2015 (11) TMI 72 - HC - Income Tax

Monetary limit - whether the said Instruction No.3 would apply to pending appeals as well? - Held that - The legal position that has been made explicit is that Instruction No.3/2011 dated 9th February 2011 would not be applicable to appeals already been filed prior to the said date whether before the ITAT or before the High Court.

Summary

Issues:
1. Applicability of Instruction No. 3/2011 on pending appeals before ITAT.
2. Justifiability of Revenue's appeal before High Court.
3. Interpretation of monetary limits for filing appeal before ITAT.
4. Impact of Supreme Court's order on applicability of Instruction No. 3/2011.

Analysis:

1. The appeal by the Revenue challenged an order of the ITAT citing Instruction No. 3/2011, restricting appeals where tax effect did not exceed Rs. 3 lakhs. The ITAT dismissed the appeal based on this instruction, referencing a previous court decision. The High Court criticized the Revenue for appealing to them when the ITAT appeal was not maintainable due to the tax amount being less than Rs. 10 lakhs, directing departmental action against the responsible officer.

2. The Principal Chief Commissioner of Income Tax explained the Revenue's decision to appeal, stating it was to challenge the application of Instruction No. 3/2011 to a pending appeal filed before the instruction's issuance in 2011. The Department clarified that the instruction applied to appeals filed after 9th February 2011, not to cases filed before that date under previous monetary limits.

3. The Revenue argued that when the appeal was filed before the ITAT in 2010, the monetary limit was Rs. 2 lakhs as per Instruction No. 5 of 2008, which was exceeded in this case. The High Court noted that the Revenue failed to present this information during the hearing, suggesting that the consistent view of the court on instruction applicability could have influenced the ITAT's decision.

4. A new development arose with a Supreme Court order in July 2015, setting aside previous decisions based on Instruction No. 3/2011. The Supreme Court clarified that the instruction would not apply to cases filed before 2011, emphasizing that it governed only appeals filed after its issuance. This order established that Instruction No. 3/2011 did not apply to appeals filed before its effective date, impacting the interpretation and application of the instruction in pending cases.

This detailed analysis outlines the progression of the case, including the initial ITAT decision, High Court's response, Revenue's explanation, interpretation of monetary limits, and the significant impact of the Supreme Court's order on the applicability of Instruction No. 3/2011 to pending appeals.