TaxTMI 
TaxTMI 
2004 (2) TMI 274
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.... Board of Direct Taxes (in short CBDT) is the Supreme Body of Income Tax Department responsible for formulation and implementation of Govt. policy and administration of Direct Taxes Laws. As per provisions of section 119 of the Act, the CBDT is vested with the powers of issuing directions/instructions to the field officers. With a view to reducing the pendency of appeals in the Tribunal, High Court and Supreme Court and also to redress the difficulties of Small assessees in meeting the cost of litigation, the Board has been issuing instructions to the field officers of the Income Tax Department prescribing the monetary limit for filing appeals before the various appellate forums including the Tribunal. In the year 1980, the CBDT issued Instruction No. 1328 wherein it was stated that insofar as the Wealth Tax appeals are concerned, appeals to Tribunal should not be filed if the tax effect was less than Rs. 2,000. For appeals arising from Income Tax, such monetary limit was fixed at Rs. 5,000. The main objective was to reduce the litigation and also the costs involved therein. On 6-4-1985 Instruction No. 1612 was issued wherein the monetary limit (tax effect) was fixed at Rs. 5,000 i....
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....s also held that these instructions were benevolent in nature as these seek to redress the difficulties of Small Tax payers and also reflect the policy of the Government for reducing unnecessary litigation in comparatively small cases. It was, therefore, the duty of field officers of the Income-tax Department to comply with these instructions, which were binding. Since the appeal in the case was filed against the instructions of the Board, the same was dismissed on this ground. 4. Thereafter, ITAT, Amritsar Bench by relying on the order of ITAT, Chandigarh Bench in the case of Dharamvir and the judgment of Bombay High Court in the case of CIT v. Cameo Colour Co. [2002] 254 ITR 565 dismissed the appeal in the case of ITO v. Ravinder Kumar [IT Appeal Nos. 404 and 405 (Asr.) of 1997, dated 1-8-2002] for the assessment years 1992-93 and 1993-94 and other cases vide consolidated order. On identical facts and for the same reasons, ITAT, Amritsar Bench also dismissed appeals in the case of ITO v. Bir Engg. Works [IT Appeal Nos. 377, 378 and 379 (Asr.) of 2002, dated 20-1-2003] for the assessment years 1983-84 to 1985-86 and others vide consolidated order. Thereafter, the Revenue filed ....
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....28 ITR 463. He submitted that intended purpose of Instruction is materially different from that of Circular. While Instructions are issued for the purpose of proper administration of the Act, these are guidelines for the Departmental Officers and these do not have any statutory force. Thus, Instruction Nos. 1903 and 1979 prescribed only the monetary limit of tax effect for filing the appeals before the various appellate forums with a view of minimize pendency of litigation. But there are certain exceptions provided therein where an appeal can be filed even though the tax effect involved is less than the prescribed monetary limit. He submitted that in case the Departmental Authority decides to file appeals on the ground that case is covered by any of the exception, the authority is not duty bound to specify such exception in the grounds of appeal because there is no requirement under the law to do so. He further argued that the Instructions could not substitute any provisions of law. The power for filing an appeal is conferred on the Income-tax Authorities by the statute. He submitted that the Income-tax Authority files an appeal as per powers conferred under the Act. The Board cann....
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....dgment of jurisdictional High Court/Supreme Court would relate back to the date when particular section was inserted in the Act. This according to him would be a mistake of law apparent from record which could be rectified under section 154/254(2). Thus, referring to the judgment of Hon'ble Punjab & Haryana High Court in the case of Rani Paliwal, the learned DR submitted that the Hon'ble High Court has held that even if appeal filed by the Revenue is below a particular limit, the Tribunal is bound to decide the same on merits. He submitted that in view of the judgment of jurisdictional High Court, the Miscellaneous Applications filed by the Revenue in the aforesaid cases deserve to be allowed. He further submitted that relying on the judgment of the Hon'ble Punjab & Haryana High Court in the case of Rani Paliwal, the ITAT, Amritsar Bench has allowed the Miscellaneous Applications filed by the Revenue in several cases. He particularly referred to the Misc. Application Nos. 128, 95, 98, 96, 101, 91, 92, 97, 93 and 127 (Asr.)/2004. He, therefore, submitted that present Misc. Applications also deserve to be allowed. 5.3 Shri R.K. Raina, Ld. DR has also filed written subm....
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.... appeal before the Hon'ble High Court. He submitted that this decision of the ITAT Chandigarh Bench has been followed by various Benches of the ITAT including ITAT Amritsar Bench in several such cases. He particularly referred to the decision of ITAT Amritsar Bench in the case of ITO v. Partap Builders [IT Appeal No. 33 (Asr.) of 2001]. He submitted that in addition to the decision of the ITAT Chandigarh Bench in the case of Dharamvir, the ITAT Amritsar Bench has also followed the judgment of Hon'ble Bombay High Court in the cases of Executors of Late D.T. Udeshi, Cameo Colour Co. He further submitted that the decisions of the ITAT Amritsar Bench have been accepted by the Department. 6.1 Proceeding further, the Id. counsel submitted that Instructions issued by the CBDT are binding on the Income-tax authorities. He relied on the Judgment of Hon'ble Supreme Court in the case of UCO Bank v. CIT [1999] 237 ITR 889, the judgment of Andhra Pradesh High Court in the case of CIT v. Smt. Nayana P. Dedhia [2004] 270 ITR 572, the judgment of Hon'ble Allahabad Court in the case of CIT v. Smt. Parkashwati [1994] 210 ITR 567 and the judgment of Hon'ble Madras High Court in....
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....claim of the assessee by relying on such instructions and the same authority or some other authority might decide such matters against the assessee by ignoring such instructions. He submitted that this approach would be contrary to the judgment of Hon'ble Supreme Court in the case of Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219. He also submitted that the judgment of Hon'ble Punjab & Haryana High Court in the case of Rani Paliwal was rendered in all together different context. He submitted that the Hon'ble High Court dismissed the appeal of the assessee on the ground that such plea was not taken before the authorities below. But it does not mean that the Hon'ble High Court has decided the issue on merits. Therefore, this judgment is not binding in nature. 8. Sh. S.K. Bansal, Advocate, appearing for the intervener adopted the same arguments and submitted that the instructions issued by the CBDT were binding on the Income-tax authorities. He relied on 9 judgments of the Hon'ble Supreme Court and 21 judgments of the various High Courts mentioned in Annexure - A of this order, in support of the proposition that the instructions issued by the CBDT ....
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....ding? (iii) Whether the mistakes pointed out by the Revenue in the Misc. Applications could be rectified by the Tribunal under section 254(2) of the Income-tax Act or not? 11.1 Before proceeding to decide these questions it would be relevant to reproduce hereunder the provisions of section 119 which empower the CBDT to issue directions to the Field Officers of the Income-tax Department. This section reads as under: "119(1) The Board may, from time-to-time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board: Provided that no such orders, instructions or directions shall be issued- (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the Commissioner (Appeals) in exercise of his appellate functions. (2) Without prejudice to the generality of the forego....
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....ing of section reproduced above, it is clear that subsection (1) of section 119 refers to orders, instructions and directions to the Income-tax authorities by the Board. The section itself provides that all such authorities and all other persons employed in the execution of this Act, shall observe and follow such orders, instructions and directions of the Board. Only exceptions provided under the proviso are that such instructions cannot interfere with the discretion of the CIT(A) in exercise of appellate functions and also cannot direct any Income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner. Otherwise, sub-section (1) of section 119 itself mandates that such instructions shall be binding on the Income-tax authorities. Sub-section (2) of section 119 refers to specific orders with reference to any class of income or class of cases either by way of relaxation of any of the provisions of section mentioned therein or with reference to class of income or class of cases. These instructions could be in the form of guidelines, principles or procedure to be followed by the Income-tax authorities in the work relating to assessment, ....
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....he Hon'ble Apex Court in the case of UCO Bank. The Hon'ble Supreme Court observed that the CBDT under section 119 of the Income-tax Act, 1961, has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its powers, by issuing circulars in exercise of its statutory powers under section 119 of the Act which are binding on the authorities in the administration of the Act. However, under section 119(2)(a), the circulars as contemplated therein cannot be adverse to the assessee. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. Such power is beneficial power given to the Board for proper administration of Direct Tax Laws so that undue hardship may not be caused to the assessee and such laws are correctly applied. Such circulars are binding on the tax authorities. In the case of CCE v. Dhiren Chemical Industries [2002] 254 ITR 554, the Hon'ble Supreme Court has gone to the extent of saying that regardless of the interpretation that the Hon'ble Supreme Court has placed on the phrase, if there were circulars which have been issued by the Central Board of Excise and Cus....
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....rovisions of section 151A are in pan materia with the provisions of section 119 of the Income-tax Act, 1961, and section 37B of the Central Excise Act. Parliament introduced section 151A by an amendment to the Customs Act, 1962; in 1985 but with effect from December 27, 1985 (Act 80 of 1985), when this court had already construed identical language in the manner indicated. It may be assumed that Parliament had legislatively approved the construction by using the exact words so construed again in the Customs Act. There is, therefore, no reason why the principles enunciated by this Court under the two earlier Acts should not also be determinative of the construction put on the latter in respect of a materially similar statutory provision. This was also not argued by the appellant." From the above, it is clear that Hon'ble Apex Court has not only referred to the binding nature of the circulars of the Board, but even the instructions issued by the Board. The Hon'ble Apex Court has also referred to the provisions of section 151A of the Customs Act, section 37V of the Central Excise Act and equated these provisions with section 119 of the Income-tax Act. The Hon'ble Suprem....
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....issed on account of smallness of tax effect. (5) CIT v. Bhagwan Cloth Store [2002] 170 Taxation 503 (MP) In this case also, the Hon'ble Madhya Pradesh High Court has dismissed the reference by referring to Board's Instruction No. 1903 prescribing monetary limit on the ground that the tax effect was below the monetary limit prescribed by the Board. While dismissing the appeal, the Hon'ble Madhya Pradesh High Court also took into account the fact that on identical facts reference application was dismissed by the High Court vide its order dated 24-2-1999 in ITR 69 and 70 of 1998 and the SLP filed against the above order before the Hon'ble Supreme Court was also dismissed. (7) Smt. Aruna Luthra's case In this case, the Hon'ble High Court held that once the jurisdictional High Court or Supreme Court enunciates a law, the same would relate back to the date when provisions were introduced in the Act. This would be a mistake of law apparent from record, which could be rectified under section 154. However, the Hon'ble High Court referred to the Instructions issued by the Board prescribing the monetary limit of filing an appeal ....
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....r, these instructions are issued by the Board after due deliberations after taking into account the various aspects of the matter including the likely revenue impact. These also reflect the policy of the Government. Therefore, it is the duty of every officer working in the Department to follow the same moreso when these have the statutory backing/force. The judgment of Apex Court in the case of J.R. Raghupathy relied upon by the ld. DR has no application to the facts of the present case because, section 119 of the Act is in the statute itself. Therefore, instructions issued by the Board have statutory force. 11.6 Thus, in the light of detailed discussions in the preceding paragraphs and legal position discussed above, we are of the considered opinion that instructions of the Board including those prescribing monetary limit for filing the appeal before the various forums are binding on the Income-tax authorities. The law does not draw any distinction between instructions/circulars issued under sections 119(1) and 119(2) of the Income-tax Act. Both are binding on the Departmental Officers. We hold accordingly. Therefore, this question is decided accordingly. 12. The next asp....
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.... of law. Now in the present case, the Hon'ble High Court has observed with the opening sentence itself that none of the questions raised is a question of law much less a substantial question of law and, therefore, the appeal deserves to be dismissed. (ii) As regards the plea of the Id. counsel that tax effect in the present case being less than Rs. 1,00,000, the Hon'ble High Court observed that the assessee cannot be allowed to raise this plea for the first time because no such plea was taken before the Tribunal. (iii) As regards Board's circular, the Hon'ble Court has observed that these were only instructions issued to the Income-tax authorities not to file appeals where the tax effect was less than Rs. 1,00,000 and the Tribunal is not bound by any such instruction. (iv) Once the Department files an appeal, the Tribunal was bound to decide the same on the merits. This question, in their opinion was not a question of law. 12.1 From the above, it is clear that the Hon'ble High Court dismissed the appeal of the assessee on the ground that the issue raised did not involve any question of law much less of substantial question of law. A....
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....ous judgments of the Hon'ble Supreme Court and High Courts on these issues. Thus, we are of the opinion that such observations of the Hon'ble High Court are in the nature of passing remarks only. 12.2 In this regard, it would be appropriate to refer to the judgment of Hon'ble Supreme Court in the case of S. Shanmugavel Nadar v. State of Tamil Nadu [2003] 263 ITR 658. The facts of the case before the Hon'ble Supreme Court were that the constitutional validity of an Amendment Act of 1960 amending the Madras City Tenants Protection Act, 1921 was upheld by the Madras High Court in Varadaraja Pillai [1972] 85 Mad. LW 760. Appeals by special leave were dismissed by the Hon'ble Supreme Court on the technical ground that the State of Madras, a necessary party, had not been impleaded. When the constitutional validity of an Amendment Act, 1996, amending the 1921 Act, was challenged a Division Bench of the High Court entertained some doubt about the correctness of the earlier decision in Varadaraja Pillai's case and the matter was referred to a Full Bench for reconsidering that decision. The Full Bench held that, appeals from the decision in Varadaraja Pillai's ....
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....was not allowed to be raised. Therefore, observations were made by the Hon'ble High Court without hearing the parties and without considering the various judgments of the Hon'ble Supreme Court on the issue of binding nature of the instructions. These were only passing remarks, not binding in nature. 12.3 Without prejudice and independent of the view that the observations made by the Hon'ble High Courts were only passing remarks, we wish to mention that even if it is considered that these observations are binding, still the issue which requires to be decided is whether the same constitutes any mistake of law or facts apparent from the record, which could be rectified under section 254(2) of the Income-tax Act. The issue involved in the present cases are miscellaneous applications filed under section 254(2) of the Income-tax Act and the appeals in these cases already stand dismissed by the Tribunal. It is settled position under the law that under section 254(2) of the Act, the Tribunal has limited powers. The issue whether the same falls within the powers of the Tribunal or not is dealt within the succeeding paragraphs. 13. As per provisions of section 254(2) of the....
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.... the case of Smt. Baljeet Jolly v. CIT [2001] 250 ITR 113, where the Hon'ble High Court held that powers of the Tribunal to rectify an errors are limited only to rectify mistakes, which were apparent from record. Mistakes discovered by a complicated process of investigation, argument and proof did not fall within the purview of section 254(2) of the Income-tax Act. Further the Hon'ble Calcutta High Court in the case of CIT v. Anamika Builders (P.) Ltd. [2001] 251 ITR 585 has held that once a possible view had been taken by the Tribunal, it cannot be changed in a miscellaneous petition filed by the assessee. 13.3 In the case of CIT v. Ideal Engineers [2001] 251 ITR 743, the Hon'ble Andhra Pradesh High Court has held that order under section 254(2) recalling its earlier order on the ground that same was erroneous amounts to review of its original order. The same is not permitted under section 254(2) of the Act. In the case of Karan & Co. v. ITAT [2001] 253 ITR 131, the Hon'ble Delhi High Court has held that Tribunal has no powers to recall its original order under section 254(2) of the Income-tax Act. 13.4 Now when we examine the present case in the light of abo....
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....n'ble Supreme Court and High Courts cited by Shri S.K. Bansal, Advocate, as Intervener Sr. No. Supreme Court Cases 1. CIT v. Anjum M.H. Ghaswala and Ors. (2001) 252 ITR 1 (SC) 2. UCO Bank v. CIT: (1999) 237 ITR 889 (SC) 3. Collector of Central Excise v. Dhiren Chemicals Inds.: (2002) 254 ITR 554 (SC) 4. Union of India and Anr. v. Azadi Bachao Andolan and Anr. (2003) 263 ITR 706 (SC) 5. CST v. Indra Ind.: (2001) 248 ITR 338 (SC) 6. Berger Paints India Ltd: (2004) 266 ITR 99 (SC) 7. Goodyear v. State of Haryana: (1991) 188 ITR 402 (SC) 8. CIT v. Sun Engg. Works (P) Ltd.: (1992) 198 ITR 297 (SC) 9 . Commr. of Customs v. Indian Oil Corporation Ltd. and Anr.: (2004) 267 ITR 272 (SC) High Courts Cases 10. Unit Trust of India and Anr. v. P.K. Unny and Ors.: (2001) 249 ITR 612 (Bom) 11. Smt. Pati Devi v. ITO and Anr.: (1999) 240 ITR 727 (Kar) 12. CIT v. ITAT and Ors.: (1998) 232 ITR 207 (Del) 13. CIT v. Sm....