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TMI Blog2013 (10) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Assessing Officer was deleted. To that extent, the loss computed for the assessment year in question was increased. 4. Revenue contested the issue and carried the matter in appeal before the Income Tax Appellate Tribunal("the Tribunal" for short). The Tribunal by impugned order dated 7.11.2008 dismissed the appeal as not maintainable. Before the Tribunal, the assessee contended that in view of the fact that in any case in the net result the income of the assessee would be in the negative; by virtue of circulars issued by Central Board of Direct Taxes ("CBDT" for short), the appeal was not maintainable. The assessee's case was that, looked from any angle, for the assessment year in question, the assessee had no positive income. The Tribunal considered the issue making following observations:- "4. Further, we find that the appeal is not maintainable in a case where the final assessment has been made on loss and Instruction 1979 dated 27.3.2000 will equally be applied. In this regard we rely on the decision of the ITAT Special Bench in the case of CIT v. Peerless Developers Ltd. (2006) 103 ITD 349 (KOL) (SB). Although different High Courts have taken a different view but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructions to appear on behalf of some of the assessees where identical issue is involved. Their cases, however, are not on board today. At our request, they assisted us in the present group of appeals since despite service of notice, no one appeared on behalf of the assessees in these appeals. 8. Learned Counsel for the Revenue submitted that the Tribunal erred in dismissing the appeals on the ground of low tax effect misconstruing the Board's circulars. He drew our attention to several circulars issued by the Board from time to time to contend that it was never envisaged by the Board that in such cases no appeals should be filed before the Tribunal. 9. Counsel further submitted that the computation of loss with accuracy is essential in relation to carry forward and set off of loss in subsequent years. 10. Counsel referred to Section 2(24) of the Income Tax Act, 1961( "the Act" for short) to point out that income includes profits and gains. Reliance was placed on the decision of the Apex Court in the case of Commissioner of Income Tax (Central), Delhi, vs. Harprasad & Company P. Ltd. reported in [1975] 99 ITR 118 wherein it was observed that from the charging provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt time. He drew our attention to different circulars issued by the Board from time to time. Counsel pointed out that Para 11 of the Board's circular dated 15.5.2008 specified that the instruction will apply to appeals filed on or after 15.5.2008. In cases where appeals have been filed before such date, the same will be governed by the instructions operative at the time when such appeal was filed. 16. The question can be approached in two parts. First would be whether in ordinary circumstances, it is necessary to compute with degree of accuracy, declaration of loss made by the assessee in view of the statutory provisions contained in the Act. Second part of our inquiry would be whether by virtue of the Board's circulars issued from time to time, which in view of the Section 268A of Act, have acquired considerable significance, and force the appeal presented to the Tribunal, could be termed as not maintainable only on account of the fact that even if the Assessing Officer's order is restored, net result would be negative income of the assessee. To put it differently, the question is even if the difference of opinion between the Assessing Officer and the CIT (Appeals) in terms of qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the time allowed under sub-section(1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section(1)." Section 157 of the Act provides for intimation of loss and reads as under:- "157. When, in the course of the assessment of the total income of any assessee, it is established that a loss has taken place which the assessee is entitled to have carried forward and set off under the provisions of sub-section(1)] of section 72, sub-section (2) of section 73, [sub-section(1)[ or subsection( 3)] of section 74 or sub-section (3) of section 74A], the [Assessing] Officer shall notify to the assessee by an order in writing the amount of the loss as computed by him for the purposes of sub-section(1) of section 72, sub-section(2) of section 73, [sub-section(1) [ or sub-section(3)] of section 74 or sub-section(3) of section 74A]." 20. Section 143(1) (a) of the Act requires that the total income or loss shall be computed after making the adjustments regarding any arithmetical error in the return or an incorrect claim or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruling the previous decision in the case of Virtual Soft Systems Ltd. vs. CIT reported in [2007] 289 ITR 83 (SC) held that even in a case where claim of loss is found to have been wrongly made, by virtue of Explanation 4 of Section 271(1)(c) (iii), penalty can be levied. 24. From the above statutory provisions, it can be seen that merely on the ground that even if the Assessing Officer's order is restored, the net result would be a negative income, the issue cannot be treated to be one of academic interest. The extent of loss claimed and allowed would be significant for variety of purposes, particularly, for the purpose of set off and carrying forward of such loss. We fail to see how such an issue can be seen as one of low tax effect. In a given case, an assessee may claim large amount by way of loss, which according to him he suffered during the assessment year. The Assessing Officer, while framing the assessment, may come to a conclusion that the loss is much smaller than what is claimed by the assessee. If in the appeal filed by the assessee, the CIT (Appeals) accepts the assessee's claim and sets aside the Assessing Officer's order, and if such order is allowed to stand merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1), it shall not be lawful for an assessee , being a party in any appeal or reference, to contend that the incometax authority has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case. (4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under sub-section(1) and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case. (5) Every order, instruction or direction which has been issued by the Board fixing monetary limits for filing an appeal or application for reference shall be deemed to have been issued under sub-section(1) and the provisions of sub-sections (2),(3) and (4) shall apply accordingly.]." 27. Combined reading of Section 268A of the Act would reveal that while recognizing Board's power to issue orders and instructions from time to time, particularly with respect to fixing monetary limits for regulating filing of appeals, it also gives a statutory flavour to such circulars. Simultaneously, provisions have also been made to keep an issue open which might not have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulated by the Board's circulars issued from time to time laying down besides other conditions, monetary limits for preferring such appeals. The question is whether the Board's instructions, prevented the department from preferring appeal in case of loss irrespective of the difference of the quantum between the loss assessed by the Assessing Officer and the CIT(Appeals). To answer this question, it would be necessary to refer to some of the Board's instructions issued from time to time. We may record that all cases in this group involve appeals presented before the Tribunal prior to 15.5.2008. This date assumes significance since by virtue of circular dated 15.5.2008, the position stands on a different footing. The Board issued its instruction No.1979 vide circular dated 27.3.2000 revising the monetary limits for filing appeals before the Tribunal, relevant portion of the circular reads as under:- "2. In supercession of the above instructions, it has now been decided by the Board that appeals will be filed only in cases where the tax effect exceeds the revised monetary limits given hereunder:- (Tax effect) (i) Appeal before the Appellate Tribunal (in Income-tax matters. Rs.1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 4 of the Circular provided that the instructions dated 27.3.2000 and 29.6.2000 will continue to operate. 32. Yet another circular dated 16.7.2007 came to be issued by the Board. However, with contents of such circular we are not directly concerned. 33. Another circular, which came to be issued by the Board on 15.5.2008 was in supercession of all circulars including ones dated 27.3.2000 and 29.6.2000. Fresh monetary limits for preferring appeals before the Tribunal and Courts were laid down. Fresh guidelines were also issued for governing such appeals. Relevant portion of the circular reads as under;- "3. Appeals will henceforth be filed only in cases where the tax effect exceeds monetary limits given here under:- Sl. No. Appeals in Income-Tax matters Monetary Limit(In Rs.) 1. Appeal before Appellate Tribunal 2,00,000/- 2. Appeal under section 260A before High Court 4,00,000/- 3. Appeal before Supreme Court 10,00,000/- 4. For this purpose, "tax effect" means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issue against which appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against." 34. From the above circulars, two fold questions arise. Firstly, we are required to answer the question if circulars ranging from 27.3.2000 till 16.7.2007, debarred the department from filing appeals in cases of negative income of the assessee. The second aspect of the matter is whether when the Board in its subsequent circular dated 15.5.2008 provided that " Similarly, in loss cases notional tax effect should be taken into account", did the Board desire for the first time that the appeals be permitted to be presented in cases of loss only on and from 15.4.2008 and not before. In other words, the question is whether above quoted portion in the Board circular dated 15.4.2008 is clarificatory in nature or not? 35. Close perusal of the circulars issued prior to 15.5.2008 noted hereinabove, would reveal that such circulars provided for different conditions on which the Revenue could prefer appeals before the Tribunal and Courts which included the monetary limits specified from time to time. Nowhere do these circulars, sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... potential tax effect would be enormous, simply because in the year in question, the assessee had earned negative income. 37. The issue can be looked from a slightly different angle. In absence of the Board's circulars issued, which now can be stated to be covered under Section 268A of the Act, there are no limitations on Revenue carrying the issue in appeal either before the appellate Tribunal, the High Court, the Supreme Court. To hold that a particular appeal is not maintainable by virtue of the limitations imposed by the Board in its circular, such limitation must be traced into circular itself. In other words unless and until the appeal is found to be opposed to the directives issued by the Board in its different circulars prevailing from time to time, such an appeal cannot be categorized as not maintainable. 38. Circulars of the Board nowhere provide that in case of return of loss automatically per se irrespective of difference in the Assessing Officer's perception and that of the CIT (Appeals) of the computation of loss, further appeal would be shut out. 39. The contention that by virtue of subsequent clarifications contained in circulars dated 15.5.2008 and 9.2.2011 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, notional tax effect is to be taken into account. The learned counsel, however, conceded that these instructions are applicable in respect of those appeals preferred after the issuance of these instructions. In fact, it is specifically provided in paragraph 11 of the said instruction as under " this instruction will apply to appeals filed on or after May, 15,2008". However, the cases where appeals have been before May 15, 2008, will be governed by the earlier instructions on this subject, operative at the time when such appeal was filed. In the present case, appeal was filed in the year 2005 before the Income-Tax Appellate Tribunal and it was dismissed on November, 30, 2007, as not maintainable. These instructions cam much thereafter, and in view of the paragraph 11 thereof, has no applicability to the case. The Income-tax Appellate Tribunal and it was dismissed on November 30, 2007, as not maintainable. These instructions came much thereafter, and in view of paragraph 11 thereof, has no applicability to the case. The Income-tax Appellate Tribunal, therefore, rightly dismissed the appeal as nonmaintainable. The present appeal preferred thus clearly is a misuse of the process ..... X X X X Extracts X X X X X X X X Extracts X X X X
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