9911796707
TMI Blog2015 (5) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal by the Department was Rs. 10 lacs, whereas the tax effect in the instant appeal is less than Rs. 10 lacs and, therefore, the appeal should be dismissed as not maintainable. Since the preliminary objection raised had far reaching consequence affecting pending appeals in the High Court, the Court invited other counsels to address the Court on this issue. In this manner, we have heard Sri Bharat Ji Agarwal, the learned Senior Counsel alongwith Sri Shambhu Chopra and Sri Govind Krishna, the learned counsels for the Department and Sri R.P. Agarwal, Sri Piyush Agarwal, Sri Ashish Bansal and Sri Suyash Agarwal, the learned counsels for the assessee. The learned Senior Counsel for the Income Tax Department (hereinafter referred to as the Department) vehemently repudiated the preliminary objection raised by the learned counsel for the assessee. The learned Senior Counsel for the Department contended that the instructions issued by CBDT only lays down the monetary limits for regulating the filing of the appeals and not to regulate the appeals already filed. It was urged that the appeals already filed as per the earlier instructions will have to be decided on merits irrespective o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending in various Courts of India in an attempt to reduce the average pendency time from 15 years to 3 years. The National Litigation Policy reads as under:- "National Litigation Policy In this background, it is necessary to notice the 'National Litigation Policy Document Released'. The Centre has formulated the National Litigation Policy to reduce the cases pending in various courts in India under the National Legal Mission to reduce average pendency time from 15 years to 3 years. It reads as under: 'Introduction Whereas at the National consultation for strengthening the judiciay toward reducing pendency and delays held on October 24/25, 2009, the Union Minister of Law and Justice, presented resolutions which were adopted by the entire conference unanimously. And wherein the said resolution acknowledged the initiative undertaken by the Government of India to frame the National Litigation Policy with a view to ensure conduct of responsible litigation by the Central Government and urges every State Government to evolve similar policies. The National Litigation Policy is as follows: The Vision/Mission 1. The National Litigation Policy is based on the recognition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions and senior citizens and other categories requiring assistance must be given utmost priority. In respect of filing of appeals in revenue matter it is stated as under: "(G) Appeals in revenue matters will not be filed: (a) if the stakes are not high and are less than that amount to be fixed by the Revenue authorities: (b) if the matter is covered by a series of judgments of the Tribunal or of the High Court which have held the field and which have not been challenged in the Supreme Court: (c) where the assessee has acted in accordance with long standing industry practice: (d) merely because of change of opinion on the part of the jurisdictional officers. Review of pending cases (A) All pending cases involving the Government will be reviewed. This due diligence process shall involve drawing upon statistics of all pending matters which shall be provided for by all Government departments (including public sector undertakings). The Office of the Attorney General and the Solicitor General shall also be responsible for reviewing all pending cases and filtering frivolous and vexatious matters from the meritorious ones. (B) Cases will be grouped and categorized. The practice of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment before the Income-tax Appellate Tribunal, High Courts and Supreme Court - Measures for reducing litigation - Regarding. Reference is invited to Board's instruction No.5 of 2008, dated May 15, 2008, wherein monetary limits and other conditions for filing Departmental appeals (in Income-tax matters) before Appellate Tribunal, High Courts and Supreme Court were specified. 2. In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on the merits before the Appellate Tribunal, High Courts and Supreme Court keeping in view the monetary limits and conditions specified below. 3. Henceforth appeals shall not be filed in cases where the tax effect does not exceed monetary limits given hereunder:- Sl. No. Appeals in income-tax matters Monetary limit (in Rs.) 1 Appeal before Appellate Tribunal 3,00,000 2 Appeal under section 260A before High Court 10,00,000 3 Appeal before Supreme Court 25,00,000 It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on the merits of the case. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the tax effect is less than the monetary limit specified in this instruction". Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits. 7. In the past, a number of instances have come to the notice of the Board, whereby an assessee has claimed relief from the Tribunal or the Court only on the ground that the Department has implicitly accepted the decision of the Tribunal or Court in the case of the assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year, by not filing an appeal on the same disputed issues. The Departmental representatives/counsels must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructions, the CBDT had issued Instructions No.1777 dated 4th November, 1987 fixing a monetary limit by which an appeal would not be filed before the High Court where the tax effect was less than Rs. 50,000/- This was enhanced to Rs. 2 lacs by Instructions No.1979 dated 27th March, 2000. By Instructions No.2 of 2005 dated 24th October, 2005 the limit was enhanced to Rs. 4 lacs. Similar instructions were again issued by Instruction No.5 of 2008 dated 15th May, 2008. By Instruction No.3 of 2011, the limit was enhanced to Rs. 10 lacs and reiterated by Instruction No.5 of 2014 dated 10th July, 2014 wherein the limit for filing an appeal before the High Court remained the same. Para 3 of Instruction No.3 of 2011 indicates that the appeal would only be filed where the tax effect exceeds the monetary limits, namely, Rs. 10 lacs before the High Court. Para 11 of the instructions indicate that Instructions No.3 of 2011 would apply to appeals filed on or after 9th February, 2011 and where appeals having been filed before 9th February, 2011, the said appeals would be governed by the instructions, which were operative at the time when such appeal was filed. The present appeal was filed in 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessing. 5. These instructions will apply to litigation under other direct taxes also, e.g., wealth-tax, gift-tax, estate duty, etc. 6. These monetary limits will apply to writ matters. 7. This instruction will come into effect from April 1, 2000." A perusal of the aforesaid instructions and the earlier instructions of the CBDT indicate that it was issued to reduce the litigation in the Court. Previously, only instructions were issued by CBDT under Section 119 of the Act and, in order to give it a legislative measure, a new Section 268A was inserted by the Finance Act, 2008 with retrospective effect from 1st April, 1999 in the Income Tax Act, 1961. For ready reference, the said provision is extracted hereunder:--- "Filing of appeal or application for reference by income-tax authority. 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-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structions or directions issued under sub-section (1), an income tax authority has not filed any appeal or application for reference on any issue in the case of an assessee for any assessment year, it shall not preclude such authority from filing an appeal or application for reference on the same issue in the case of-- (a) the same assessee for any other assessment year, or (b) any other assessee for the same or any other assessment year. It is also proposed to provide that notwithstanding that no appeal or application for reference has been filed by an income- tax authority pursuant to the orders, instructions or directions issued under sub-section (1), it shall not be lawful for an assessee,being a party in any appeal or reference, to contend that the income tax authority has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case. It is also proposed to provide that the Appellate Tribunal or Court, hearing any appeal or reference had filed under this Chapter, shall have regard to the orders, instructions or directions issued by the Board from time to time either before or after the insertion of this section and the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which - (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section." Numerous rules of interpretation have been formulated by courts. If a statutory provision is open to more than one interpretation, the Court has to choose that interpretation which represents the true intention of the legislature. The duty of the Court is to expound and not to legislate. However, at times, there is a marginal area in which the Court could mould or creatively interpret legislation. The Court in such a situation are called refiners or polishers of legislation. At times there are gaps in the legislation and Courts are called upon to fill in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral constructions is in truth one of degree only as held in Oliver Ashworth (Holdings) Ltd. Vs. Bellard (Kent) Ltd., (1999) 2 All ER 791at 805 and reiterated in Tanna & Modi Vs. Commissioner of Income Act, Mumbai, (2007) 7 SCC 434. The real distinction lies in the balance to be struck in the particular case between literal meaning of the words on the one hand and the context and purpose of the measure in which they appear on the other. In Francis Bennion's Statutory Interpretation, purposive construction has been described in the following manner: "A purposive construction of an enactment is one which gives effect to the legislative purpose by - (a) following the literal meaning of the enactment where that meaning is in accordance with the legislative purpose (in this code called purposive and literal construction)." Heydon's case now known as "purposive construction" or "mischief rule" was explained by the Supreme Court in Bengal Immunity Co. Vs. State of Bihar, AIR 1955 SC 661 holding: "(22) It is a sound rule of construction of a statute firmly established in England as far back as 1584 when - 'Heydon's case, (1584) 3 Co. Rep 7a (V) was decided that - ".... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfill its constitutional obligations." The Bombay High Court, being conscious of the instructions issued by CBDT dismissed a large number of appeals on the ground that the instructions issued by CBDT from time to time were not being adhered to and that the appeals were being filed in utter disregard to the monetary limits. The Bombay High Court insisted that all the appeals filed by the department where the tax effect was below the Board's prescribed limit should be withdrawn forthwith. In this regard, CBDT issued instruction dated 5th June, 2007 directing the department to examine all appeals pending before the Bombay High Court on a case to case basis with further direction to withdraw cases wherein the criteria of monetary limits as per the prevailing instruction was not satisfied unless the question of law involved or raised in appeal or referred to the High Court for opinion was of a recurring nature requiring it to be settled by the High Court. When the hearing of the present appeal started, the instructions of CBDT dated 5th June, 2007 was brought to the notice of the Court. The Court accordingly, directed the Ministry of Finance and/or CBDT to take a conscious deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid direction, the Income Tax Officer, Allahabad filed an affidavit dated 14th August, 2014 indicating that the Instruction No.3 of 2011 was issued in the light of the National Litigation Policy. Since the affidavit was not in consonance with the direction of the Court dated 22nd July, 2014, further directions was issued directing that an affidavit should be filed by the Joint Secretary of the Ministry of Finance or Central Board of Direct Taxes. Based on the aforesaid order, an affidavit of CBDT dated 1st September, 2014 was filed. The CBDT contended that the earlier instruction dated 5th June, 2007 was only confined to the appeals pending before the Bombay High Court and that it was not applicable to other High Courts. The CBDT in the affidavit further contended that the instructions issued from time to time were prospective in nature as is clear from para 11 of Instruction No.3 of 2011 and contended that pending appeals filed prior to the issuance of the Instruction No.3 of 2011 have to be decided on merits. The CBDT further contended that the National Litigation Policy has been considered and, in order to reduce the litigation with the tax payers, the monetary limits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect." The Bombay High Court held that the instructions would apply to pending appeals and, therefore, will have a retrospective effect. Similar view was again reiterated by the Bombay High Court in Commissioner of Income Tax Vs. Camco Colour Co., 254 ITR 565, Commissioner of Income Tax Vs. Smt. Vijaya V. Kavekar L/H of Late Vijaykumar B. Kavekar, 350 ITR 237, Commissioner of Income Tax Vs. Madhukar K. Inamdar (HUF), 318 ITR 149 and Commissioner of Income Tax Vs. Vitessee Trading Ltd., 331 ITR 433. The Delhi High Court also took the same view in CIT Vs. P.S. Jain and Co., 335 ITR 591. The Madhya Pradesh High Court in Commissioner of Income Tax Vs. Ashok Kumar Manibhai Patel and Co., 317 ITR 386 followed the Bombay High Court and extended the benefit to the assessee. The Karnataka High Court in Commissioner of Income Tax and another Vs. Ranka and Ranka, 352 ITR 121 considered Instruction No.3 of 2011 and held that the said instruction would be applicable to pending appeals. The Karnataka High Court held: "33. In the instant case, Instruction No.3 of 2011 is more beneficial than Instruction No.2 of 2005. If Instruction No.3 of 2011 is also made applicable to the pending appeals be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal where the number of cases which are pending are more, decides the appeal, subsequent to these latest circulars and the amount involved is less than Rs. 10 lakhs, the assessee in such cases get the benefit of the latest circular. However, if the Tribunal has decided a case expeditiously or in Tribunals where the pendency is less and if the subject-matter of the appeal preferred by the Revenue in such cases is more than Rs. 4 lakhs and less than Rs. 10 lakhs, the assessees in those appeals are denied the benefit of the latest circular. In other words, where there is huge pendency of cases in the Tribunal or court, an appeal filed earlier is disposed of after the circular, the benefit accrues to the assessee. However, in Tribunals and the courts where the pendency of cases is less, an appeal filed recently is decided before the circular or where the assessee co-operates with the court in speed disposal of the appeal and the appeal is disposed of before the date of circular, he is denied the benefit of the circular. Therefore, the benefit to which the assessee is entitled to should not be dependant on the date of the decision, over which neither the assessee nor the Revenue h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Co. P. Ltd., 337 ITR 515, have held that: "... the maintainability of appeals/references at the instance of the Revenue is to be considered on the basis of circulars/ instructions prevailing at the relevant time when the appeal/reference was made and instruction issued, vide circular dated May 15, 2008, is prospective and it has no application whatsoever to any proceedings initiated before May 15, 2008, and the same remain undecided and pending after May 15, 2008." In the light of the contentions raised by the parties and various provisions indicated above, we find that the instructions issued by CBDT is not merely an administrative instruction but is an extension of the statute being issued under Section 268A of the Act. A Division Bench of the Punjab and Haryana High Court in CIT Vs. Oscar Laboratories Ltd., 324 ITR 115 held that as a consequence of the insertion of Section 268A in the Act, orders, instructions, or directions issued on the subject of monetary limits for filing appeals must be deemed to have attained statutory status. The legislature in its wisdom clearly desired to give effect to all instructions issued on the subject of monetary limits for regulating fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 268A was inserted in the Act with retrospective effect from 1st April, 1999. The legislature desired to give statutory effect to all the instructions issued on the subject of monetary limits in regulating filing of appeals retrospectively. We are of the view that instructions issued by CBDT laying down the monetary limits for filing an appeal is mandatory and binding on the Revenue. The contention of the department that the right to file an appeal under Section 260A of the Act by the department cannot be restricted or carved by any instructions of CBDT or by Section 268A is patently erroneous and cannot be accepted. Similar view was also given by the Punjab and Haryana High Court in Oscar Laboratories case (supra). In the light of the aforesaid, there is no doubt that the instructions issued by CBDT only regulates the monetary limits for filing an appeal. Instruction No.3 of 2011 clearly indicates that no appeal could be filed where the tax effect was less than Rs. 10 lacs. A mandatory provision has been made that no appeal would be filed where the tax effect is less than the prescribed limit. Para 3 of the instructions also indicates that an appeal above the prescribed limit c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of Section 268A will come into play when the appeal is being heard and the Court will then have regard to the orders, instructions or directions issued under sub-Clause(1) of Section 268A and the circumstances under which such appeal was filed or not filed in respect of any case. Meaning thereby, that at the stage of hearing of an appeal, the Court can see where the circumstances contemplated under para 3 of the instructions was existing or not. At this stage para 3 of the instructions dated 27th March, 2000 is again being reproduced:- "3. Adverse judgments relating to the following should be contested irrespective of revenue effect: (i) Where Revenue audit objection in the case has been accepted by the Department. (ii) Where the Board's order, notification, instruction or circular is the subject matter of an adverse order. (iii)Where prosecution proceedings are contemplated against the assessee. (iv) Where the constitutional validity of the provisions of the Act are under challenge." These exceptions as indicated in para 3 of instructions dated 27th March, 2000 is more or less the same as given in Instruction No.3 of 2011. If the aforesaid exceptions are not existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... likely to be recovered by the Revenue, on the success thereof. If the proportion of the aforesaid recovery of tax as against the expenses incurred in pursuing the appellate remedy is negligible, and there is no other adverse effect, the inference should be, that the remedy of appeal would be an exercise in futility. In such an eventuality, an appeal should not be filed." There is another aspect of the matter. As per the latest instructions, no appeal could be filed and, consequently, cannot be heard where the tax effect is less than Rs. 10 lacs. Would it be justified if a pending appeal, which has a tax effect of less than Rs. 10 lacs is now heard on merits? In our opinion, there is no logic behind this approach. If the instruction is only held to be prospective and is not applicable to pending appeals, it would be hit by the vice of discrimination. Consequently, in our view, we have no hesitation in holding that if the exceptions indicated in the instructions exists at the time of hearing of the appeal, the same would be decided on merits othwerwise the appeal would be dismissed on the ground of monetary limit. By doing this, the instructions would be saved from the vice of disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring in mind the principles of interpretation as discussed above and the legal proposition that flows from such interpretation. We find that there is a defect in the instructions issued by the CBDT. The only measure taken in reducing the litigation was to raise the monetary limit. No effort was made to review the pending cases. Accordingly, we are of the opinion that the literal rule of interpretation cannot be applied in the instant case. Since the instructions is a beneficial piece of legislation, the pendulum is tilted more in favour of the assessee and impels the Court to interpret the provisions harmoniously by adopting the purposive method of construction. We must not shut our eyes to the object for which the instructions were issued and if the instructions had been made applicable to pending cases as laid down by the National Litigation Policy, the object of the policy would have been fulfilled. We are not here to legislate but to expound and in such a situation, we at best could be called reformers or polishers of legislation as to fill up the gaps left in the legislation. Para 11 of Instruction No.3 of 2011 makes it apparently clear that it applies to appeals that would b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
