TMI Blog2017 (11) TMI 1494X X X X Extracts X X X X X X X X Extracts X X X X ..... e (supra). Liberty is given to the Department to move the High Court pointing out that the Circular dated 9th February, 2011, should not be applied ipso facto, particularly, when the matter has a cascading effect. There are cases under the Income Tax Act, 1961, in which a common principle may be involved in subsequent group of matters or large number of matters. In our view, in such cases if attention of the High Court is drawn, the High Court will not apply the circular ipso facto. - Civil Appeal Nos. 19650 -19651 of 2017 ( Arising out of SLP(C) No.24055 -24056 of 2017 ) - - - Dated:- 23-11-2017 - Rohinton Fali Nariman And Sanjay Kishan Kaul, JJ. For the Petitioner : Mr. Arijit Prasad, Adv. Mrs. Anil Katiyar, AOR For the Respondent : Ms. Sharmila Upadhyay, AOR Mr. Kamal Mohan Gupta, AOR JUDGMENT Sanjay Kishan Kaul, J. 1. Leave granted. 2. The propensity of Government Departments and public authorities to keep litigating through different tiers of judicial scrutiny is one of the reasons for docket explosion. The Income Tax Department of the Government of India is one of the major litigants. There are two departmental scrutinies at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, as in the mean time, a large number of cases have been disposed of on the application of the Instruction/Circular in question though the appeals were preferred by the Revenue prior to the Instruction/Circular being issued as a large number of High Courts took that view. High Courts of the View that the Circular in question would apply to pending appeals as well: A. Karnataka High Court: Commissioner of Income Tax, Bangalore V. Ranka Ranka [2012] 284 ELT 185 (Karn) ; [2013] 352 ITR 121 (Karn) . The issue was squarely addressed by the Division Bench of the Karnataka High Court recognizing that the concept of providing the monetary limit was not new and has been invoked from 1992. The limit was raised from time to time. The clause in the circular has explained the meaning of Tax Effect as the difference between the tax on 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 issues against which appeal is intended to be filed without impact of interest. The different clauses protected the interest of the Revenue so as not to have any precedentiary impact. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Government and its various agencies are the pre-dominant litigants in courts and Tribunals in the country. Its aim is to transform the 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 the Government litigation should never forget this basic principle. Efficient litigant means - Focusing on the 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: comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torney 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 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 fashion. 11. We consider it appropriate to refer to some of the observations in the judgment of the Karnataka High Court, which have our imprimatur, as under: 22. The Government has formulated 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. Its a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eviewed 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 the 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 the 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 the said cases are withdrawn. The only measure taken for reducing the litigation is, by raising the monetary limit. However, as the same is made prospective, it had no application to the pending cases. Therefore, the said Instruction No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow-cause notice proposing reclassification. 26. Following this judgment, the apex court in the case of Suchitra Components Ltd. V. CCE 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. CCE V. Mysore Electricals Industries Ltd. reported in [2006] (204) ELT 517 (SC). In the said judgment, this court held that a beneficial circular has to be applied retrospectively while oppressive circular has to he applied prospectively. Thus, when the circular is against the assessee, they have the right to claim the enforcement of the same prospectively. 27. 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 ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue audit objection in the case has been accepted by the Department, notwithstanding the fact that the tax effect is less than 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 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 Nation Litigation Policy, 2011, so that it can be used for better and productive purpose. 12. The Division Bench also pointed out the anomaly in the working of the Circular, were it to apply only prospectively, in the following words: 31. Yet another anomaly which requires to be noticed is, if a Tribunal where the number of cases which are pending are more, decides the appeal, subsequent to these latest circulars and the amount involved is less than ₹ 10 lakhs, the assessee in such cases get the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 ITR 149 (Bom) the Circular dated 15.5.2008 was examined, opining that it was in 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 ₹ 4 lakhs, considering the cost of litigation and other administrative cost which may be much more than the tax recovery, especially in the context of the Circular dated 5.6.2007 requiring the current matters also to be examined. C D. Madhya Pradesh High Court Delhi High Court: 15. In Commissioner of Income Tax V. Ashok Kumar Manibhai Patel Co. [2009] 317 ITR 386 (MP) and Commissioner of Income Tax V. P.S. Jain Co. [2011] 335 ITR 591 (Delhi) : In both the above cases, the Circular in question was dated 27.3.2000, but the ratio is the same. High Courts of the View that the Circular in question would apply only prospectively: A. Punjab Haryana High Court: 16. In Commissioner of Income Tax V. Varindera Construction Co. [2011] 331 ITR 449 (P H) [FB] Instruction No.5/2008 dated 15.5.2008 was held to apply only prospectively. The Court disagreed with the view taken by other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred before 2011 and the Instructions were dated 9.2.2011, the earlier cases would not be covered by the Instruction. This order in turn had been followed by another two Judges Bench in Civil Appeal No.16815/2017 titled The Commissioner of Income Tax Bangalore I Anr. V. M/s. Gemini Distilleries dated 12.10.2017. 21. Once again, in another matter Commissioner of Income Tax Anr. V. Century Park [2015] 14 SCC 704 ; [2015] 373 ITR 32 (SC) , the line adopted by the three Judges Bench in Surya Herbal Ltd. case (supra) has been followed. 22. We have already given our imprimatur to the observations made by the Karnataka High Court in a detailed analysis in Ranka Ranka case (supra), which has dealt with the litigation policy philosophy behind applying the Circular and the benefit being extended in view thereof to all Assessees where appeals have been pending, but below the financial limit, as otherwise an anomalous situation would arise. 23. We may also take note of the judgment of this Court in Suchitra Components Ltd. V. Commissioner of Central Excise, Guntur [2007] 208 ELT 321 (SC) on the general principle of application of Circulars. Reliance was placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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