Appeal Dismissed: CBDT Instruction Not Statutory

The court dismissed the Revenue's appeal as legally not maintainable due to the tax effect being below the threshold specified in CBDT Instruction No. 1903, despite arguments regarding the binding nature of CBDT instructions on Revenue authorities. The court held that unless instructions are explicitly determined to be issued under Section 119 of the Income Tax Act, they cannot be considered statutory and enforceable through the court.

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Issues Involved:
1. Maintainability of the appeal filed by the Revenue in light of CBDT Instruction No. 1903.
2. Binding nature of CBDT instructions on Revenue authorities and their enforceability through court.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal:
The primary issue in this case revolves around the maintainability of the Revenue's appeal against the order dated 12th July 1995 by CIT(A)-II, Agra, for the assessment year 1991-92. The learned counsel for the assessee raised a preliminary objection, arguing that per Instruction 1903, dated 28th October 1992, issued by the Central Board of Direct Taxes (CBDT), appeals should not be filed by the Revenue where the tax effect does not exceed Rs. 25,000. The counsel contended that since these instructions are binding on all Revenue authorities, the appeal filed by the Revenue is not legally maintainable and should be dismissed.

2. Binding Nature and Enforceability of CBDT Instructions:
The learned counsel for the assessee argued that the CBDT instructions issued under Section 119 of the Income Tax Act are binding on the IT authorities. The counsel referred to various cases, including CIT vs. Paramount Spinning (P) Ltd., CIT vs. Smt. Prakashwati, and others, to support the claim that such instructions are mandatory and should be followed. The counsel also highlighted that the instructions issued under Section 119(2) of the IT Act need to be published and circulated, unlike those under Section 119(1).

The learned Departmental Representative countered this argument by stating that the instructions in question are administrative and meant for internal guidance of the IT Department. The Departmental Representative emphasized that the statutory right to file an appeal is vested in the CIT under Section 253(2) of the IT Act, and such instructions cannot override the statutory provisions. The Departmental Representative cited various judgments, including State Bank of Madhya Pradesh & Anr. vs. G.S. Dal & Flour Mills, CIT vs. Sahney Steel & Press Works Ltd., and others, to argue that CBDT instructions cannot prevail over the statute.

Court's Observations and Decision:
The court examined whether the instructions in question are statutory in nature or merely administrative. It noted that the decision in CIT vs. Sun Engineering Works (P) Ltd. emphasized that judgments must be read in the context of the questions before the court. The court observed that there was no specific view in the case laws cited by the assessee's counsel that the instructions were issued under Section 119(1) of the Act. The court reiterated its earlier decision in Asstt. CIT vs. Jain Motors & Tractors, where it was held that the instructions in question are administrative and not statutory.

The court concluded that unless it is explicitly determined that the instructions were issued under Section 119 of the Act, they cannot be considered statutory and enforceable through the court. However, bound by the decision of the jurisdictional High Court, the court held that the appeal filed by the Revenue, contrary to Instruction No. 1903, is not legally maintainable. It was noted that the tax effect involved in the present appeal is less than Rs. 25,000, as the appeal was filed against the deletion of an addition of Rs. 17,340 made under Section 40A(3) of the Act.

Conclusion:
The appeal of the Revenue was dismissed on the preliminary ground that it was not legally maintainable due to the tax effect being below the threshold specified in CBDT Instruction No. 1903.

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