TaxTMI 
TaxTMI 
2015 (5) TMI 320
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....f 2011, the monetary limit for filing an appeal by the Department was Rs. 10 lacs, whereas the tax effect in the instant appeal is less than Rs. 10 lacs and, therefore, the appeal should be dismissed as not maintainable. Since the preliminary objection raised had far reaching consequence affecting pending appeals in the High Court, the Court invited other counsels to address the Court on this issue. In this manner, we have heard Sri Bharat Ji Agarwal, the learned Senior Counsel alongwith Sri Shambhu Chopra and Sri Govind Krishna, the learned counsels for the Department and Sri R.P. Agarwal, Sri Piyush Agarwal, Sri Ashish Bansal and Sri Suyash Agarwal, the learned counsels for the assessee. The learned Senior Counsel for the Income Tax Department (hereinafter referred to as the Department) vehemently repudiated the preliminary objection raised by the learned counsel for the assessee. The learned Senior Counsel for the Department contended that the instructions issued by CBDT only lays down the monetary limits for regulating the filing of the appeals and not to regulate the appeals already filed. It was urged that the appeals already filed as per the earlier instructions will have....
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....tional Litigation Policy to reduce the cases pending in various Courts of India in an attempt to reduce the average pendency time from 15 years to 3 years. The National Litigation Policy reads as under:- "National Litigation Policy In this background, it is necessary to notice the 'National Litigation Policy Document Released'. The Centre has formulated the National Litigation Policy to reduce the cases pending in various courts in India under the National Legal Mission to reduce average pendency time from 15 years to 3 years. It reads as under: 'Introduction Whereas at the National consultation for strengthening the judiciay toward reducing pendency and delays held on October 24/25, 2009, the Union Minister of Law and Justice, presented resolutions which were adopted by the entire conference unanimously. And wherein the said resolution acknowledged the initiative undertaken by the Government of India to 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....
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....be achieved with particular emphasis on welfare legislation, social reform, weaker sections and senior citizens and other categories requiring assistance must be given utmost priority. In respect of filing of appeals in revenue matter it is stated as under: "(G) Appeals in revenue matters will not be filed: (a) if the stakes are not high and are less than that amount to be fixed by the Revenue authorities: (b) if the matter is covered by a series of judgments of the Tribunal or of the High Court which have held the field and which have not been challenged in the Supreme Court: (c) where the assessee has acted in accordance with long standing industry practice: (d) merely because of change of opinion on the part of the jurisdictional officers. Review of pending cases (A) All pending cases involving the Government will be reviewed. This due diligence process shall involve drawing upon statistics of all pending matters which shall be provided for by all Government departments (including public sector undertakings). The Office of the Attorney General and the Solicitor General shall also be responsible for reviewing all pending cases and filtering frivolous and vexa....
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....me-tax and All Directors General of Income-tax. Subject: Revision of monetary limits for filing of appeals by the Department before the Income-tax Appellate Tribunal, High Courts and Supreme Court - Measures for reducing litigation - Regarding. Reference is invited to Board's instruction No.5 of 2008, dated May 15, 2008, wherein monetary limits and other conditions for filing Departmental appeals (in Income-tax matters) before Appellate Tribunal, High Courts and Supreme Court were specified. 2. In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on the merits before the Appellate Tribunal, High Courts and Supreme Court keeping in view the monetary limits and conditions specified below. 3. Henceforth appeals shall not be filed in cases where the tax effect does not exceed monetary limits given hereunder:- Sl. No. Appeals in income-tax matters Monetary limit (in Rs.) 1 Appeal before Appellate Tribunal 3,00,000 2 Appeal under section 260A before High Court 10,00,000 3 Appeal before Supreme Court 25,00,000 It is clarified that an appeal should not be filed merely beca....
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.... the Commissioner of Income-tax shall specifically record that "even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this instruction". Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits. 7. In the past, a number of instances have come to the notice of the Board, whereby an assessee has claimed relief from the Tribunal or the Court only on the ground that 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/counsels must make every effort to bring to....
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....(1) of the Income-tax Act, 1961. Yours faithfully, (Sd.).............. (A.K. Bharadwaj) Under Secretary to the Government of India (ITJ-II), CBDT" Prior to the aforesaid instructions, the CBDT had issued Instructions No.1777 dated 4th November, 1987 fixing a monetary limit by which an appeal would not be filed before the High Court where the tax effect was less than Rs. 50,000/- This was enhanced to Rs. 2 lacs by Instructions No.1979 dated 27th March, 2000. By Instructions No.2 of 2005 dated 24th October, 2005 the limit was enhanced to Rs. 4 lacs. Similar instructions were again issued by Instruction No.5 of 2008 dated 15th May, 2008. By Instruction No.3 of 2011, the limit was enhanced to Rs. 10 lacs and reiterated by Instruction No.5 of 2014 dated 10th July, 2014 wherein the limit for filing an appeal before the High Court remained the same. Para 3 of Instruction No.3 of 2011 indicates that the appeal would only be filed where the tax effect exceeds the monetary limits, namely, Rs. 10 lacs before the High Court. Para 11 of the instructions indicate that Instructions No.3 of 2011 would apply to appeals filed on or after 9th February, 2011 and where appeals having ....
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.... in consultation with the Ministry of Law. Therefore, where the Chief Commissioner decides to contest an adverse judgment by filing special leave petition before the Supreme Court, they should send the proposal to the Board for further processing. 5. These instructions will apply to litigation under other direct taxes also, e.g., wealth-tax, gift-tax, estate duty, etc. 6. These monetary limits will apply to writ matters. 7. This instruction will come into effect from April 1, 2000." A perusal of the aforesaid instructions and the earlier instructions of the CBDT indicate that it was issued to reduce the litigation in the Court. Previously, only instructions were issued by CBDT under Section 119 of the Act and, in order to give it a legislative measure, a new Section 268A was inserted by the Finance Act, 2008 with retrospective effect from 1st April, 1999 in the Income Tax Act, 1961. For ready reference, the said provision is extracted hereunder:--- "Filing of appeal or application for reference by income-tax authority. 268A. (1) The Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limit....
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....ties, 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 Chapter XX. It is further proposed to provide that where, in pursuance of the orders, instructions or directions issued under sub-section (1), an 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 assessee for the same or any other assessment year. It is also proposed to provide that notwithstanding that no appeal or application for reference has been filed by an income- tax authority pursuant to the orders, instructions or directions issued under sub-section (1), it shall not be lawful for an assessee,being a party in any appeal or reference, to contend that the income tax authority has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case. It is also ....
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....hat nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. (5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which - (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section." Numerous rules of interpretation have been formulated by courts. If a statutory provision is open to more than one interpretation, the Court has to choose that interpretation which represents the true intention of the legislature. The duty of th....
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....e approaches, namely, the true meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. Once this is achieved, it would be called "the cardinal principle of construction". The difference between purposive and literal constructions is in truth one of degree only as held in Oliver Ashworth (Holdings) Ltd. Vs. Bellard (Kent) Ltd., (1999) 2 All ER 791at 805 and reiterated in Tanna & Modi Vs. Commissioner of Income Act, Mumbai, (2007) 7 SCC 434. The real distinction lies in the balance to be struck in the particular case between literal meaning of the words on the one hand and the context and purpose of the measure in which they appear on the other. In Francis Bennion's Statutory Interpretation, purposive construction has been described in the following manner: "A purposive construction of an enactment is one which gives effect to the legislative purpose by - (a) following the literal meaning of the enactment where that meaning is in accordance with the legislative purpose (in this code called purposive and literal construction)." Heydon's case now kn....
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....te in a reasonable manner, the court must place itself in the chair of a reasonable legislator/author. So done, the rules of purposive construction have to be resorted to which would require the construction of the Act in such a manner so as to see that the object of the Act fulfilled; which in turn would lead the beneficiary under the statutory scheme to fulfill its constitutional obligations." The Bombay High Court, being conscious of the instructions issued by CBDT dismissed a large number of appeals on the ground that the instructions issued by CBDT from time to time were not being adhered to and that the appeals were being filed in utter disregard to the monetary limits. The Bombay High Court insisted that all the appeals filed by the department where the tax effect was below the Board's prescribed limit should be withdrawn forthwith. In this regard, CBDT issued instruction dated 5th June, 2007 directing the department to examine all appeals pending before the Bombay High Court on a case to case basis with further direction to withdraw cases wherein the criteria of monetary limits as per the prevailing instruction was not satisfied unless the question of law involved or....
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....ind the national litigation policy framed by the Central Government with the object of reducing the burden of pending appeals before various Courts across the country. We, accordingly, adjourn the matter for a period of two weeks and direct the Income Tax Department to take necessary instructions and intimate the Court on an affidavit. List on 06.08.2014." Based on the aforesaid direction, the Income Tax Officer, Allahabad filed an affidavit dated 14th August, 2014 indicating that the Instruction No.3 of 2011 was issued in the light of the National Litigation Policy. Since the affidavit was not in consonance with the direction of the Court dated 22nd July, 2014, further directions was issued directing that an affidavit should be filed by the Joint Secretary of the Ministry of Finance or Central Board of Direct Taxes. Based on the aforesaid order, an affidavit of CBDT dated 1st September, 2014 was filed. The CBDT contended that the earlier instruction dated 5th June, 2007 was only confined to the appeals pending before the Bombay High Court and that it was not applicable to other High Courts. The CBDT in the affidavit further contended that the instructions issued from time....
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....matters needs to be adopted by the Department. In our view, the Board's circular dated March 27m 2000, is very much applicable even to the old references which are still undecided. The Department is not justified in proceeding with the old references wherein the tax impact is minimal. Thus, there is no justification to proceed with decades old references having negligible tax effect." The Bombay High Court held that the instructions would apply to pending appeals and, therefore, will have a retrospective effect. Similar view was again reiterated by the Bombay High Court in Commissioner of Income Tax Vs. Camco Colour Co., 254 ITR 565, Commissioner of Income Tax Vs. Smt. Vijaya V. Kavekar L/H of Late Vijaykumar B. Kavekar, 350 ITR 237, Commissioner of Income Tax Vs. Madhukar K. Inamdar (HUF), 318 ITR 149 and Commissioner of Income Tax Vs. Vitessee Trading Ltd., 331 ITR 433. The Delhi High Court also took the same view in CIT Vs. P.S. Jain and Co., 335 ITR 591. The Madhya Pradesh High Court in Commissioner of Income Tax Vs. Ashok Kumar Manibhai Patel and Co., 317 ITR 386 followed the Bombay High Court and extended the benefit to the assessee. The Karnataka High Court in Comm....
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....ute. 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 National Litigation Policy, 2011, so that it can be used for better and productive purpose. 37. 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 Rs. 10 lakhs, the assessee in such cases get the benefit of the latest circular. However, if the Tribunal has decided a case expeditiously or in Tribunals where the pendency is less and if the subject-matter of the appeal preferred by the Revenue in such cases is more than Rs. 4 lakhs and less than Rs. 10 lakhs, the assessees in those appeals are denied the benefit of the latest circular. In other words, where there is huge pendency of cases in the Tribunal or court, an appeal filed earlier is disposed of after the circular, the benefit accrues to the assessee. However, in Tribunals and the courts where the pendency of cases is less, an ap....
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.... and Haryana High Court held that the object of the circular was to regulate the filing of the appeal and not to regulate the appeals already filed. Similar view was reiterated by the Madras High Court in CIT Vs. Kodanand Tea Estates Co., 275 ITR 244. The Kerala High Court in the case of CWT Vs. John L. Chackola, 337 ITR 385 and the Chattisgarh High Court in the case of CIT Vs. Navbharat Explosives Co. P. Ltd., 337 ITR 515, have held that: "... the maintainability of appeals/references at the instance of the Revenue is to be 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." In the light of the contentions raised by the parties and various provisions indicated above, we find that the instructions issued by CBDT is not merely an administrative instruction but is an extension of the statute being issued under Section 268A of the Act. A Division Bench of the Punjab and Haryana High Court in ....
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....Section 268A of the Act indicates that earlier instructions issued by CBDT fixing monetary limits for filing an appeal shall be deemed to have been issued under Section 268A of the Act. After the introduction of Section 268A into the Act, Section 260A of the Act cannot be read independently. Both Section 260A and 268A of the Act will have to be interpreted by reading the two provisions harmoniously. Section 268A was inserted in the Act with retrospective effect from 1st April, 1999. The legislature desired to give statutory effect to all the instructions issued on the subject of monetary limits in regulating filing of appeals retrospectively. We are of the view that instructions issued by CBDT laying down the monetary limits for filing an appeal is mandatory and binding on the Revenue. The contention of the department that the right to file an appeal under Section 260A of the Act by the department cannot be restricted or carved by any instructions of CBDT or by Section 268A is patently erroneous and cannot be accepted. Similar view was also given by the Punjab and Haryana High Court in Oscar Laboratories case (supra). In the light of the aforesaid, there is no doubt that the ....
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....dicates that the instruction would apply to appeals filed on or after 9th February, 2011 and where appeals have been filed before 9th February, 2011, the said appeals would be governed by the instructions operative at the time when such appeal was filed, which in the instant case was Instruction No.1979 dated 27th March, 2000. Whereas instructions issued by CBDT only regulates the filing of the appeal, sub-clause (4) of Section 268A will come into play when the appeal is being heard and the Court will then have regard to the orders, instructions or directions issued under sub-Clause(1) of Section 268A and the circumstances under which such appeal was filed or not filed in respect of any case. Meaning thereby, that at the stage of hearing of an appeal, the Court can see where the circumstances contemplated under para 3 of the instructions was existing or not. At this stage para 3 of the instructions dated 27th March, 2000 is again being reproduced:- "3. Adverse judgments relating to the following should be contested irrespective of revenue effect: (i) Where Revenue audit objection in the case has been accepted by the Department. (ii) Where the Board's order, notificatio....
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....ial expense, which when taken to its logical effect, falls on the shoulders of the general public as the same is incurred out of money collected from innocent taxpayers. Filing of an appeal should be a fruitful exercise. An appeal should not be filed only to press a proposition of law, unless it results in an adverse inference against the Revenue. The veracity of filing an appeal must be gauged with reference to the tax, which is likely to be recovered by the Revenue, on the success thereof. If the proportion of the aforesaid recovery of tax as against the expenses incurred in pursuing the appellate remedy is negligible, and there is no other adverse effect, the inference should be, that the remedy of appeal would be an exercise in futility. In such an eventuality, an appeal should not be filed." There is another aspect of the matter. As per the latest instructions, no appeal could be filed and, consequently, cannot be heard where the tax effect is less than Rs. 10 lacs. Would it be justified if a pending appeal, which has a tax effect of less than Rs. 10 lacs is now heard on merits? In our opinion, there is no logic behind this approach. If the instruction is only held to be pr....
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....nch of the Gujarat High Court and Punjab and Haryana High Court but in deference to the said decisions, we find that the National Litigation Policy was not taken into consideration and, consequently, the Full Bench only applied the literal interpretation of the instructions. Considering the object and intention and the surrounding circumstances of the National Litigation Policy, it is necessary for the Court to iron out the creases bearing in mind the principles of interpretation as discussed above and the legal proposition that flows from such interpretation. We find that there is a defect in the instructions issued by the CBDT. The only measure taken in reducing the litigation was to raise the monetary limit. No effort was made to review the pending cases. Accordingly, we are of the opinion that the literal rule of interpretation cannot be applied in the instant case. Since the instructions is a beneficial piece of legislation, the pendulum is tilted more in favour of the assessee and impels the Court to interpret the provisions harmoniously by adopting the purposive method of construction. We must not shut our eyes to the object for which the instructions were issued and if the ....