TaxTMI 
TaxTMI 
2011 (11) TMI 449
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....round. In view of the aforesaid preliminary objection, the same is considered as a preliminary point. 3. The learned Senior Counsel Sri Indra Kumar appearing for the Revenue contended that instruction No.3/2011 expressly states at clause (11) that the instructions will apply to appeals filed on or after 09.02.2011. However, the cases where appeals have been filed before 09.02.2011 will be governed by the instructions on this subject, operative at the time when such appeal was filed. The instruction which was operating on the day the present appeal is filed, was instruction No.2/2005 which prescribed a monetary limit of Rs. 4 lakhs. Therefore, as the tax effect is Rs. 4,87,730/-, as it was above the monetary limit prescribed under instruction No.2/2005, the appeal filed under Section 260A of the Act is maintainable and instruction No.3/2011 is not applicable to the present case. 4. Per contra Sri A.Shankar, learned Counsel appearing for the assessee submitted that instruction No.3/2011 was issued on 09.02.2011 and clause (11) of the said circular makes it only prospective. It is settled law that a circular which is beneficial to an assessee is to be applied retrospectively and....
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....0A before High Court 4,00,000/- 3 Appeal before Supreme Court 10,00,000/- Clause (4) explains the meaning of the tax effect as under: "Tax effect" means the difference between the tax on the 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 (hereinafter referred to as "disputed issues"). However, the tax will not include any interest thereon. Similarly, in loss cases notional tax effect should be taken into account. In the case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. 8. Having regard to the confusion which prevailed till the date of issue of the said instruction regarding how the tax effect is to be calculated in respect of the assessee when a common order is passed for several assessment years, the position was clarified as under at clause (5): "The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issue in the case of every assessee. If in the case of an assessee the dispute....
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....hat the Department has implicitly accepted the decision of the Tribunal or Court in the case of the assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year, by not filing an appeal on the same disputed issues. The Departmental representatives/counsel 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 by reason of the tax effect being less than the specified monetary limit and therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that such cases do not have any precedent value." 11. However, the right to prefer an appeal even in cases where the tax effect is less than the monetary limit in the following cases finds a place at clause (8) which reads as under: "Adverse judgments relating to the following should be contested irrespective of the tax effect: (a) Where the Constitutional validity of the provisions of an Act or Rule are under challenge. (b) Where Board's order. Notificat....
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.... appeals/references at the distance of the revenue is to he considered on the basis of circulars/instructions prevailing at the relevant time when the appeal/reference was made and instruction issued, vide circular dated May 15. 2008. is prospective and it has no application whatsoever to any proceedings initiated before May 15. 2008 and the same remain undecided and pending after May 15. 2008." The Punjab and Haryana Court in the case of CIT v. Varindera Construction Co., [2011] 331 ITR 449 (P&H) held as under: "(10). After due consideration of the rival contentions, we are in agreement with the contention raised on behalf of the Revenue. Circular laying down monetary limit controls the filing of the appeals and not (heir hearing. Appeals filed as per the applicable limit at the time of filing cannot be governed by circular applicable at the time of hearing. We respectfully differ from the view taken by the Bombay High Court as followed by this Court. The object of the circular under section 268A as already mentioned is only to govern monetary limit for filing of the appeals. There is no scope for reading the circular as being applicable to pending appeals. Even the Hon'ble ....
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....ion to proceed with decades old references having negligible tax effect. The Madhya Pradesh High Court in the case of CIT v. Ashok Kumar Manibhai Patel and Co. reported in [2009] 317 ITR 386 (MP) followed the aforesaid judgment rendered by the Bombay High Court and extended the benefit to the assessee. The Delhi High Court in the case of CIT v. P.S.Jain and Co. reported in [2011] 335 ITR 591 (Delhi) also followed the aforesaid judgment of the Bombay High Court. Again the Delhi High Court in the case of CIT v. Delhi Race Club Ltd. in ITA No.128/2008 dated 03.03.2011, followed the aforesaid judgment and extended the benefit to the assessee. The Bombay High Court in CIT v. Madhukar K.Inamdar (HUF) reported in [2009] 318 ITR 149 (Bom) has held as under: 7. One fails to understand how the Revenue, on the face of the above clear instructions of the Central Board of Direct Taxes, can contend that the Circular dated May 15, 2008. issued by the Central Board of Direct Taxes is applicable to the cases filed after May 15, 2008, and in compliance thereof, they do not file appeals, if the tax effect is less than Rs. 4 lakhs; but the said circular is not applicable to the cases fi....
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.... these circulars prescribing monetary limit, being treated as prospective or retrospective. In other words, do they apply to pending matters anterior to the issue of the said instructions. 18. The circular No. 1/2009 dated 27.03.2009 states that there is a prescribed dispute resolution mechanism in the Income Tax Act. In this regard the Central Board of Tax cases has issued instructions from time to time directing the departmental officers not to file appeals if the tax effect is less than the monetary limit prescribed by it. The Hon'ble Supreme Court of India in Berger Paints Limited v. CIT reported in [2004] 266 ITR 99, held that if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the Revenue to challenge the correctness in the case of other assessee without just cause. The department's appeals are being dismissed by judicial authorities on the consideration that the disputed issue was not agitated in the case of the same assessee or in the case of any other assessee. The underlining object of the Board's resolution is to reduce litigation in similar cases with a view t....
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....he Finance Act, 2008, inserted section 268A into the 1961 Act. This conclusion of ours is clearly derivable from the objects recorded in the Bill introduced in Parliament for the promulgation of the Finance Act, 2008. An extract of the objects recorded in the Bill pertaining to the insertion of section 268A into the 1961 Act, is reproduced hereunder: [(2008) 298 ITR(st) 170] The proposed section seeks to provide that 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 XX. It is further proposed to provide that where, in pursuance of the orders, instructions or directions issued under sub-section (1), on income-tax authority has not filed any appeal or application 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 asses....
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....monetary limits for filing of appeals, shall be deemed to have been issued under sub-section (1) of section 268A of the 1961 Act. This conclusion emerges from the fact that section 268A of the 1961 Act was introduced with retrospective effect from April 1, 1999. Accordingly, instructions, orders or directions issued even prior to the insertion of section 268A of the 1961 Act must be deemed to have statutory status, if they were issued after April 1, 1999. All issues prejudicial to the Revenue, in case where an appeal was not filed by the Revenue must, therefore, be deemed to have been done away with, after the inclusion of section 268A into the 1961 Act. After the introduction of section 268A into the 1961 Act, section 260A of the 1961 Act cannot be read independently. Sections 260A and 268A of the 1961 Act will now have to be interpreted reading the two harmoniously, so as to give effect to the two provisions keeping in mind the objects and the reasons on the basis whereof section 268A was inserted into the 1961 Act. The Department of Revenue having chosen on its own volition, the monetary limits for filing appeals to challenge orders passed in favour of assessee, cannot be hea....
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....nner. - 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 Government is not an ordinary litigant and that a litigation does not have to be won at any cost. "Responsible Litigant" Means - That litigation will not be resorted to for the sake of litigating. - That false pleas and technical points will not be taken and shall be discouraged. - Ensuring that the correct facts and all relevant documents will be placed before the Court. - That nothing will be suppressed from the Court and there will be no attempt to mislead any Court or Tribunal. 2. Government must cease 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 woul....
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.... 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 aim is to transform Government into an efficient and responsible litigant. Efficient litigant means ensuring that good cases are won and bad cases are not needlessly persevered with. The litigation should not be resorted to for the sake of litigating. Government must cease 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. 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 average pendency time from 15 years to 3 years. All pending cases involving Government has to be reviewed with the intention of filtering frivolous and vexatious matters from the meritorious one. Panels have to be set up to implement categorization, review such cases, to identify c....
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....itigation 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. 3/11 do not fulfil the requirement prescribed by the National Litigation Policy. It only partially satisfies the requirement in respect of future litigation. Under the aforesaid instruction, the crucial date is the date of filing of the appeal. It is that date when the tax effect is less than the monetary limit prescribed, the Revenue is precluded from filing such appeals. Though the date of filing of the appeal may be the criteria, that by itself would not provide a rationale sufficient to distinguish between pending cases and cases to be filed in future. The earlier monetary limit was fixed in the year 2005. So it is after six years, the monetary limit is enhanced. If only the instruction No. 3/11 had been made applicable to the pending cases also, as laid down in the National Litigation Policy, the object of the policy would have been fulfilled. One of the ways of giving effect to the said policy is to make that instruction applicable retrospectively to all pending appeals as on the date of the circular. It would s....
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.... the assessee, if 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 tax effect is enormous. That apart, the duration, an appeal takes in this Court would be reduced as desired by the National Litigation Policy. 28. It is also not out of context to mention that periodically, the Revenue introduces what is called as Karvivadh Samadhan Scheme and Voluntary Disclosure of Income Scheme to annul black money and to give benefit to persons who are not prompt in filing returns and paying tax. But unfortunately, persons who are paying tax regularly but have succeeded before the Tribunal in showing that there is no tax liability, are made to face these litigations, instead of concentrating their time and energy in productive work. Under these circumstances, we are of the view that it is settled law that any notification issued under this fiscal legislation granting exemption from payment of tax has to be construed strictly. Any Circulars/Instructions issued conferring benefit on the assessees who are still to come to Court and who already in....
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....ade and industry, has extended several benefits under the Act. Without properly appreciating the context and the object with which those provisions are enacted, the department has interpreted those provisions preventing those, benefits reaching the persons to whom it was intended. In most of the cases, the Tribunal has come to the rescue of those assessee, has interpreted those provisions in proper perspective and have extended the benefit to the assessee. It is against those orders, most of the appeals are filed mechanically as compulsive litigation without any sense of responsibility. It is our experience that most of the appeals which are filed by the Revenue are frivolous and vexatious. The majority of the appeals are filed with the sole object of leaving it to the Courts for ultimate decision. The approach is, 'let the Court decide'. The authority who decides to prefer the appeal is not prepared to take the responsibility. There is an attempt to save their skin, so that tomorrow they are not held responsible in any manner. It is this approach, which is to be eschewed and .condemned, as stated in the National Litigation Policy. It is yet another ground for us to make this circu....