Reference applications u/s 256(1)-Criteria. - Income Tax - 1328/CBDT

INSTRUCTION NO. 1328/CBDT Dated: April 5, 1980 At present the board exercises centralised control in regard to filing of references under the I.T.Act and other tax acts. As per instruction No.173 (F.No.277/1/70-ITJ, DATED 20-5-70) the commissioners are expected to send reports to the board only where they recommend a reference or where they have some doubts. Where the commissioners propose to accept the decisions of the tribunal they are not expected to refer the matter to the board. The board is generally reluctant to advise reference unless the tax effect is more than Rs.10,000 or a general question of law affecting a large number of cases is involved. Further where the board has already authorised reference to a high court on a particular issue in a case from a commissioners charge and it is pending, the commissioner files reference applications on the same issue in all cases from that charge; the board's approval is not required to be taken afresh for every case. If the commissioner does not propose to file a reference in such a case for reasons other than of low tax effect, he is effected to send a report in the matter for obtaining the board's approval. 2. In supersession of the previous instructions on the subject the board has now decided as under; a(i The present practice of seeking the boards approval for filing reference applications u/s.256(1) is discontinued and the commissioner should decide on his own whether to accept the decision of the tribunal or to file reference application u/s.256(1) etc. Even where reference application u/s.256(1) etc., so filed by the commissioner is rejected by the Tribunal and the commissioner proposes to accept the same on reconsideration of the matter he need not refer the case to the board; (ii) wherever reassessment/rectification/revision proceedings have been initiated on the basis of revenue audit objection and the finding of the tribunal in such a case is against the department, the commissioner should invariably send a report to the board giving the gist of the objection whether it was accepted by the department or not and whether it has appeared as a d.p in the audit report and seek the boards advice before accepting the decision. b) where an application u/s.256(1) etc. filed by the commissioner is rejected by the tribunal and the commissioner is of the opinion that the high court should be approached u/s.256(2) etc., he should seek the approval of the board complying with the following requirements:- i) The proposal for filing reference application u/s.256(2) should reach the boards office at least 3 months in advance of the date of limitation. ii) The proposal should be accompanied by all relevant documents including the opinion of the standing counsel. The standing counsel may be asked to give firm, detailed and well reasoned opinions and on the basis thereof may recommend filing of references only if the department has not merely an arguable case but a good chance of succeeding before the high court. 3.1 The present monetary limits of Rs.10,000 for reference to the high court and of Rs.30,000 for appeal to the supreme court laid down in Instruction No.284 dated 10th January 1975 will continue. The limit of Rs.10,000 for reference to the high court however shall be relaxed where the question of law is repetitive and the cumulative tax effect in a number of cases is bound to be substantial. In such cases whereas the first reference to the High court may be filed howsoever low, the tax effect may be subsequent references should be filed only if the tax effect in each reference is more than Rs.5000. 3.2 However in subsequent references involving issues already covered by an adverse decision of the same High court, which is being contested by the department whether in the case of the same assessee or in other cases the general monetary limit of Rs.10,000 for filing a reference will apply. 3.3 Since the main object is to reduce the litigation and also the costs involved therein the commissioners will make sure that repitive reference on identical questions of law filed in the high court should be grouped and the high court may be requested to hear them together. 4. The board has further decided that no departmental appeal on questions of fact need be filed against the order of the AACs/CsIT if the tax effect/reduction in penalty is Rs.5000 or less in respect of an income-tax appeal and Rs.2000 or less in respect of an appeal under other direct taxes. Repitive appeals need not be filed on the same legal issue if the tax effect in each such order is Rs.1000 or less. 5. In order to ensure that infructous appeals/references are not being filed by the commissioners the board will review the quarterly statement regarding appeals/references etc. before tribunals and courts charge wise sent by them to the DI(IT). The said statement gives break-up of departmental appeals before the ITAT reference applications u/s.256(1)/ 256(2) etc., and also the results of such appeals etc.