2011 (11) TMI 449 - HC - Income Tax

Maintainability of appeal - Monetary limit of appeal to High court - tax effect of present appeal is Rs 4.8 lacs - instruction No.2/2005 prescribed a monetary limit of Rs. 4 lakhs v/s instruction No.3/2011, dated 09.02.2011 prescribing monetary limit of 10 lacs - Held that - In the instant case, the instruction No. 3/11 is more beneficial than Instruction No. 2/05. If instruction No.3/11 is also made applicable to the pending appeals before this Court, it would grant relief to the assessee. Apart from granting relief to the assessee, if number of appeals pending before this Court are disposed of on the basis of the said circular, the precious time which would be saved by this Court could be better utilized for deciding disputes where tax effect is enormous. That apart, the duration, an appeal takes in this Court would be reduced as desired by the National Litigation Policy. Benefit to which the assessee is entitled to should not be dependent on the date of the decision, over which neither the assessee nor revenue has no control. In this context, the circular would be discriminatory, if it is held to be prospective only. It could be saved from such vice of discrimination by holding it as retrospective. It is held that Instruction No. 3/11 is also applicable to the pending appeals. Appeal dismissed as the tax effect in the instant case is less than Rs. 10 lakhs without expressing any opinion on the merits of the claim.

Issues Involved:
1. Applicability of Instruction No. 3/2011 to Pending Appeals
2. Monetary Limits for Filing Appeals by the Revenue
3. National Litigation Policy and Its Impact on Pending Cases

Detailed Analysis:

1. Applicability of Instruction No. 3/2011 to Pending Appeals
The primary issue was whether Instruction No. 3/2011, issued by the CBDT on 09.02.2011, applies prospectively only or also to pending appeals before the High Court at the time of its issuance. The revenue argued that the instruction is prospective, applying only to appeals filed after 09.02.2011, as per clause (11) of the instruction. Conversely, the assessee contended that beneficial circulars should be applied retrospectively, based on the principle that beneficial circulars must be applied retrospectively while oppressive ones prospectively, as held by the Apex Court. The court noted that previous instructions and circulars had set monetary limits for appeals, with the latest Instruction No. 3/2011 increasing these limits. The court concluded that Instruction No. 3/2011 should apply to pending appeals to align with the National Litigation Policy, which aims to reduce litigation.

2. Monetary Limits for Filing Appeals by the Revenue
The court reviewed the evolution of monetary limits prescribed by various CBDT instructions over the years. Instruction No. 3/2011 raised the monetary limits for appeals to Rs. 3,00,000 before the Appellate Tribunal, Rs. 10,00,000 before the High Court, and Rs. 25,00,000 before the Supreme Court. The court analyzed the rationale behind these limits, emphasizing that they aim to reduce frivolous appeals and focus on substantial tax disputes. The court highlighted the inconsistency in applying different monetary limits to pending and future appeals, noting that applying the latest instruction retrospectively would ensure uniformity and fairness.

3. National Litigation Policy and Its Impact on Pending Cases
The court discussed the National Litigation Policy, which seeks to transform the government into an efficient and responsible litigant by reducing unnecessary litigation. The policy emphasizes that litigation should not be pursued for the sake of it and that the government should focus on significant cases. The court observed that the policy aims to reduce the average pendency time of cases from 15 years to 3 years by filtering out frivolous and vexatious matters. The court noted that Instruction No. 3/2011, issued in line with this policy, should apply to pending cases to achieve the policy's objectives. The court criticized the revenue for not applying the policy to reduce pending litigation and emphasized that applying Instruction No. 3/2011 retrospectively would align with the policy's goals.

Conclusion:
The court held that Instruction No. 3/2011 applies to pending appeals, dismissing the appeal on the ground of monetary limit since the tax effect was less than Rs. 10 lakhs. The court emphasized that the revenue could pursue similar issues in future cases if the tax effect exceeds the prescribed monetary limit. The decision aligns with the National Litigation Policy's aim to reduce litigation and ensure efficient use of court resources.

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