TaxTMI 
TaxTMI 
2006 (7) TMI 252
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....While doing so, he observed that the assessee was following mercantile system of accounting and any expenditure incurred has to be included in the cost of project and debited to the Profit & Loss A/c. and cost of project has to be shown as closing stock of work-in-progress, which the assessee has shown in its Balance sheet. In computing the income, the assessee has reduced the work-in-progress and thereby lowering the income for the year under consideration. This cannot be accepted in view of the fact that while completing the assessment for the assessment years 1993-94 and 1995-96, similar view was taken. He also noted that the ld. CIT(A)-II vide order dated 28-7-1998 has allowed relief to the assessee and as the Department is in appeal before the ITAT, therefore, following its decision of the earlier years, he disallowed the claim of deduction to the assessee. 3. The ld. CIT(A) in appeal following his order dated 28-7-1998 in Appeal No. 172/A-II/97-98 deleted the disallowance and decided the issue in favour of assessee. Revenue being aggrieved by the said order of the CIT(A) is in appeal before us. 4. At the outset, the ld. Authorised Representative for the assessee Shri S.K. T....
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....s determined is allowed to be carried forward and adjusted with the profits of the subsequent year. 6. The second contention of the Id. Departmental Representative was that once an appeal is filed by the Department, the Tribunal is bound to decide the same even if the tax effect is below monetary limit as per Instruction issued by the CBDT. For this, he placed reliance on the decision of the Hon'ble Punjab & Haryana High Court in case of Rani Paliwal v. CIT [2004] 268 ITR 220, wherein it was held that Board Circular is only Instruction issued to the Income-tax Authorities not to file appeals, where the tax effect is less than Rs. 1 lakh. The Tribunal is not bound by any such Instruction and once the Department files an appeal, the Tribunal was bound to decide the same on the merits. He also relied on the decision of the Hon'ble Delhi High Court in case of CIT v. ITAT [1998] 232 ITR 207, wherein it was held that "the Central Board of Direct Taxes Instruction are binding on the Department. If the instant case was covered by a policy laid down by the Central Board of Direct Taxes, in that case no fault could be found with the order of the Tribunal refusing to state the case and there....
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....ere it was held that Instructions of the Central Board of Direct Taxes, dated 27-3-2000 for not filing appeal before the Tribunal, where the tax effect in the appeal was less than Rs. 1 lakh are only internal matters of the Department and the assessee cannot object for filing of appeal despite such an Instruction. The appeal is clearly maintainable before the Tribunal on behalf of the Department under section 253(2) of the Income-tax Act, and this right to file an appeal is a statutory right and cannot be taken away or prohibited by executive instructions. 10. The 4th and last contention of the ld. Departmental Representative for the Revenue was that in a case which involved substantial question of law as referred to Special Bench, the appeal can be" filed before the Tribunal and in those cases, the Instruction No. 1979 read with Instruction No. 1777, dated 4-11-1987 and Instruction No.2 of 2005 are not applicable and the appeal of the Revenue cannot be dismissed on that count. 11. He also relied on the decision of the Hon'ble Bombay High Court in case of CIT v. Pithwa Engg. Works [2005] 276 ITR 519, where it was held that the CBDT Circular dated 27-3-2000 raising the earlier lim....
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....thorities and the material available on record. The short question to be decided by us is whether the appeal filed by the revenue is maintainable in view of the CBDT Instruction No. 1979, dated 27-3-2000 which states that where the tax effect in an appeal is less than Rs. 1 lakh, then the department should not file any appeal before the Tribunal. The facts leading to this case are that in the year under appeal, the assessee has claimed expenditure of Rs. 69,84,089 on account of administrative overhead in respect of Sodepur and Brahmaputra Projects, which are under construction. The assessee has included this expenditure in the computation of income in the assessment year 1997 -98 when the said projects were completed and the revenue from projects was recognized as income. The Assessing Officer in the assessment made for the assessment year 1997-98 has added the sum of Rs. 69,84,089 while determining the income of the assessee for the assessment year 1997-98, but in the assessment year 1996-97 has not allowed deduction for the sum of Rs. 69,84,089 claimed by the assessee. Thus if we uphold the addition in the present year under appeal and consequently the Revenue has to delete the a....
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.... as under:- "The Central Board of Direct Taxes Instructions are binding on the Department. If the instant case was covered by a policy laid down by the Central Board of Direct Taxes, in that case no fault could be found with the order of the Tribunal refusing to state the case and there was no reason by the Hon'ble High Court to interfere with such discretion of the Tribunal as has been exercised. The Hon'ble High Court could not ordinarily breach of policy decision and Departmental Instructions which have a public purpose behind it. However, if the case is not covered by the said Instruction or is covered by one of the exceptions carved out in the Instructions themselves, in that case, the denial of reference would be failure to exercise its jurisdiction statutorily vested in the Tribunal. Inasmuch as, the Tribunal has not examined the case from that point of view and adequate material was not available before the Hon'ble High Court and enabling formation of an opinion in that way, the present case should be sent back to the Tribunal for consideration afresh." Thus the Hon'ble Delhi High Court opined that only in cases which fall in the exception carved out in the CBDT Instructi....
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....e found above that the Revenue involved in the present case is NIL and hence the decision in the case of Dharamvir, wherein the Tribunal has held that the appeal is maintainable when substantial revenue is involved, is found not applicable to the instant case. 17. The last contention of the ld. D.R. was that as the issue has been referred to a Special Bench, it implies that the issue involves a substantial question of law. We find that section 255(3) of the Act empowers the President of the Tribunal to constitute a Special Bench. The said section reads as under - "255. (3) The President or any other member of the Appellate Tribunal authorized in this behalf by the Central Government may, sitting singly, dispose of any case which has been allotted to the Bench of which he is a member and which pertains to an assessee whose total income as computed by the [Assessing] Officer in the case does not exceed five hundred thousand rupees, and the President may, for the disposal of any particular case, constitute a Special Bench consisting of three or more members, one of whom shall necessarily be a judicial member and one an accountant member." 18. Thus it is observed that it is not nece....