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TMI Blog2013 (3) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... R SN SOPARKAR, SR. ADV. with MRS SWATI SOPARKAR for Opponent(s):1, ORAL ORDER (Per : HONOURABLE MS JUSTICE SONIA GOKANI) 1. For the assessment year 2003-04 the assessee filed its return of income. On scrutiny assessment, the same was finalized by the Assessing Officer, wherein it disallowed certain losses. 2. When challenged before CIT(Appeals), it confirmed the disallowance of Rs.3,24,000/- and deleted the disallowance of Rs.36,84,912/- being the value of assurance. 3. When the Revenue approached the Appellate Tribunal against the deletion of the addition of the amount of Rs.36,84,912/- , the Appellate Tribunal dismissed the appeal on the ground of low tax effect. According to the Tribunal the tax effect involved in the year under consideration was less than Rs.2,00,000/-. Relying on the judgment of Special Judge Bench of Tribunal in the case of JOT vs. Peerless Developers Ltd. reported in (2006) 103 D 349 (Kol) (SB), it dismissed the appeal in limine. 4. The impugned order is challenged proposing the following question of law for our consideration:- Whether the Appellate Tribunal is right in law and on the facts in dismissing the appeal of the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(24) of the Act provides that income includes profits and gains. Section 70 of the Act pertains to the set off of losses from one source against income from other sources under the same head of income. Section 71 of the Act makes provisions for set off of loss from one head against income from another under certain circumstances. Section 71B of the Act provides for carry forward and set off of loss from house property. Section 72 similarly makes such provisions for set off and carry forward of business losses. Provisions also have been made under Section 72A for carry forward and set off of cumulated losses; in cases of amalgamation and demerger of companies; in cases of reorganization of Cooperative Banks. etc. 18. Section 80 of the Act requires submission of return of loss also and reads as under:- "80. Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed [ in accordance with the provisions of sub-section(3) of section 139], shall be carried forward and set off under subsection( 1) of Section 72 or sub-section(2) of section 73 or sub-section (1) [or sub-section(3)] of section 74 [ or subsecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that no loss which has not been determined in pursuance of a return filed in accordance with the provisions contained in sub-Section (3) of Section 139, shall be carried forward or set off under Sections 72(1) or 73(2) or 74(1) or (3) or under Section 74(3) of the Act. In cases, where the assessee desires to carry forward losses or seek set off in subsequent years' income, it is necessary that a return indicating loss has been filed and the same has been determined pursuant to return filed under sub-Section (3) of Section 139 of the Act. Further, Section 157 of the Act requires that when in the course of assessment of any assessee, it is established that the loss has taken place which the assessee is entitled to have carried forward and set off under the provisions specified therein, the Assessing Officer shall notify to the assessee, by an order in writing, the amount of loss as computed by him for the purpose of such Sections. Thus, not only the computation of loss but different headings under which such loss is allowed, would also have to be judged and intimated by the Assessing Officer. 22. Because the loss suffered can be set off or carried forward in the subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance can it be stated that the Appeal of the Revenue is on of low tax effect. Our answer has to be in the negative. For an assessee to claim carry forward and set-off of losses, series of provisions have been made in the Act. It is necessary that loss claimed by an assessee is properly computed. Such declaration of negative income just as declaration of positive income should be allowed to go through the entire gamut of Appeals and Revisions. 26. This brings us to the question whether by virtue of the Board's circular, such appeal can be shut out. Section 268A of the Act introduced by Finance Act of 2008 with effect from 1.4.1999 makes provisions with respect to the Board's circulars its effect etc., Section 268A reads as under:- "268A. (1) The Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing of appeal or application for reference by any income-tax authority under the provisions of this Chapter. (2) Where, in pursuance of the orders, instructions or directions issued under sub-section(1), an income-tax authority has not filed any ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved as under:- "28. We are of the view that simply because the appeal is filed by the department in contravention of the circular, the Tribunal is not bound to decide the appeal on the merits. Due weightage should invariably be given by the Tribunal to the circular issued by the Board. Even otherwise, the newly inserted provisions contained in section 268A(4) make it obligatory for the Tribunal to consider such circular. It is not open for the Department to contend that circulars are internal mattes of the Department and the assessee cannot object to filing of an appeal on the basis of such circular. It is true that filing of an appeal is a statutory right but it can certainly be regulated by the Board by issuance of orders, instructions or circulars. This would not amount to taking away the right of filing of appeal or that such right is prohibited by executive instructions. Section 268A(1) of the Act now recognizes such right of the Board to regulate the filing of appeal or application before the Tribunal or the court. It is also true that when the hon'ble Supreme Court or the territorial High Court have declared the law on a question, it is not open to the Tribunal to direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 28.10.1992 and 4.11.1987 providing lower limits for filing appeals before the Tribunal. In particular, circular dated 4.11.1987 provided for monetary limits and other conditions for preferring appeals etc before the Tribunal and Courts. It also provided for instances where such appeals be filed irrespective of low tax effect. In particular, in para 3 of the circular provided that " while applying the monetary limits, the effect of carry forward, effect of consequential addition/deletions in other years should be kept in view" 30. A clarificatory circular came to be issued on 29.6.2000 in the form of instruction No.1985 by the Board clarifying principally that while applying monetary limits laid down in Circular dated 27.3.2000, each case shall be taken singly. 31. Fresh circular dated 24.10.2005 came to be issued by the Board revising the monetary limits for filing appeals before the Tribunal and the Courts as under:- "2. In partial modification of the above instruction, it has now been decided by the Board that appeals will henceforth be filed only in cases where the tax effect exceeds the revised monetary limits given hereunder:- Sl.No. INCOME-TAX ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng should be contested irrespective of the tax effect. (a) Where the Constitutional validity of the provisions of an Act or Rule are under challenge. (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires. (c) Where Revenue Audit objection in the case has been accepted by the Department. 11. This instruction will apply to appeals filed on or after 15th of May 2008. However, the cases where appeals have been filed before 15th of May 2008 will be governed by the instructions on this subject, operative at the time when such appeal was filed. 12. This issues under Section 268(A)(1) of the Income-tax Act, 1961." (underline supplied) Yet another circular dated 9.2.2011 has since then been issued laying down fresh monetary limits for filing appeals providing as under:- "3. Hence forth 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.260 A before High Court 10,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar provided for limits for preferring appeals to the Tribunal, reference before the High Court and appeal before the Supreme Court as long as the tax effect exceeded Rs.1,00,000/-, Rs.2,00,000/- and Rs.5,00,000/- respectively. Paragraph 3 of the said circular specified the categories where irrespective of the revenue effect, such appeals could be pursued. The term tax effect" specified in circular dated 27.3.2000 is nowhere defined and explained in any of the preceding and succeeding circulars. We must, therefore, understand this term in the context of the intention of the Board in limiting the Tax Appeals. 36. We must also remind ourselves that Board circulars are not statutes though by virtue of Section 268A, it may have certain statutory force. Common thread running through all the circulars presented before us is that the Board desired that subject to certain exceptions, Tax Appeals in which effect of tax is lower than the prescribed limit such appeals whether before the Tribunal, High Court or the Supreme Court, should not be presented. For example in Circular dated 27.3.2000 it is provided that appeals will be filed only in cases where tax effect exceeds the revised mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss, notional tax effect should be taken into account. This clarification to our mind, contained in circular dated 15.5.2008 and absence of any such clarification in the previous circulars, is of no consequence. Such a clause can, at the best, be seen as clarificatory declaration by the Board to put the controversy beyond any shadow of doubt or debate. It cannot, however, be stated that only on and from 15.5.2008 the Board desired that on the basis of notional tax effect in cases of loss the appeals should be filed. In the previous circulars to reiterate, no such intention emerges. Only because clarification came in the subsequent circular dated 15.5.2008, would not mean that previously the Board desired that such appeals should be filtered out. 40. Reference to the decision of the Delhi High Court in the case of Mangalam Risinus (supra) or subsequent judgment in the case of Nanakram Jaysinghania (upra) would not persuade us to change our view. In the case of Mangalam Risinus (supra), the Delhi High Court simply affirmed the view of the Tribunal making following observations. "5. We are in agreement with the view of the Tribunal that even if the order of the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances, we dismiss the appeal with costs quantified at Rs.10,000/- to be paid to the Delhi High Court Mediation and Conciliation Centre." 42. Here also various statutory provisions and judicial pronouncements cited before us were not cited before the High Court. The High Court, therefore, did not have the benefit of examining such judicial pronouncements. Even otherwise we have given detailed reasons for holding the belief that we have expressed in this judgment. We are unable to persuade ourselves to follow Delhi High court in above mentioned cases of Commissioner of Income-Tax vs. Nanak Ram Jaisinghania (supra) and in the case of Commissioner of Income-Tax, Delhi-II vs. Manglam Ricinus Ltd. (supra). 43. In the result common question, framed in all appeals, is answered in favour of the Revenue and against the assessees. It is held that merely because even as per the Assessing Officer's order, ultimately income of the assessee is negative, the Revenue's appeal before the appellate Tribunal would not be barred by the Board's circular under Section 268A of the Act. It is, however, clarified that the notional tax effect would have to be above the limits prescribed by the Board f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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