2018 (2) TMI 1648 - HC - Income Tax

Court upholds CBDT circular, rejects application due to non-appearance, emphasizing due process and tax impact assessment.

The Court proceeded with the hearing despite the non-appearance of the assessee, emphasizing the importance of due process. The rejection of the ... Maintainability of appeal - monetary limit - Held that:- We do not think the result of this adjudication is going in favour of revenue. As such though this matter has been listed under the heading “To Be Mentioned”, we have heard it. Question no.2 in the reference is :- Whether, on the facts and in the circumstances of the case, the Hon’ble I.T.A.T. was justified in law in holding that no adjustment can be made under section 143(1)(a)in case of loss? However, in view of the aforesaid circumstances, as tax effect is below threshold, the application is rejected and Rule discharged. Issues Involved:1. Non-appearance of the assessee in the reference application.2. Applicability of Central Board of Direct Taxes (CBDT) circular dated 10th December, 2015.3. Binding nature of circular on tax authorities.4. Interpretation of Section 119 of the Income Tax Act, 1961.5. Retroactive application of circulars.6. Impact of previous judicial decisions on circulars.7. Justification of adjustment under section 143(1)(a) in case of loss.8. Threshold for tax effect in the case.Analysis:1. The judgment addresses the issue of the non-appearance of the assessee in the reference application, highlighting multiple instances where the assessee failed to appear despite notices being issued. The Court proceeded with the hearing based on the submission of the revenue's advocates, emphasizing the importance of due process and representation in legal proceedings.2. The Court delved into the applicability of the CBDT circular dated 10th December, 2015, specifically focusing on clause 10 of the circular. The revenue's advocate argued that the reference falls below the tax effect specified in the circular, thereby justifying the rejection of the application based on the circular's provisions.3. The judgment explores the binding nature of the circular on tax authorities, citing Section 119 of the Income Tax Act, 1961. The advocate for the revenue relied on previous judicial decisions to support the contention that the circular is mandatory and must be adhered to by tax authorities in determining the outcome of the reference application.4. Regarding the interpretation of Section 119 of the Income Tax Act, 1961, the advocate for the revenue argued that the circular issued by the CBDT holds legal weight and must be followed by tax authorities. The Court considered the advocate's submission in light of relevant legal provisions and precedents to determine the impact of the circular on the reference application.5. The judgment scrutinized the retroactive application of circulars, drawing comparisons with previous circulars and judicial decisions. The advocate highlighted specific clauses in different circulars to support the argument for or against retroactive application, leading to a detailed analysis of the temporal scope of circulars in tax matters.6. The impact of previous judicial decisions on circulars was a crucial aspect of the judgment, with references made to various High Court and Supreme Court rulings. The Court examined conflicting views on the retrospective application of circulars, emphasizing the need for clarity and consistency in interpreting circulars in tax litigation.7. The judgment also addressed the justification for adjustment under section 143(1)(a) in case of loss, focusing on the legal interpretation and application of relevant provisions. The Court considered the arguments presented by the revenue's advocate to determine the validity of the adjustment in the context of the reference application.8. Lastly, the judgment evaluated the threshold for tax effect in the case, ultimately leading to the rejection of the application and discharge of the Rule based on the assessment of the tax impact in relation to the reference. The Court's decision was influenced by the arguments presented by the revenue's advocate and the legal provisions governing tax assessments.