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Income-Tax Officer, Wd-3(1), Asansol () v. Dinesh Kumar Sharma ().

Income Tax Appellate Tribunal

Feb 29, 2012

Judgment

Subsequent
References

CaseIQ

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Summary of Opinion — Mahavir Singh, J.M.

Factual and Procedural Background

This is an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals), Asansol (CIT(A)) in Appeal No. 225.CIT(A)/Asl/W-3(1)/Asl/2009-2010 dated 28.07.2011, pertaining to assessment framed by the ITO, Wd-3(1), Asansol under section 143(3) of the Income Tax Act, 1961 for Assessment Year 2007-2008 by order dated 31.12.2009.

The Revenue's appeal was filed before the Tribunal on 01.11.2011. The appeal as presented to the Bench was delayed in filing by 24 days; the Revenue filed an affidavit explaining the reasons for the delay, which described the preparation and forwarding of the assessment sanction report (A.S.R.) and internal office dates culminating in preparation of appeal papers on 01.11.2011. The learned counsel for Revenue conceded that there was a reasonable cause for the delay and the Bench admitted the appeal for adjudication on the merits of the jurisdictional/maintainability issue.

At hearing, the Tribunal examined whether the Revenue's appeal was maintainable because the tax effect in dispute was below the monetary limit prescribed by the Central Board of Direct Taxes (CBDT) Instruction No. 3/2011 (dated 09.02.2011). The amount in dispute was Rs. 5,80,151/-, and the tax demand (tax effect) was stated as Rs. 1,85,648/-. The Tribunal considered the applicability of Instruction No. 3/2011 and relevant judicial authorities, and whether any exceptions to the Instruction applied to admit the appeal.

Legal Issues Presented

Whether the appeal should be admitted notwithstanding a 24-day delay in filing (i.e., whether reasonable cause existed and delay should be condoned).
Whether the Revenue's appeal is maintainable before the Tribunal given that the tax effect (Rs. 1,85,648/-) is below the monetary limit prescribed by CBDT Instruction No. 3/2011 (Rs. 3,00,000/- for appeal before the Appellate Tribunal) applicable to appeals filed on or after 09.02.2011.
Whether any exception to Instruction No. 3/2011 (as enumerated in that Instruction) applies so as to permit filing/entertainment of the appeal despite the tax effect being below the prescribed limit.

Arguments of the Parties

Appellant's (Revenue) Arguments

The Revenue filed an affidavit explaining a 24-day delay in filing the appeal; the affidavit traced internal office steps: A.S.R. prepared and forwarded by the Assessing Officer on 12.08.2011, forwarded by the Joint CIT office on 18.08.2011, direction by CIT to file the second appeal on 21.10.2011, and appeal papers prepared on 01.11.2011.
The learned counsel for the Revenue fairly conceded the position concerning delay and accepted there was a reasonable cause for condonation of delay; on that basis the Bench admitted the appeal for adjudication of the maintainability issue.

Respondent's / Departmental Representative (DR) Position

On query from the Bench, the learned DR could not point to any of the exceptions listed in the CBDT Instruction (such as a loss case with tax effect over limit; composite order across assessment years; other assessment year pending on the same issue; constitutional challenge to provisions; Board's order/circular held illegal or ultra vires; or accepted Revenue Audit objection) that would permit filing the appeal notwithstanding the tax-effect threshold.
There were no detailed arguments recorded in the text about the merits of the disputed tax issues themselves; the DR's inability to identify an applicable exception was decisive on maintainability.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
CIT v. Delhi Race Club (ITA No. 128/2008) — Hon'ble Delhi High Court (03.03.2011)	Applied the CBDT guidelines and held that appeals where the tax effect is below the prescribed monetary limit are not to be entertained; referred to the Board's guidance limiting appeals where tax effect is less than specified thresholds.	The Tribunal relied on this decision to support the proposition that revised monetary limits contained in CBDT instructions apply to pending appeals and reinforce that appeals with tax effect below the prescribed limit should not be entertained.
Commissioner of Income Tax-III v. P.S. Jain and Co. (ITA No. 179/1991) — (decision referenced dated 2nd August, 2010)	Held (as cited) that such circulars/instructions would apply to pending cases.	The Tribunal cited this decision to reinforce that Instruction No. 3/2011 (the revised monetary limits) applies to appeals pending as on the date the Instruction governs.
Instruction No. 3/2011 (CBDT) dated 09.02.2011	Prescribes monetary limits for filing departmental appeals: Rs. 3,00,000 for appeals before Appellate Tribunal; along with definitions of "tax effect" and specified exceptions where appeals should be contested regardless of monetary limit.	The Tribunal applied the Instruction to the appeal filed on 01.11.2011, concluded the applicable monetary limit for appeal before the Appellate Tribunal was Rs. 3,00,000, and determined that the tax effect in the present appeal (Rs. 1,85,648) was below that limit; therefore, absent an applicable exception, the appeal was not to be entertained.

Court's Reasoning and Analysis

The Tribunal followed a stepwise approach in its analysis, grounded on the record and the CBDT Instruction:

Admission despite delay: The appeal was initially delayed by 24 days. The Revenue filed an affidavit explaining the internal office timeline for preparing and forwarding the Assessment Sanction Report (A.S.R.) and appeal papers. The learned counsel for the Revenue conceded there was a reasonable cause for the delay. On that concession, the Tribunal admitted the appeal for adjudication of its maintainability (i.e., it condoned the delay and proceeded to decide whether the appeal could be entertained on the merits of jurisdiction/monetary limit).
Identification of the relevant monetary threshold: The Tribunal noted that the appeal was filed on 01.11.2011 and therefore fell to be governed by CBDT Instruction No. 3/2011 dated 09.02.2011, which prescribes a monetary limit of Rs. 3,00,000 for filing appeals before the Appellate Tribunal (ITAT). The Tribunal recorded the amounts: total amount in dispute Rs. 5,80,151 and tax effect/tax demand stated as Rs. 1,85,648.
Reliance on judicial authorities: The Tribunal cited the decision of the Delhi High Court in CIT v. Delhi Race Club and the view in Commissioner of Income Tax-III v. P.S. Jain and Co., which (as cited) support the application of CBDT guidelines/instructions to pending cases. Relying on these authorities, the Tribunal held that the revised monetary limit of Rs. 3,00,000 would apply to the appeal before it.
Examination of exceptions: The Tribunal queried the learned Departmental Representative about potential exceptions enumerated in Instruction No. 3/2011 (for example: loss cases with tax effect above limit; composite orders spanning assessment years; other years pending on the same issue; constitutional challenges; Board's orders/circulars declared ultra vires; or accepted Revenue Audit objections). The DR could not point to any of these exceptions as applicable in the present matter.
Conclusion on maintainability: Because the tax effect (Rs. 1,85,648) was below the Rs. 3,00,000 threshold and no exception applied, the Tribunal concluded that the appeal could not be entertained. The Tribunal therefore dismissed the Revenue's appeal in limine as unadmitted and did not proceed to decide the substantive merits of the tax issues.

Holding and Implications

Holding:

The appeal of the Revenue is dismissed.

Implications:

Direct effect on the parties: The Revenue's appeal was dismissed in limine (treated as unadmitted) because the tax effect (Rs. 1,85,648/-) was below the monetary limit of Rs. 3,00,000/- prescribed by CBDT Instruction No. 3/2011 for appeals before the Appellate Tribunal, and no exception under that Instruction applied.
The Tribunal did not decide any substantive tax issues on merits because the appeal was dismissed on the threshold ground of maintainability. The dismissal was procedural: the appeal was not entertained due to the tax-effect threshold prescribed by the CBDT Instruction (as interpreted in the cited authorities).
No new legal precedent was created by this order; the Tribunal applied existing CBDT Instruction No. 3/2011 and relied on earlier judicial decisions to conclude that the Instruction applies to appeals filed on or after 09.02.2011, including pending appeals of the nature described in the text.

Show all summary ...

Mahavir Singh, J.M:— This appeal by revenue is arising out of order of CIT(A), Asansol in Appeal No. 225.CIT(A)/Asl/W-3(1)/Asl/2009-2010 dated 28.07.2011 Assessment was framed by ITO, Wd-3(1), Asansol u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2007-2008 vide his order dated 31.12.2009

2. This appeal of revenue has been delayed by 24 days. Revenue has filed affidavit explaining the reasons for delay, which are as under:

“i) That that A.S.R was prepared by the A.O and forwarded to the O/o the Jt. CIT, Range-3, Asansol along with assessment records on 12.08.2011 for considering the issue of filing second appeal. But the O/o the JCIT, Asansol forwarded the A.S.R along with Assessment records on 18.08.2011 The Ld. CIT, Asansol directed the A.O to file the Second Appeal on 21.10.2011.

ii) The Appeal papers have been prepared and made on 01.11.2011 for submission before Hon'ble ITAT, Kolkata.”

When this was pointed out, the Ld. Counsel fairly conceded the position. In view of the fact that Ld. Counsel conceded that there is reasonable cause, we admit the appeal and adjudicate the issue.

3. At the time of hearing we find that tax effect in this appeal of the revenue is below the prescribed monetary limits for filing of appeal before ITAT and other superior courts. It seems that the revenue's appeal, the amount in dispute involved is Rs. 5,80,151/- on which tax demand to be raised on the assessee is Rs. 1,85,648/-. The only issue now remains before us is that the appeal of the revenue is below the prescribed limit of tax effect in view of the Board's Instruction issued from time to time revising the monetary limits for filing of appeals by the Department before ITAT and other superior courts. The appeal relates to Assessment Year 2007-2008 and filed before the Tribunal on 01.11.2011 Since this appeal filed on 01.11.2011, the same will be covered by Instruction No. 3/2011 issued on 09.02.2011 i.e the revised monetary limit for filing of appeal before ITAT, whereby the CBDT has fixed the limit of Rs. 3 lacs. Hon'ble Delhi High Court in the case of CIT v. Delhi Race Club in ITA No. 128/2008 dated 03.03.2011 has held as under:

“The tax effect involved in the present appeal is Rs. 4,65,860/-. As per the recent guidelines of the CBDT, appeal in those cases where the tax effect is less than 10 lacs, are not to be entertained.

This court in the case of Commissioner of Income Tax-III v. P.S Jain and Co. being ITA No. 179/1991 decided on 2nd August, 2010 has taken a view that such circular would also apply to pending cases.”

In view of the decision of Hon'ble Delhi High Court, the revised monetary limit of Rs. 3 lacs as per Instruction No. 3/2011 will apply to pending appeals.

The relevant circular issued by CBDT reads as under:

“INSTRUCTION NO. 3/2011 [F. NO. 279.MISC. 142/2007-ITJ], DATED 9-2-2011

Reference is Invited to Board's instruction No. 5/2008 dated 15-5-2008 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 merits before 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 the monetary limits given hereunder:—

S. No. Appeals in Income-tax matters Monetary Limit (in Rs.) 1. Appeal before Appellate Tribunal 3,00,000 2. Appeal u/s. 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 because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.

4. For this purpose, “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, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against.

5. The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal, can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeal shall be filed in respect of all such assessment years even if the ‘tax effect’ is less than the prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which ‘tax effect’ exceeds the monetary limit prescribed. In case where a composite order/judgment involves more than one assessee, each assessee shall be dealt with separately.

6. In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, 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 the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the 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. As the evidence of not filing appeal due to this instruction may have to be produced in courts, the judicial folders in the office of CIT must be maintained in a Systemic manner for easy retrieval.

8. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect.

a. Where the Constitutional validity of the provisions of an Act or Rule are under challenge, or

b. Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or

c. Where Revenue Audit objection in the case has been accepted by the Department.

9. The proposal for filing Special Leave Petition under Article 136 of the Constitution before the Supreme Court should, in all cases, be sent to the Directorate of Income-tax (Legal & Research), New Delhi and the decision to file Special Leave Petition shall be in consultation with the Ministry of Law and Justice.

10. The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income-tax, filing of appeals in other direct tax matters shall continue to be governed by relevant provisions of statute and rules. Further, filing of appeal in cases of Income-tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case.

11. This instruction will apply to appeals filed on or after February, 09, 2011. However, the cases where appeals have been filed before February 09, 2011 will be governed by the instructions on this subject, operative at the time when such appeal was filed.

12. This issues under section 268(1) of the Income Tax Act, 1961.”

4. On query from the Bench, the Ld. DR could not point out any of the exceptions as provided in the Circular as under:

(a) that this is a loss case having tax effect more than the prescribed limit, which should be taken into account,

(b) that this is a composite order for many assessment years where tax effect will be more than the prescribed limit as per para 5 of above instructions,

(d) that in the case of revenue, where constitutional validity of the provisions of the Act or I.T Rules 1962 are under challenge,

(e) that Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires,

(f) that Revenue Audit Objection in the case has been accepted by the Department and the same is under challenge.

The Ld. DR could not point out any of the exceptions as provided above. Accordingly, this being a tax effect case, we dismiss the appeal of the revenue in limine without going into merits and as unadmitted.

5. In the result, appeal of revenue is dismissed.