R.C. Sharma, Accountant Member. - This is an appeal filed by the revenue against the order of the CIT (Appeals) dated 27-3-2004 for the assessment year 2001-02, in the matter of order passed by the Assessing Officer under section 143(3) of the Income-tax Act, 1961. The grounds of the revenue are as under :

"1. That the learned CIT (Appeals)-I, Dehradun has erred in law and on facts in deleting the addition made by applying the provisions of section 40A(2), not disputed by the assessee at any stage before the Assessing Officer.

2. That learned CIT (Appeals)-I, Dehradun has erred in law and on facts in deleting the disallowance made on expenses by the Assessing Officer."

2. Rival contentions have been heard and record perused. The facts in brief are that the assessee is a partnership firm consisting of two partners. It is engaged in the business of sales and service of Hero Honda Motorcycles, swaraj mazda buses, generator sets for the last fifteen years. In addition to the partners themselves, the other family members who are well-qualified were also associated with the firm as whole time employees, on which salary and incentives were paid to them as per work performed by them. During the course of assessment under section 143(3), the Assessing Officer disallowed part of the payment by invoking the provisions of section 40A(2) of the Income-tax Act, 1961 on the allegations that payment was excessive and unreasonable. With regard to payment of salary and incentive to Shri Amit Oberoi, it was submitted before the Assessing Officer that Shri Amit Oberoi was qualified engineer and also completed diploma in sales and marketing, he was looking after marketing of motorcycles and also workshop. Monika Oberoi was post-graduate and diploma holder in manufacturing technology, was working as customer satisfaction manager specifically for insurance claims, etc. Thus, she was looking after sales through finance from finance companies and was paid salary of Rs. 69,600. In respect of Shri Amit Oberoi, the Assessing Officer found that he was paid salary of Rs. 1,50,000 and in addition to which he was paid incentive at the rate of Rs. 100 per motorcycle on sales of over and above 500 motorcycles. It was explained that Shri Amit Oberoi was looking after sales and workshop for which he was being paid salary of Rs. 12,500 per month. In respect of Smt. Monica Oberoi, the Assessing Officer observed that she was diploma holder in manufacturing technologies which was not business of the assessee and her qualification was nothing to do with the business of the assessee. He, therefore, held that such payment of salary and incentives to the persons falling under definition of relative as defined under section 40A(2)(b) of the Act was nothing but an intelligent device to dodge the revenue. He further stated that gross profit rate for the year was declined to 4.55 per cent as compared to the gross profit rate of immediately preceding assessment year which was at 4.56 per cent. The Assessing Officer thus held that all the four persons being close relative of the partners have been given benefit out of the way, they have been paid salary/incentive more than justified. He, therefore, disallowed incentive of Rs. 1,56,000 paid to Shri Amit Oberoi and of Rs. 51,000 paid to Ambuj Oberoi. In respect of salary paid to Smt. Anita Oberoi and Monika Oberoi, the Assessing Officer held that salary of Rs. 2,500 per month was reasonable, he, therefore, disallowed balance salary of Rs. 39,600 and Rs. 33,600 paid to Smt. Anita Oberoi and Monika Oberoi respectively.

3. By the impugned order, the CIT (Appeals) deleted the disallowance of Rs. 1,56,000 paid as incentive to Shri Amit Oberoi by observing that Shri Amit Oberoi is a bona fide employee of the firm, looking after the workshop and also the sale and marketing of motorcycles, that he has adequate and professional training and background to handle the job, that he is a regular assessee at Dehradun and the entire income received by him was being assessed to tax, and that sales of motorcycles in the last three years of his employment have increased tremendously, bringing in considerably higher profit. He further observed that there was nothing on record to suggest that incentive at the rate Rs. 100 per motorcycle was excessive or unreasonable. He, therefore, deleted the disallowance on account of incentive paid to Shri Amit Oberoi. With respect to sales linked incentive of Rs. 1,01,000 paid to Shri Ambuj Oberoi, the CIT (Appeals) found that incentive of Rs. 1,01,000 paid to Shri Ambuj Oberoi was inclusive of all expenses, such as local/outstanding travelling, sales assistance/conveyance etc. He further observed that sales of Swaraj Mazda vehicle and generator set have increased tremendously in the last three years because of the active contribution of Shri Ambuj Oberoi. A finding has also been recorded by the CIT (Appeals) to the effect that if the assessee-firm had to appoint a sales executive to visit the potential customers, it would have annually cost about Rs. 60,000 plus sales target incentive of Rs. 50,000 plus EPF, ESI, TA & DA at the rate applicable from time to time, thus the total annual cost to the firm towards expenses incurred on the assessee’s sales executive will certainly be higher than incentive paid to Mr. Ambuj Oberoi. As per CIT (Appeals), there was nothing on record to suggest that payment of Rs. 1,01,000 to Shri Ambuj Oberoi was excessive or non-genuine.

4. With regard to salary paid to Smt. Anita Oberoi, the CIT (Appeals) found that there is no dispute regarding genuineness and status of Smt. Anita Oberoi, as an employee of the assessee-firm, the Assessing Officer has accepted salary payment to the extent of Rs. 2,500 per month as reasonable thereby accepting the genuineness of salary of Rs. 30,000 per year. The CIT (Appeals) found that Assessing Officer has not given any basis of working out balance salary of Rs. 39,600 as unreasonable and no material fact is on record to suggest that the amount in respect of which the disallowance has been made was excessive or unreasonable. Similarly in respect of salary paid to Smt. Monika Oberoi, the CIT (Appeals) found that she was graduate from St. Stephen College, New Delhi and diploma holder in manufacturing technology from South Delhi Polytechnic for Women and that before marriage she was working for Delhi based manufacturing company dealing in export. He thus found that as per the assessment order, genuineness and the status of Smt. Monika Oberoi as an employee of the assessee-firm has not been disputed. The Assessing Officer has accepted salary to the extent of Rs. 2,500 per month as reasonable thereby accepting the genuineness of the salary of Rs. 30,000 per year. He further observed that Assessing Officer has not given any basis for working out balance salary of Rs. 33,600 as unreasonable and no material fact is on record to suggest that amount in respect of which the disallowance has been made was excessive or unreasonable.

5. Aggrieved by the above deletion of the disallowance, made by the Assessing Officer under section 40A(2), the revenue is in appeal before us.

6. It was argued by learned DR that the payment of salary and incentive were made to the close relative just to divert the profit of the firm. He further submitted that keeping in view the handsome salary paid to the partner of the assessee-firm, there was no justification for paying such a higher salary and incentive to their sons and daughter-in-law. He thus justified the order of the Assessing Officer with regard to excessive payment made to persons falling under section 40A(2)(b) of the Income-tax Act, 1961.

7. On the other hand, it was contended that by the learned AR that all the persons were being paid salary and incentive as per their technical qualifications and experience, and the services put by them. Our attention was drawn to the tremendous increase in sales figure as well as gross profit during the year under consideration as compared to the earlier years. As per learned AR both Amit and Ambuj Oberoi was in higher tax bracket, therefore, there was no occasion for any reduction in the tax liability by paying salary and incentive to these persons for the services rendered by them. He further relied on the detailed findings of the learned CIT (Appeals) with regard to reasonableness of the payments made to the persons falling under section 40A(2)(b) of the Act.

8. We have considered the rival contentions carefully gone through the order of the lower authorities and also deliberated on the case laws cited by learned DR and AR, and also referred by the learned Assessing Officer and the CIT (Appeals) in their respective orders, in the context of factual matrix of the case. As per our considered view, it is a trite law that so far as the question of commercial expediency and business needs of an organization is concerned, it is not the view of the revenue officer which would count, but it would be the view point of ordinary businessman dealing with a situation like one faced by the assessee-firm in question, is to be considered. The reasonableness of the expenditure for the purpose of business has to be adjudged from the point of view of the businessman and not of the revenue. While making any disallowance under section 40A(2), the burden lies on the revenue to prove that assessee has incurred any expenditure in respect of which payment has been made to any person referred to in clause (b) of section 40A(2) of the Act and the Assessing Officer found that such expenditure is excessive or unreasonable having regard to the fair market value of goods, services or facilities for which payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom. Unlike the provisions of sections 30 and 37 wherein deduction for expenditure is claimed, the onus lies on the assessee to prove that expenditure was wholly and necessarily incurred for the purpose of business, section 40A(2) deals with disallowance of expenditure which is otherwise allowable under the Act, the Assessing Officer has to bring on record that expenditure is excessive or unreasonable having regard to the fair market value of goods or services for which payment is being incurred or the legitimate needs of the business of the assessee or the benefit derived therefrom. The Assessing Officer has necessarily to establish that payment made is in excess of the commercial consideration. In the instant case, the family members of the assessee-firm who were technically qualified and experienced were engaged in the business. Some of them were full time working with the firm in accordance with the terms of appointment, and the same was duly recorded in the tax audit report. Undisputedly, payments were made to them not only as per the terms and conditions of their appointment but also as per the services rendered by the respective members of the family and the same were inconsonance with the professional/technical qualifications and experiences being possessed by these persons. Undisputedly, the payments received by respective family members were duly offered for taxation in their individual hands and in case of Shri Amit and Ambuj Oberoi, the rates of tax were in the highest bracket. From the record, we also found that sales of the assessee-firm has increased more than 60% of the sales in the im- mediately preceding year. As against gross profit of Rs. 27,47,000, earned in the immediately preceding assessment year, the assessee-firm has earned gross profit of Rs. 42,71,000 during the assessment year 2000-01, under consideration.

9. In respect of Shri Amit Oberoi, we found that after completing from Doon School, Dehradun, he qualified as a mechanical engineer and thereafter completed diploma in sales and marketing from National Institute of Sales. After having successfully completed said qualifications, he undertaken training programme with M/s. Hero Honda Motors Technical Shop Floor Training at Hero Honda Factory, Sales & Marketing Programme at Delhi Hero Honda Office and Self Development & Attitude Training in Delhi. On successfully completing the training programme Mr. Amit Oberoi was appointed by the assessee-firm in the capacity of Sales & Marketing Manager to look after the marketing of Hero Honda motorcycles, as well as managing the Hero Honda Motorcycle Workshop in the year 1994. As a pre-condition of the appointment of Mr. Amit Oberoi as Sales & Marketing Manager, Mr. Amit Oberoi had to necessarily attend the Sales & Service meetings-cum-refresher training programmes conducted by M/s. Hero Honda Motors in the Northern Region from time to time and specially before the launch of every new motorcycles and/or modification of the existing range. During the year under consideration, apart from the fixed salary of Rs. 1,50,000 he has also been paid incentive @ Rs. 100 per motorcycle sold in excess of 500 motorcycles i.e., Rs. 1,56,800 (2068-500 = 1568 × 100). The amount of said salary and incentive has already been shown in his personal income-tax assessment and accordingly paid income-tax thereon. Mr. Amit Oberoi is found to be regularly assessed to tax in Ward 2(1), Dehradun (PAN AACPO0220G).

10. In the present competitive market, the starting annual salary for qualified engineer with sales and marketing qualifications in automobile industry is around 1.75 lakhs whereas for an employee with these qualifications having 7 to 8 years experience is about Rs. 6,00,000, whereas in the instant case, Shri Ambuj Oberoi with the very same qualifications and experience of 7-8 years was paid salary of Rs. 1,50,000 and incentive of Rs. 1,50,800 totalling to Rs. 3,00,800. We also found that payment of incentives was as per the trade practice and commercial expediency, the Assessing Officer was not justified in imposing his own point of view. We also found that sales of the motorcycles has increased from Rs. 5.47 crores in the immediately preceding assessment year 2000-01, to Rs. 8.41 crores during the assessment year 2001-02, thereby giving a rise of 60%. Thus, on basis of material placed on record, we are satisfied that payment of incentive at Rs. 100 per motorcycle in excess of 500 motorcycles sold by the assessee-firm, was neither unreasonable nor excessive, in view of services rendered by Shri Amit Oberoi, and the technical/professional qualifications and experience possessed by him.

11. In respect of Shri Ambuj Oberoi, we found from the record that he is a qualified engineer and he is running his own computer business which involves extensive meeting and contact with various institutions/organizations/schools/hospital etc. and this provides him with excellent opportunity to promote sales of Swaraj Mazda buses/ambulance and generators of the assessee-firm to those institutions and for this reason that the assessee-firm has appointed him as their representative/selling agent. For all these purposes, Shri Ambuj Oberoi was being paid fixed incentive determined on the basis of number of vehicles/generator sold. Undisputed, during the year under consideration, the sales of Swaraj Mazda vehicles has increased substantially, as also sales of generator sets. Total sales of these items has increased from Rs. 56.73 lakhs in the assessment year 2000-01 to Rs. 74.31 lakhs during the assessment year 2001-02 under consideration. Thus, we found a steady rise in the volume of sales and which has been made possible because of the efforts undertaken by Shri Ambuj Oberoi. Thus, the payment of incentive of Rs. 1,01,000 which is inclusive of all expenses such as local/outstanding travelling/sales assistance/helper/conveyance etc. was quite justified and reasonable. This income was also offered by Shri Ambuj Oberoi in his return of income and has been duly suffered tax. Considering otherwise also, if the assessee-firm had to appoint a sales executives to visit the potential customers, it would have initially costed Rs. 60,000 plus sales target incentive of about Rs. 50,000, in addition to liability on account of EPF, ESI, TA and DA at the rates applicable from time to time. Thus, the total annual opportunity cost of the assessee-firm towards expenses incurred on the sales executive will certainly be higher than the incentive paid to Mr. Ambuj Oberoi. Nothing has been brought on record by the Assessing Officer to establish that the payment was excessive or unreasonable having regard to the facts and circumstances of the case, which is a pre-requirement of section 40A(2).

12. With regard to disallowance of part of salary in case of Smt. Monika Oberoi, we found from the record that Smt. Monica Oberoi wife of Mr. Amit Oberoi is a graduate from St. Stephen’s College, New Delhi and is a diploma holder in manufacturing technology from South Delhi Polytechnic for Women, before marriage she has been working for a Delhi based manufacturing company dealing in the export division. After marriage, Smt. Monica Oberoi joined the family business of the assessee-firm for promotion of motor cycle sales through finance from finance companies like GE Countrywide, JFC Finance, KJF Finance, Tata Finance Ltd. Hero Finance, Ashok Leyland Finance etc. Her skills/abilities in customer satisfaction have contributed to the increase in the motorcycle sales through finance. We also found that the employees of the assessee- firm as well as those from various finance companies reporting to Smt. Monika Oberoi were drawing higher monthly/annual salaries than what has been allowed by the learned Assessing Officer. Smt. Monika Oberoi is being regularly assessed to tax in Ward 2(1), Dehradum. Copy of the assessment order for the assessment year 2001-02, in support of the said claim was also placed in the record.

13. In view of the above qualifications and the services rendered by Smt. Monika Oberoi, we found that salary of Rs. 5,300 per month paid to her was quite reasonable and justified. Nothing was brought on record by the Assessing Officer to the effect that similar services were available to the assessee by some other persons on payment of some lower salary. Whatever the Assessing Officer has considered reasonable was even below the salary which was paid to the other employees reporting to her. We, therefore, do not find any infirmity in the order of the CIT (Appeals) for deleting disallowance on account of salary paid to Smt. Monika Oberoi. Smt. Anita Oberoi is a post-graduate from Punjab University and she was a registered Insurance Agent even before her marriage. As Customer Satisfaction Manager she was specially in charge of insurance/insurance claims and that the salary being paid to her was much less compared to the salary being paid to other employees of the firm working under Smt. Anita Oberoi and as such the salary paid to her was neither excessive nor unreasonable. We also found that she was a regular tax payer and the salary income was duly taxed in her hands.

14. In view of the above, we can safely conclude that nothing was brought on record by the Assessing Officer in support of the contentions that payment of salary/incentive to the persons falling under section 40A(2)(b) was excessive or unreasonable. Whereas on the contrary, we found that payments to these persons were as per commercial considerations and business needs of the assessee organization keeping in view the services rendered by these persons and the benefit received by the assessee-firm in the form of exorbitant increase in sales, gross profit and net profit of the business during the year under consideration.

14A. In the result, the appeal of the revenue is dismissed on the grounds raised in the appeal.

15. We have gone through the grounds of appeal filed by the Revenue and found that tax effect in the instant appeal is less than Rs. 2 lakhs. In view of C.B.D.T. Instruction No. 2 dated 24-10-2005, the department should not have filed the appeals before the Tribunal. For this purpose reliance may be placed on the decision of ITAT Delhi Bench in case of Vikram Bhatnagar [IT Appeal No. 60/Delhi/2002, order dated 10-3-2006].

16. The revenue is not supported to file appeal as per CBDT Circular dated 24th October, 2005. The appeal of the revenue is therefore liable to be dismissed in the light of the decision of the Hon’ble Bombay High Court in the case of CIT v. Pithwa Engg. Works [2005] 276 ITR 519 , wherein their Lordships have observed as under :

"One fails to understand how the Revenue can contend that so far as new cases are concerned, the circular issued by the Board is binding on them and in compliance with the said instructions, they do not file references if the tax effect is less than Rs. 2 lakhs. But the same approach is not adopted with respect to the old referred cases even if the tax effect is less than Rs. 2 lakhs. In our view, there is no logic behind this approach.

This Court can very well take judicial notice of the fact that by passage of time money value has gone down, the cost of litigation expenses has gone up, the assessees on the file of the Departments have increased; consequently, the burden on the department also increased to a tremendous extent. The corridors of the superior courts are choked with huge pendency of cases. In this view of the matter, the Board has rightly taken a decision not to file references if the tax effect is less than Rs. 2 lakhs. The same policy for old matters needs to be adopted by the Department. In our view, the Board’s circular dated March 27, 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."

17. In case of Asstt. CIT v. Rajoo Engineers Ltd. [2006] 100 ITD 555 (Rajkot), it was observed that :—

"It is true that the High Court decision in CIT v. Pithwa Engg. Works [2005] 276 ITR 519 was not dealing with the new limit of the circular dated 24-10-2005. It was with reference to the earlier circular where reference was not required to be filed to the High Court if the tax effect was less than Rs. 2 lakhs. The contention of the revenue in that case was that Rs. 2 lakhs limit was increased by circular dated 27-3-2000 and prior to that, the limit was only Rs. 50,000 and the contention of the revenue was that the new limit would not be applicable to the old references. The High Court rejected the said contention of the revenue.

In those circumstances, though the said High Court decision did not deal with the circular dated 24-10-2005, but it had dealt with the earlier circular and the limits of that circular were applied even to the cases which were prior to the old circular. Therefore, the ratio of that decision was applicable in the instant case as well. The CBDT has taken a policy decision not to file appeals in such type of cases and the circular is binding on the revenue even to appeals filed before 31-10-2005 and the department would not be justified in proceeding with those appeals within the monetary limit of tax effect prescribed in the circular dated 24-10-2005."

18. As per our considered view the instructions for not filing the appeals with regard to the quantum of revenue effect being less than particular amount have not been issued by the Central Board of Direct Taxes in a light hearted manner. These are issued after a great deal of deliberations and discussion where every aspect of the matter, more particularly the question of loss of revenue is examined in depth. Every officer is enjoined with the duty to advance the policies laid down by the Central Board of Direct Taxes and see that these are not defeated. The instructions are also aimed at reducing arrears of appeals in Courts and Tribunals. The Central Board of Direct Taxes, in the circular dated 27-3-2000, had asked all officers of the Income-tax Department under their control not to file appeals before the Appellate Tribunal in cases where the tax effect involved in appeal did not exceed Rs. 1 lakh. These instructions in question are binding on all departmental authorities and they could not be by passed and treated as of no consequence on the pretext that these were private only, and the authorities are bound to follow, comply with and see that the policies laid down by the Board achieve their objectives. These instructions had been issued to avoid unnecessary litigation in small cases particularly, it was very difficult for a small assessee to come from a remote and distant place to defend an appeal filed against him in the Tribunal. The legal fees payable to the lawyer, travelling and other incidental expenses involved, were likely to be more than the tax effect in the appeal and the financial loss to such an assessee would be more, even if he legally succeeded in the appeal. Therefore, the circular/instruction definitely aimed at redressing problems of small assessees. The assessees are entitled to urge the Tribunal to enforce it. It was observed by the Hon’ble Madras High Court in CWT v. S. Annamalai [2002] 258 ITR 675 that in order to reduce the litigation for filing Departmental appeals/references before the Income-tax Appellate Tribunal, High Courts and the Supreme Court, the Central Board of Direct Taxes by Circular F.No. 279/126/98-ITJ, dated March 27, 2000, revised the monetary limits. It was held that in case of matters not covered by the exceptions like : (i) where Revenue audit objection in the case has been accepted by the Department, (ii) where the Board’s order, notification, instruction or circular is the subject-matter of an adverse order, (iii) where prosecution proceedings are contemplated against the assessee, and (iv) where the constitutional validity of the provisions of the Act are under challenge, the appeals filed by the department should be dismissed. It was observed by ITAT Special Bench in the case of ITO v. Bir Engg. Works [2005] 94 ITD 164 (Asr.) that with a view to reduce the pendency of appeals in the Tribunal, High Court and Supreme Court and also to redress difficulties of small assessees in meeting cost of litigation, CBDT has been issuing various instructions to revenue officials prescribing the monetary limit for filing appeals before the above forums. Impugned Instruction No. 1979, dated 28-3-2000 was issued in suppression of all earlier instructions stipulating such limit of tax effect.

19. With regard to the binding nature of these instructions issued by the CBDT, on the Income-tax authorities, the provisions of section 119 of Income-tax Act are very much clear. On a plain reading of section 119, it is clear that sub-section (1) 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, section 119(1) itself mandates that such instructions shall be binding on the Income-tax authorities. Section 119(2) 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, collection of revenue or the initiation of proceedings for the imposition of penalties. Here also the Board may, if it is of the opinion that it is necessary in the public interest to do so, publish and circulate such instructions. Therefore, it is not in all cases that instructions/circulars issued by the Board under section 119(2) are published by the Board. Thus, the only difference between sub-section (1) and sub-section (2) of section 119 is that while sub-section (2) is more specific with reference to particular class of income or class of cases. The contention of the Revenue could not be accepted that instructions issued under sub-section (1) were more in the nature of administrative instructions and, therefore, were not binding on the authorities because section itself mandates that such instructions shall be followed by the revenue authorities. Nowhere section 119 provides any exception to income-tax authorities not to follow such instructions except in a case where such instructions interfere with the discretion of Commissioner (Appeals) or with the jurisdiction and power of particular income-tax authority in a particular case. Admittedly, instructions issued by the CBDT prescribing monetary limit for filing the appeals before the Tribunal, High Court or Supreme Court are not in nature which could interfere with the discretion of Commissioner (Appeals) or interfere with the powers and jurisdiction of income-tax authorities to complete the assessment order to dispose of a particular matter in a particular case in a particular manner. Therefore, these instructions are binding on income-tax authorities.

20. ITAT, Hyderabad Bench in the case of Dy. CIT v. Nb. Syed Jaffar Ali Khan [2005] 1 SOT 691. Following was the observations and conclusions of the Co-ordinate Bench :

"It is necessary to bear in mind that an expression which lacks clarity requires clarification but, in present case, the policy decision taken by the C.B.D.T. vide Instruction No. 1979 being very specific and explicit, it may not be proper to give a different view on the matter in the garb of clarification. If the C.B.D.T. is of the view that the earlier instructions contained an unintended error, it could have been withdrawn and fresh circular/instruction would have been issued, which is within the powers of C.B.D.T. under section 119 of the Act. However, in our considered opinion, the C.B.D.T. is not justified in interpreting an earlier Circular, issued under section 119 of the Act. As stated earlier, Instruction No. 1979 leaves no room for doubt as to what should be the monetary limit to be taken into consideration while filing an appeal by the revenue. From para 2 of the aforementioned instruction, it could be seen that following three points were stated explicitly i.e.,

(a)The new monetary limit would apply with reference to each case taken singly.

(b)In group cases, each case should individually satisfy that new monetary limits.

(c)The working out of the monetary limits will, therefore, not take into consideration the cumulative revenue effect.

Such being the policy decision taken by the revenue, with a view to reduce the litigation and also the cost involved therein, it is duty of the revenue authorities to scrupulously follow the policy decision taken by the C.B.D.T. and in cases where tax effect in each case is less than Rs. 1 lakh, the departmental authorities should not prefer appeals before the Appellate Tribunal. The ITAT Hyderabad Benches had consistently taken this view, which is in consonance with the view taken by the Hon’ble Bombay High Court in the case of Commissioner Of Income-Tax… v. Camoo Colour Co.…. [2002] 254 ITR 565 and the judgment of the Hon’ble Madras High Court in the case of CIT v. S. Annamalai [2002] 258 ITR 675. No doubt the Circulars issued by the C.B.D.T. are not binding on the Courts and Tribunals but it is the duty of the Court to see to it that the instructions, which are binding upon the revenue authorities, being issued in exercise of their powers under section 119 of the Act, are followed by them. In this connection, it would be relevant to extract the observations of Hon’ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706.

‘If, in the teeth of this clarification, the Assessing Officer chose to ignore the guidelines and spent their time, talent and energy on inconsequential matters, we think that the C.B.D.T. was justified in issuing "appropriate" directions vide Circular No. 789 [see [2000] 243 ITR (St.) 57], under its powers under section 119, to set things on course by eliminating avoidable wastage of time, talent and energy of the Assessing Officer discharging the onerous public duty of collection of revenue.’"

21. We are well aware of the judicial precedent that an order passed by the co-ordinate Bench should not be lightly disregard. In taking this view, we are supported by the decision of Hon’ble Supreme Court in the case of Union of India v. Paras Laminate (P.) Ltd. [1990] 186 ITR 722 wherein Hon’ble Supreme Court has observed that it is true that a Bench of two Members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. The rational of this rule is the need of continuity, certainty and predictability in the administration of justice. Persons effected by the decision of Tribunal have a right to expect that those exercising judicial functions will follow the reasons or grounds of the judicial decision in the earlier cases on identical matters.

22. In view of the consistent view taken by the co-ordinate Benches of the Tribunal with respect to amount of tax effect in the appeal filed by the revenue, instant appeal of the revenue is liable to be dismissed even on account of low tax effect.

23. In the result appeal of the revenue is dismissed both on merits as well as tax effect.