rs. 1,74,96,566/- and eventually the income of the assessee was determined at Rs. 1,34,685/-. 2. This was challenged before CIT (Appeals) dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iderable, whether the Revenue's appeal would be shut out as not maintainable simply because in any case the assessee's income is negative for a particular assessment year. As already noted in Tax Appeal No. 1601 of 2009, the Assessing Officer had disallowed the claim of interest of Rs. 27.70 lakhs whereas the CIT (Appeals) deleted such disallowance. In that view of the matter, the loss claimed by the assessee of Rs. 35.75 lakhs would vary by a sum of Rs. 27.70 lakhs in view of the difference of opinion between the Assessing Officer and the CIT (Appeals). 17. Addressing the first limb of question we may notice few statutory provisions contained in the Act. As already noted, Section 2(24) of the Act provides that income includes profits and gains. Section 70 of the Act pertains to the set off of losses from one source against income from other sources under the same head of income. Section 71 of the Act makes provisions for set off of loss from one head against income from another under certain circumstances. Section 71B of the Act provides for carry forward and set off of loss from house property. Section 72 similarly makes such provisions for set off and carry forward of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim or any such claim, which is apparent from the information in the return. Section 147 of the Act pertains to income escaping assessment. Sub-clause (iv) of clause (c) of Explanation 2 of Section 147 of the Act provides that for the purpose of the Section even excessive loss or depreciation allowance also shall be deemed to be a case where income chargeable to tax has escaped assessment. 21. From the above statutory provisions, it can be seen that even loss claimed by assessee for a particular year assumes considerable significance in varity of situations. The Act permits set off and carry forward of loss in given circumstances. It is for this reason that Section 80 of the Act provides that no loss which has not been determined in pursuance of a return filed in accordance with the provisions contained in sub-Section (3) of Section 139, shall be carried forward or set off under Sections 72(1) or 73(2) or 74(1) or (3) or under Section 74(3) of the Act. In cases, where the assessee desires to carry forward losses or seek set off in subsequent years' income, it is necessary that a return indicating loss has been filed and the same has been determined pursuant to return filed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand merely on the ground that further appeal is not maintainable, it would be the CIT's computation of loss, which will prevail for all times to come without further scrutiny, by the higher forum. In other words, the order of CIT (Appeals) would achieve finality despite contentious issues being involved and the Revenue's disagreement to the order of the CIT (Appeals). Eventually if the assessee declares positive income in future years, the claims of carry forward and set off of loss would be judged on the basis of the order passed by the CIT, which order would not have been scrutinized by the Tribunal only on the ground that the appeal was not maintainable. 25. Under the circumstance can it be stated that the Appeal of the Revenue is on of low tax effect. Our answer has to be in the negative. For an assessee to claim carry forward and set-off of losses, series of provisions have been made in the Act. It is necessary that loss claimed by an assessee is properly computed. Such declaration of negative income just as declaration of positive income should be allowed to go through the entire gamut of Appeals and Revisions. 26. This brings us to the question whether by virtue of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue open which might not have been carried in appeal only on account of the Board's circulars laying down monetary limits for filing such an appeal. We also find, as pointed out by the counsel for the assessee that sub-Section (4) of Section 268A requires even the Appellate Tribunal or the Court hearing such an appeal or reference to have regard to the instructions and directions issued by the Board under sub-Section (1) of Section 268A of the Act. It was in this background that the Division Bench of this Court in the case of Concord Pharmaceuticals ( supra ) discussed the issue at length and after referring to series of judgments cited, held and observed as under:- "28. We are of the view that simply because the appeal is filed by the department in contravention of the circular, the Tribunal is not bound to decide the appeal on the merits. Due weightage should invariably be given by the Tribunal to the circular issued by the Board. Even otherwise, the newly inserted provisions contained in section 268A(4) make it obligatory for the Tribunal to consider such circular. It is not open for the Department to contend that circulars are internal mattes of the Department and the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Tribunal (in Income-tax matters. Rs. 1,00,000/- ( ii ) Appeals U/s. 260 A/Reference U/s. 256(2) before the High Court. Rs. 2,00,000/- ( iii ) Appeal in the Supreme Court Rs. 5,00,000/- The new 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 Board's earlier Instruction referred to above." 29. The said circular dated 27.3.2000 superseded previous instructions of the Board dated 28.10.1992 and 4.11.1987 providing lower limits for filing appeals before the Tribunal. In particular, circular dated 4.11.1987 provided for monetary limits and other conditions for preferring appeals etc before the Tribunal and Courts. It also provided for instances where such appeals be filed irrespective of low tax effect. In particular, in para 3 of the circular provided that "while applying the monetary limits, the effect of carry forward, effect of consequential addition/deletions in othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 260A before High Court 4,00,000/- 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 mean quantum of penalty deleted or reduced in the order to be appealed against. 8. Adverse judgments 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, Notification, 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. 11. This instruction will apply to appeals filed on or after 15th of May 2008. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be presented in cases of loss only on and from 15.4.2008 and not before. In other words, the question is whether above quoted portion in the Board circular dated 15.4.2008 is clarificatory in nature or not? 35. Close perusal of the circulars issued prior to 15.5.2008 noted hereinabove, would reveal that such circulars provided for different conditions on which the Revenue could prefer appeals before the Tribunal and Courts which included the monetary limits specified from time to time. Nowhere do these circulars, specify that irrespective of the degree of divergence between the Assessing Officer and CIT merely because in either case the assessee is held to have suffered loss, appeal before the Tribunal would not be presented. Starting with circular dated 27.3.2000, we find that the said circular provided for limits for preferring appeals to the Tribunal, reference before the High Court and appeal before the Supreme Court as long as the tax effect exceeded Rs. 1,00,000/-, Rs. 2,00,000/- and Rs. 5,00,000/- respectively. Paragraph 3 of the said circular specified the categories where irrespective of the revenue effect, such appeals could be pursued. The term "tax effect" specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opposed to the directives issued by the Board in its different circulars prevailing from time to time, such an appeal cannot be categorized as not maintainable. 38. Circulars of the Board nowhere provide that in case of return of loss automatically per se irrespective of difference in the Assessing Officer's perception and that of the CIT (Appeals) of the computation of loss, further appeal would be shut out. 39. The contention that by virtue of subsequent clarifications contained in circulars dated 15.5.2008 and 9.2.2011 the position prevailing prior to such circulars gets amplified and that therefore in cases of loss returns the Board's instructions did not envisage further appeal also does not impress us. We may recall that in the circular dated 15.5.2008 it is provided that in the case of loss, notional tax effect should be taken into account. This clarification to our mind, contained in circular dated 15.5.2008 and absence of any such clarification in the previous circulars, is of no consequence. Such a clause can, at the best, be seen as clarificatory declaration by the Board to put the controversy beyond any shadow of doubt or debate. It cannot, however, be stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal and it was dismissed on November, 30, 2007, as not maintainable. These instructions cam much thereafter, and in view of the paragraph 11 thereof, has no applicability to the case. The Income-tax Appellate Tribunal and it was dismissed on November 30, 2007, as not maintainable. These instructions came much thereafter, and in view of paragraph 11 thereof, has no applicability to the case. The Income-tax Appellate Tribunal, therefore, rightly dismissed the appeal as non-maintainable. The present appeal preferred thus clearly is a misuse of the process of law and in spite of the aforesaid clear instructions of the Central Board of Direct Taxes itself, we fail to understand as to why this appeal is preferred when the appeal before the Income-tax Appellate Tribunal itself was not maintainable. In these circumstances, we dismiss the appeal with costs quantified at Rs. 10,000/- to be paid to the Delhi High Court Mediation and Conciliation Centre." 42. Here also various statutory provisions and judicial pronouncements cited before us were not cited before the High Court. The High Court, therefore, did not have the benefit of examining such judicial pronouncements. Even otherwise we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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