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2015 (5) TMI 320 - ALLAHABAD HIGH COURT

2015 (5) TMI 320 - ALLAHABAD HIGH COURT - [2015] 374 ITR 68 (All) - Maintainability of appeal - National Litigation Policy introduced by the Central Government - whether under the Instructions No.3 of 2011, the monetary limit for filing an appeal by the Department was ₹ 10 lacs, whereas the tax effect in the instant appeal is less than ₹ 10 lacs and, therefore, the appeal should be dismissed as not maintainable? - Held that:- Considering the object and intention and the surrounding c .....

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pretation cannot be applied in the instant case. Since the instructions is a beneficial piece of legislation, the pendulum is tilted more in favour of the assessee and impels the Court to interpret the provisions harmoniously by adopting the purposive method of construction. We must not shut our eyes to the object for which the instructions were issued and if the instructions had been made applicable to pending cases as laid down by the National Litigation Policy, the object of the policy would .....

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reading para 11 harmoniously with sub-clause (4) of Section 268 one can remove the mischief or the defect in Instruction No.3 of 2011. By our orders, we had directed the CBDT and the income tax department to take a concious decision and review pending cases, which they failed to do so. On the other hand, the department insisted in hearing the appeal on merits. We find that the exception carved out under of the instructions are not existing and that the appeal was only filed because the tax effec .....

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of the opinion that the Instruction No.3 of 2011 would also apply to pending appeals in various Courts or Tribunals unless it is pointed out by the department that the appeal would have a cascading effect in other assessment years of the assessee or that it is within the exception provided in the instructions that was issued at the time when the appeal was presented.

In view of the aforesaid, the appeal is dismissed on the ground of monetary limit without expressing any opinion on the .....

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December, 2004 on the basis of Instruction No.1979 dated 27th March, 2000. When the appeal was taken up for hearing, a preliminary objection was raised by the learned counsel for the respondent-assessee on the issue of maintainability of the instant appeal. Reliance was placed on Section 268A of the Income Tax Act (hereinafter referred to as the Act) as well as the Instructions No.3 of 2011 dated 9th February, 2011 by the Central Board of Direct Taxes (hereinafter referred to as the CBDT) laying .....

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invited other counsels to address the Court on this issue. In this manner, we have heard Sri Bharat Ji Agarwal, the learned Senior Counsel alongwith Sri Shambhu Chopra and Sri Govind Krishna, the learned counsels for the Department and Sri R.P. Agarwal, Sri Piyush Agarwal, Sri Ashish Bansal and Sri Suyash Agarwal, the learned counsels for the assessee. The learned Senior Counsel for the Income Tax Department (hereinafter referred to as the Department) vehemently repudiated the preliminary objec .....

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ed Senior Counsel urged that the right to file an appeal is a substantive right under Section 260A of the Act which cannot be taken away by Section 268A or by the instructions issued by CBDT under Section 119 of the Act. It was contended that the instructions are at best guidelines and are not mandatory upon the department. In support of his submission, reliance was placed on the following decisions, namely, Messrs. Hoosein Kasam Dada (India) Ltd. Vs. The State of Madhya Pradesh and others, AIR .....

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, the literal rule of interpretation would apply and it is not for the Court to interpret the same in a different way. On the other hand, the counsels in support of the assessee, in addition to the submission on monetary limit, contended that the instructions has been issued pursuant to the National Litigation Policy, which also provided for review of pending cases so as to reduce the government litigation in Courts so that valuable court time was spent in resolving other serious issues. The und .....

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various decisions which would be referred hereinafter. In the light of the submissions made by the learned counsels, reference in the first instance must be made to the National Litigation Policy. In 2009, the Central Government formulated a National Litigation Policy to reduce the cases pending in various Courts of India in an attempt to reduce the average pendency time from 15 years to 3 years. The National Litigation Policy reads as under:- "National Litigation Policy In this background .....

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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 the Gove .....

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he core issues involved in the litigation and addressing them squarely. Managing and conducting litigation in a cohesive, co-ordinated and time-bound manner. Ensuring that good cases are won and bad cases are not needlessly persevered with. A litigant who is represented by competent and sensitive legal persons: competent in their skills and sensitive to the facts that the Government is not, an ordinary litigant and that a litigation does not have to be won at any cost. "Responsible litigant .....

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ase to be a compulsive litigant. The philosophy that matters should be left to the courts for ultimate decision has to be discarded. The easy approach, "Let the court decide" must be eschewed and condemned - 3. The purpose underlying this policy is also to reduce Government litigation in courts so that valuable court time would be spent in resolving other pending cases so as to achieve the goal in the National Legal Mission to reduce the average pendency time from 15 years to 3 years. .....

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. In respect of filing of appeals in revenue matter it is stated as under: "(G) Appeals in revenue matters will not be filed: (a) if the stakes are not high and are less than that amount to be fixed by the Revenue authorities: (b) if the matter is covered by a series of judgments of the Tribunal or of the High Court which have held the field and which have not been challenged in the Supreme Court: (c) where the assessee has acted in accordance with long standing industry practice: (d) merel .....

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atious 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 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 will be set up to implement categorization, review such cases to ident .....

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te Government to evolve similar policies. The policy defined the efficient litigant to mean that the litigation should not be resorted to for the sake of litigating and that the government ceases to a compulsive litigant. The underlying purpose of the policy was to reduce the government litigation in Courts so that valuable court time was spent in resolving other pending issues to enable the average pendency of a case in a court reduced from 15 years to 3 years. The policy, therefore, provided t .....

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es would be done in a time bound fashion. In this background, Instructions No.3 of 2011 was issued by the Central Board of Direct Taxes (CBDT) dated 9th February, 2011 reported in 332 ITR (Statutes) 1. For facility, the said Instructions No.3 of 2011 is extracted hereunder:- C.B.D.T. Instructions "Instruction No.3 of 2011 dated 9th February 2011 To All Chief Commissioners of Income-tax and All Directors General of Income-tax. Subject: Revision of monetary limits for filing of appeals by the .....

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iled on the merits before the 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 monetary limits given hereunder:- Sl. No. Appeals in income-tax matters Monetary limit (in Rs.) 1 Appeal before Appellate Tribunal 3,00,000 2 Appeal under section 260A before High Court 10,00,000 3 Appeal before Supreme Court 25,00,000 It is clarified that an appea .....

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uted 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 agai .....

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hich the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeal shall be filed in respect of all assessment years even if the 'tax effect' is less than the prescribed monetary lim .....

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ough 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 an .....

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, by not filing an appeal on the same disputed issues. The Departmental representatives/counsels must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the specified monetary limit and therefore, no inference should be drawn that the decision rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that su .....

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stitutional validity of the provisions of an Act or Rules are under challenge, or (b) Where Board's order, notification, instruction or circular has been held to be illegal or ultra vires, or (c) Where the Revenue audit objection in the case has been accepted by the Department. 9. The proposal for filing special leave petition under Article 136 of the Constitution before the Supreme Court should, in all cases, be sent to the Directorate of Income-tax (Legal and Research) New Delhi and the de .....

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or institutions under Section 12A of the Income-tax Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on the merits of a particular case. 11. This instruction will apply to appeals filed on or after February 9, 2011. However, the cases where appeals have been filed before February 9, 2011, will be governed by the instructions on this subject, operative at the time when such appeal was filed. 12 This issues under secti .....

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.2 of 2005 dated 24th October, 2005 the limit was enhanced to ₹ 4 lacs. Similar instructions were again issued by Instruction No.5 of 2008 dated 15th May, 2008. By Instruction No.3 of 2011, the limit was enhanced to ₹ 10 lacs and reiterated by Instruction No.5 of 2014 dated 10th July, 2014 wherein the limit for filing an appeal before the High Court remained the same. Para 3 of Instruction No.3 of 2011 indicates that the appeal would only be filed where the tax effect exceeds the mon .....

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is extracted hereunder: "Board's Instruction No.1979- "F.No.279/126/98-IT3 dated the 27th March, 2000 Subject: Revising monetary limits for filing Departmental appeals/ references before Income-tax Appellate Tribunal, High Courts and Supreme Court - Measures for reducing litigation- Regarding. Reference is invited to the Board's Instruction No.1903, dated 28th October, 1992, and Instruction No.1777, dated 4th November, 1987, wherein monetary limits of ₹ 25,000 for Departm .....

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nder Section 260A/reference under Section 256(2) before the High Court 2,00,000 (iii) Appeal in the Supreme Court 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 taken into consideration the cumulative revenue effect as envisaged in the Board's earlier instruction referred to above. 3. Adverse judgments rel .....

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are filed before the Supreme Court Court only in consultation with the Ministry of Law. Therefore, where the Chief Commissioner decides to contest an adverse judgment by filing special leave petition before the Supreme Court, they should send the proposal to the Board for further processing. 5. These instructions will apply to litigation under other direct taxes also, e.g., wealth-tax, gift-tax, estate duty, etc. 6. These monetary limits will apply to writ matters. 7. This instruction will come .....

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hereunder:- "Filing of appeal or application for reference by income-tax authority. 268A. (1) The Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing of appeal or application for reference by any income-tax authority under the provisions of this Chapter. (2) Where, in pursuance of the orders, instructions or directions issued under sub-section (1), an inco .....

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he 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 .....

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l instructions issued under sub-section (1) of the Act by CBDT and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case. Sub-clause (5) indicates that instructions issued by CBDT shall be deemed to have been issued under Section 268 of the Act. The object of introduction of Section 268A of the Act was to regulate the filing of the appeals by the government. The said object is extracted hereunder:- "The proposed section seeks to .....

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tion for reference on any issue in the case of an assessee for any assessment year, it shall not preclude such authority from filing an appeal or application for reference on the same issue in the case of- (a) the same assessee for any other assessment year, or (b) any other assessee for the same or any other assessment year. It is also proposed to provide that notwithstanding that no appeal or application for reference has been filed by an income- tax authority pursuant to the orders, instructi .....

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from time to time either before or after the insertion of this section and the circumstances in which such appeal or application for reference was filed or was not filed in any case; and accordingly the Tribunal or Court shall decide the appeal or the reference on the merits of the issue under consideration. It is also proposed to provide that every order or instruction or direction which has been issued by the Board fixing monetary limits for filing an appeal or application for reference shall .....

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nal Tax Tribunal, if the High Court is satisfied that the case involves a substantial question of law. (2) The Chief Commissioner or the Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be- (a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Chief Commissioner or Commissioner; (b) ****** (c) in the form .....

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nly on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question : Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated an .....

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g to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section." Numerous rules of interpretation have been formulated by courts. If a statutory provision is open to more than one interpretation, the Court has to choose that interpretation which represents the true intention of the legislature. The duty of the Court is to expound and not to legislate. However, at times, there is a marginal area in which the Court could mould or creatively interpret l .....

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arvard Review at 372, Judge Frank held:- "The necessary generality in the wordings of many statutes, and ineptness of drafting in others frequently compels the Courts, as best as they can, to fill in the gaps, an activity which no matter how one may label it, is in part legislative. Thus the Courts in their way, as administrators in their way perform the task of supplementing statutes. In the case of Courts, we call it 'interpretation' or 'filling in the gaps', in the case o .....

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real legislative intent, otherwise a bare mechanical interpretation of the words and application of the legislative intent devoid of concept of purpose and object will render the legislature inane. In the instant case, the question is not what the words in the relevant provision mean but what the national litigation policy meant requiring the Courts to interfere and fill in the gaps which was excluded by the legislature. In our view, it is permissible for the Courts to look into the legislative .....

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alled "the cardinal principle of construction". The difference between purposive and literal constructions is in truth one of degree only as held in Oliver Ashworth (Holdings) Ltd. Vs. Bellard (Kent) Ltd., (1999) 2 All ER 791at 805 and reiterated in Tanna & Modi Vs. Commissioner of Income Act, Mumbai, (2007) 7 SCC 434. The real distinction lies in the balance to be struck in the particular case between literal meaning of the words on the one hand and the context and purpose of the .....

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ction" or "mischief rule" was explained by the Supreme Court in Bengal Immunity Co. Vs. State of Bihar, AIR 1955 SC 661 holding: "(22) It is a sound rule of construction of a statute firmly established in England as far back as 1584 when - 'Heydon's case, (1584) 3 Co. Rep 7a (V) was decided that - "....... for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be .....

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of the mischief, and 'pro privato commodo', and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, 'pro bono publico'." The rule is equally applicable to a large extent. In order to properly interpret the provisions of the instructions, it is, therefore necessary to consider how the matter stood immediately before the circular came into existence, what was the intention and object necessitating the legislature to issue the im .....

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the basic principles of natural justice have to be borne in mind, but also principles of constitutionalism involved therein. With a view to read the provisions of the Act in a proper and effective manner, we are of the opinion that literal interpretation, if given, may give rise to an anomaly or absurdity which must be avoided. So as to enable a superior court to interpret a statute in a reasonable manner, the court must place itself in the chair of a reasonable legislator/author. So done, the r .....

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the appeals were being filed in utter disregard to the monetary limits. The Bombay High Court insisted that all the appeals filed by the department where the tax effect was below the Board's prescribed limit should be withdrawn forthwith. In this regard, CBDT issued instruction dated 5th June, 2007 directing the department to examine all appeals pending before the Bombay High Court on a case to case basis with further direction to withdraw cases wherein the criteria of monetary limits as pe .....

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appeals where the tax effect was less than ₹ 10 lacs and that this conscious decision should be taken keeping in mind the National Litigation Policy which was framed by the Central Government with the object of reducing the burden of pending appeals before the Court. For facility, the order of the Court dated 22nd July, 2014 is extracted hereunder:- "We have heard Sri Shambhoo Chopra, Sri Govind Krishna & Sri Dhananjay Awasthi for the Income Tax Department and Sri R.P.Agarwal, the .....

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ing, an objection was taken that since the tax effect is less than ₹ 10.00 lacs, the appeal should be dismissed as not maintainable. The question whether the instruction no.3 of 2011 dated 09.02.2011 will have retrospective effect on pending appeals filed before 09.02.2011 has engaged the attention of various High Courts giving divergent opinions. Without going into the said controversy, we find that there was a circular issued on 05.06.2007 directing the Income Tax Department to examine a .....

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national litigation policy framed by the Central Government with the object of reducing the burden of pending appeals before various Courts across the country. We, accordingly, adjourn the matter for a period of two weeks and direct the Income Tax Department to take necessary instructions and intimate the Court on an affidavit. List on 06.08.2014." Based on the aforesaid direction, the Income Tax Officer, Allahabad filed an affidavit dated 14th August, 2014 indicating that the Instruction N .....

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to the appeals pending before the Bombay High Court and that it was not applicable to other High Courts. The CBDT in the affidavit further contended that the instructions issued from time to time were prospective in nature as is clear from para 11 of Instruction No.3 of 2011 and contended that pending appeals filed prior to the issuance of the Instruction No.3 of 2011 have to be decided on merits. The CBDT further contended that the National Litigation Policy has been considered and, in order t .....

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nding before the Bombay High Court on a case to case basis and withdraw cases where the criteria for monetary limit as per the prevailing instructions was not satisfied, but the same criteria was not adopted by CBDT for this High Court or for other High Courts across the country. The National Litigation Policy has clearly indicated that pending cases should be reviewed filtering frivolous and vexatious matters from the meritorious ones. Various Courts have dealt with the instructions issued by C .....

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In our view, there is no logic behind this approach. 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 no .....

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High Court held that the instructions would apply to pending appeals and, therefore, will have a retrospective effect. Similar view was again reiterated by the Bombay High Court in Commissioner of Income Tax Vs. Camco Colour Co., 254 ITR 565, Commissioner of Income Tax Vs. Smt. Vijaya V. Kavekar L/H of Late Vijaykumar B. Kavekar, 350 ITR 237, Commissioner of Income Tax Vs. Madhukar K. Inamdar (HUF), 318 ITR 149 and Commissioner of Income Tax Vs. Vitessee Trading Ltd., 331 ITR 433. The Delhi Hig .....

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: "33. In the instant case, Instruction No.3 of 2011 is more beneficial than Instruction No.2 of 2005. If Instruction No.3 of 2011 is also made applicable to the pending appeals before this court, it would grant relief to the assessee. Apart from granting relief to the assessee, if a number of appeals pending before this court are disposed of on the basis of the said circular, the precious time which would be saved by this court could be better utilized for deciding disputes where the tax e .....

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assessees would be only in the nature of one-time settlement because if the same issue arises for consideration in the subsequent years and the tax effect is more than ₹ 10 lakhs, it is not open to them to plead that either the Department is estopped from claiming such amount or that the order passed by this court dismissing the appeals on the ground that the tax effect being within the monetary limit would come in the way of the Department proceeding against the assessee. The circular als .....

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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 interests 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 .....

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in such cases is more than ₹ 4 lakhs and less than ₹ 10 lakhs, the assessees in those appeals are denied the benefit of the latest circular. In other words, where there is huge pendency of cases in the Tribunal or court, an appeal filed earlier is disposed of after the circular, the benefit accrues to the assessee. However, in Tribunals and the courts where the pendency of cases is less, an appeal filed recently is decided before the circular or where the assessee co-operates with t .....

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hough Circular/Instruction 3 of 2011 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 gran .....

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ld that the circulars/instructions issued by CBDT are not applicable to pending appeals. The Gujarat High Court held that the language employed was clear and unambiguous and, therefore, it is not for the Court to interpret the same in a different way. The Full Bench further held that where the language was clear and unambiguous, the literal rule of interpretation would apply and it is not required to take the aid of the other rules of construction of statutes and that purposive construction shou .....

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igh Court in CIT Vs. Kodanand Tea Estates Co., 275 ITR 244. The Kerala High Court in the case of CWT Vs. John L. Chackola, 337 ITR 385 and the Chattisgarh High Court in the case of CIT Vs. Navbharat Explosives Co. P. Ltd., 337 ITR 515, have held that: "... the maintainability of appeals/references at the instance of the Revenue is to be considered on the basis of circulars/ instructions prevailing at the relevant time when the appeal/reference was made and instruction issued, vide circular .....

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Court in CIT Vs. Oscar Laboratories Ltd., 324 ITR 115 held that as a consequence of the insertion of Section 268A in the Act, orders, instructions, or directions issued on the subject of monetary limits for filing appeals must be deemed to have attained statutory status. The legislature in its wisdom clearly desired to give effect to all instructions issued on the subject of monetary limits for regulating filing of appeals retrospectively. Accordingly, all instructions laying down monetary limit .....

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right cannot be curtailed by the provision of Section 268A of the Act or by the instructions issued by the CBDT under Section 119 of the Act cannot be accepted. At the outset, the instructions issued by the CBDT are binding on the department. Prior to the introduction of Section 268A in the Act, the object of issuing instructions under Section 119 of the Act was apparent and obvious, namely, to alleviate unnecessary hardship to the assessee and also to avoid financial hardship and long drawn ap .....

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the monetary limits for the purpose of filing appeals. As a consequence of the insertion of Section 268A in the Act, the orders and instructions or directions issued on the subject of monetary limits for filing appeals has attained a statutory status and it has become mandatory for the department to comply with the requirement on the subject of monetary limits for filing appeals. Sub-section (5) of Section 268A of the Act indicates that earlier instructions issued by CBDT fixing monetary limits .....

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mits in regulating filing of appeals retrospectively. We are of the view that instructions issued by CBDT laying down the monetary limits for filing an appeal is mandatory and binding on the Revenue. The contention of the department that the right to file an appeal under Section 260A of the Act by the department cannot be restricted or carved by any instructions of CBDT or by Section 268A is patently erroneous and cannot be accepted. Similar view was also given by the Punjab and Haryana High Cou .....

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cribed limit cannot be filed merely on the ground that the tax effect is more than the monetary limit. An embargo has been created that even where the tax effect is more than the monetary limit, the appeal could only be filed on merits and not otherwise. Para 4 of the instructions further indicates that if a composite order has been passed for several assessment years then the appeal could be filed notwithstanding that the tax effect in one of the assessment years was less than the prescribed li .....

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instruction, has partly complied with the National Litigation Policy. The CBDT has not fully applied its mind in this regard. The policy clearly indicated that all pending cases would be reviewed from time to time so that frivolous and vexatious cases are filtered and that cases, which are covered by previous decisions of the Court are also withdrawn. The only measure taken by the CBDT in reducing the litigation was to raise the monetary limit. No effort was made to review the pending cases. Co .....

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es that the instruction would apply to appeals filed on or after 9th February, 2011 and where appeals have been filed before 9th February, 2011, the said appeals would be governed by the instructions operative at the time when such appeal was filed, which in the instant case was Instruction No.1979 dated 27th March, 2000. Whereas instructions issued by CBDT only regulates the filing of the appeal, sub-clause (4) of Section 268A will come into play when the appeal is being heard and the Court wil .....

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following should be contested irrespective of revenue effect: (i) Where Revenue audit objection in the case has been accepted by the Department. (ii) Where the Board's order, notification, instruction or circular is the subject matter of an adverse order. (iii)Where prosecution proceedings are contemplated against the assessee. (iv) Where the constitutional validity of the provisions of the Act are under challenge." These exceptions as indicated in para 3 of instructions dated 27th Mar .....

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t when the said appeal is being heard, the exceptions as depicted in para 3 of the instructions of 27th March, 2000 would be considered as to whether those exceptions still exists or not. If the exceptions exists, the Court will hear and decide the matter on merits, failing which it will decline and dismiss the appeal on the ground of monetary limits. The object of issuing such instruction is apparent and obvious, namely, to alleviate unnecessary hardship to assessee and also to avoid financial .....

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at the stage when the appeal was being heard. In our view, the monetary limit as per the latest instructions should apply equally to pending appeals unless the exception indicating in the instructions at the time of filing the appeal is carved out, which, according to the department, still exists. The Punjab and Haryana High Court in Oscar Laboratories (supra) held: "There can be no doubt, that the process of litigation is a financial hardship. An individual assessee may have to suffer the .....

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o the tax, which is likely to be recovered by the Revenue, on the success thereof. If the proportion of the aforesaid recovery of tax as against the expenses incurred in pursuing the appellate remedy is negligible, and there is no other adverse effect, the inference should be, that the remedy of appeal would be an exercise in futility. In such an eventuality, an appeal should not be filed." There is another aspect of the matter. As per the latest instructions, no appeal could be filed and, .....

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uctions exists at the time of hearing of the appeal, the same would be decided on merits othwerwise the appeal would be dismissed on the ground of monetary limit. By doing this, the instructions would be saved from the vice of discrimination. At this stage, we may take notice that the underlying purpose of the National Litigation Policy was to reduce government litigation in Courts so that valuable Court time is spent in resolving other pending issues. The Bombay High Court in Pithwa Engineering .....

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re the tax impact has now become minimal. In the light of the aforesaid, the object and intention and the surrounding circumstances of the National Litigation Policy introduced by the Central Government has to be kept in mind. As stated earlier, the underlying purpose was to reduce pending government litigation in Courts from 15 years to 3 years so that the valuable court time could be saved for several contentious issues. Pending cases were required to be reviewed and frivolous and vexatious ma .....

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ly a literal interpretation should be given and that it is not for the Court to interpret the language in a different way. There is no quarrel with the aforesaid proposition laid down by the Full Bench of the Gujarat High Court and Punjab and Haryana High Court but in deference to the said decisions, we find that the National Litigation Policy was not taken into consideration and, consequently, the Full Bench only applied the literal interpretation of the instructions. Considering the object and .....

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n that the literal rule of interpretation cannot be applied in the instant case. Since the instructions is a beneficial piece of legislation, the pendulum is tilted more in favour of the assessee and impels the Court to interpret the provisions harmoniously by adopting the purposive method of construction. We must not shut our eyes to the object for which the instructions were issued and if the instructions had been made applicable to pending cases as laid down by the National Litigation Policy, .....

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