2009 (7) TMI 145 - HC - Income Tax

CBDT Circular applies to pending appeals; Revenue must withdraw cases with tax effect under Rs.4 lakh under Section 268A

COMMISSIONER OF INCOME-TAX Versus MADHUKAR K. INAMDAR (HUF)

HC held the CBDT Circular dated May 15, 2008 applies to pending appeals and binds the Revenue to withdraw cases where cumulative tax effect is below ... Applicability of Central Board of Direct Taxes Circular dated May 15, 2008 - fixing monetary limit in case of appeal by revenue - cumulative tax effect - HELD THAT:- It is clear that on the date of issuance of Circular, prevailing instructions fixing monetary limit will hold good even for pending cases. Adopting the same approach, we are of the considered view that the Central Board of Direct Taxes Circular dated May 15, 2008, would be very much applicable to the pending cases requiring department to withdraw cases wherein the tax effect is less than the prescribed monetary limits. It will also be relevant to mention that it was necessary for the Central Board of Direct Taxes to put a caveat, while issuing instructions vide its Circular dated June 5, 2007, that the appeals involving substantial question of law of recurring nature should not be withdrawn since provision like section 268A of the Income-tax Act was absent. Now, in view of the insertion of the provision of section 268A by the Finance Act, 2008, with effect from April 1, 1999, in the Income-tax Act, 1961, no prejudice could be caused to the Revenue even if the cases involving legal issues of recurring nature are withdrawn, since the newly inserted provision takes care of the adverse eventuality which could have been put against the Revenue. The Circular dated May 15, 2008, would be applicable to the cases pending before this court either for admission or for final disposal and that it is binding on the Revenue - In this view of the matter, all these appeals, having tax effect less than Rs. 4 lakhs, are dismissed. Issues:1. Applicability of Central Board of Direct Taxes Circular dated May 15, 2008, to pending appeals filed prior to its issuance.2. Interpretation of Circular instructions regarding filing of appeals based on tax effect.3. Consideration of judicial verdict on Circular interpretation.4. Public interest implications of the Circular's application.5. Relevance of Circular issued on June 5, 2007, in conjunction with Circular dated May 15, 2008.6. Impact of section 268A of the Income-tax Act, 1961, on the Circular's applicability to pending cases.Analysis:1. The High Court deliberated on the issue of whether the Central Board of Direct Taxes Circular dated May 15, 2008, applied to appeals filed before its issuance. The court emphasized that the Circular did not have retrospective effect and should be considered only for cases coming after its issuance, not for pending appeals.2. The court analyzed the Circular's instructions on calculating tax effect for filing appeals, stating that appeals should not be filed for cases with a tax effect less than Rs. 4 lakhs, even if the issue is recurring. The court highlighted that the Circular aimed to reduce the burden on the Department and the courts.3. Referring to a judicial verdict on the Circular's interpretation, the court reiterated that the Department should not file appeals for cases where the tax effect is below the specified limit, even if the issue recurs for the same assessee in different assessment years.4. The court emphasized the public interest aspect, suggesting that the Revenue should focus on cases with substantial tax impact rather than pursuing cases with tax effects below Rs. 4 lakhs, considering the high cost of litigation and administrative expenses.5. The court discussed the relevance of a Circular issued on June 5, 2007, directing the examination of pending appeals based on monetary limits. It concluded that the Circular dated May 15, 2008, should apply to pending cases, necessitating the withdrawal of appeals with tax effects below the prescribed limit.6. Considering the insertion of section 268A in the Income-tax Act, 1961, the court highlighted that even cases involving legal issues of recurring nature could be withdrawn without prejudicing the Revenue. The court noted that the Circular dated May 15, 2008, was binding on pending cases before the court, leading to the dismissal of appeals with tax effects less than Rs. 4 lakhs.