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TMI Blog2024 (8) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Tribunal has rightly relied on the Circular No.5/2017 to dismiss the Miscellaneous Application filed by the Revenue as well as in light of the decision of Principal CIT v Nawany Construction Co. (P.) Ltd. [ 2018 (9) TMI 800 - BOMBAY HIGH COURT ] wherein it is held that mere raising of the audit objection is not sufficient for recall of the order. HELD THAT:- As it appears that the coordinate Bench of this Court, by judgment and order [ 2022 (7) TMI 1530 - GUJARAT HIGH COURT] in similar facts where appeals have been dismissed by the Tribunal, allowed the Special Civil Applications filed by the Revenue by quashing and setting aside the order passed by the Tribunal and remanding the matter back to the Tribunal as held Circular issued by the CBDT under Section 268A of the Act of 1961 is held binding on the Department thus appeal cannot be filed, if it is barred. It is, however, with a clarification that if the issue decided by the CIT (Appeals) or Tribunal is contrary to the judgments of the Supreme Court, the Department can prefer an appeal, however, care would be taken to file it only in those cases where the order passed by the CIT (Appeals) or the Tribunal is contrary to the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re separately which was incurred for earning exempt income. 3.4 The Assessing Officer passed order under Section 143(3) read with Section 147 of the Act by making proportionate disallowance of Rs.44,35,176/- under Section 14A of the Act read with Rule 8D of the Rules. 3.5 Being aggrieved with the re-assessment order, the assessee preferred appeal before the CIT (A), who confirms disallowance of Rs.04,61,744/- made under Rule 8D(2)(iii) of the Rules and deleted addition of Rs.39,73,432/- made under Rule 8D(2)(ii) of the Rules. 3.6 Being aggrieved by the order passed by the CIT (A), Revenue preferred appeal being ITA No.69/Ahd/2019 before the Tribunal. The Tribunal dismissed the appeal by order dated 29th January, 2019 on the ground of low tax effect as per CBDT Circular No.3/2018 dated 11th July, 2018, with liberty to the Revenue to recall of dismissal of appeal if the matter is covered by the permissible exceptions mentioned in the said Circular. 3.7 It appears that thereafter MA No.220/Ahd/2019 in ITA No.69/Ahd/2019 was preferred before the Tribunal to recall order dated 29th January, 2019 by submitting that the Appellate Tribunal ought to have considered the appeal filed by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of the assessment. It was, therefore, submitted that the Tribunal has rightly relied on the Circular No.5/2017 to dismiss the Miscellaneous Application filed by the Revenue as well as in light of the decision of the Bombay High Court in case of Principal CIT v Nawany Construction Co. (P.) Ltd. reported in [98 taxmann.com 294 (Bombay)] wherein it is held that mere raising of the audit objection is not sufficient for recall of the order. 7. Having heard learned advocates for the respective parties, it appears that the coordinate Bench of this Court, by judgment and order dated 08th July, 2022, in similar facts where appeals have been dismissed by the Tribunal, allowed the Special Civil Applications filed by the Revenue by quashing and setting aside the order passed by the Tribunal and remanding the matter back to the Tribunal; has held as under. 7. We have heard learned Senior Advocate Mr. M.R.Bhatt on behalf of the Revenue Department. On the part of the Revenue, it has been argued that there was a mad rush on the part of the Tribunal. The Revenue has statutory right to prefer the appeal. According to him, the CBDT circular would require the interpretation. It is not the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the departmental appeal on the ground of low tax effect without taking note of the fact that the case is covered by exceptions provided under clause (10)(c) of Circular No.3 of 2018 wherein it has been clearly stated that the cases involving revenue audit objection which had been accepted by the department are to be disposed off on merits? 2. Is not the finding of the Tribunal bad, especially the last fact finding authority should have disposed off the matter on merits especially in cases where the Revenue audit objections had been accepted by the department? 2. The first Substantial Question of Law raised by the Revenue is whether the Tribunal was right in dismissing the appeal filed by the Revenue on the ground that the appeal is hit by the Circular No.3 of 2018 dated 11.07.2018 issued by the Central Board of Direct Tax ('CBDT') fixing the monetary limit with regard to the appeals filed by the Revenue. It is the argument of Ms.R.Hemalatha, learned Senior Standing Counsel that the Tribunal erred in applying the Circular, since the assessee's case falls within Clause 10(c) of the Circular which deals with exceptional circumstances in which though the tax effect is low, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginated out of the notice under Section 263 of the I.T.Act and not as a consequence to the audit objection. It is further contended that a mere reliance on the exceptional clause of the CBDT s circular may not substantiate the stand of the applicant and the applicant will have to show that it is the audit objection that has given a rise to the notice under Section 263 of the I.T.Act and the present litigation. 3.3 Reliance is also placed on the decision of the Bombay High Court rendered in case of Principal Commissioner of Income Tax, Mumbai vs. Nawany Construction Private Limited, reported in (2018) taxman.com 294 (Bombay), where the Bombay High Court had not permitted a mere reliance on the circular without any adequate material on the record. 4. We have heard the learned advocate, Mr.Varun Patel and learned advocate, Mr.B.S.Soparkar. At the outset, we need to make a note that in Tax Appeal No.460 of 2019 and allied matters decided by this Court (Coram:Justice J.B.Pardiwala and Justice A.C.Rao), the Court has upheld the order of the ITAT and has not disturbed the same. This was in relation to the assessment under Section 143 (3) of the I.T.Act finalised in the year 2006 for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bench as per the roster. 8. The other side has contested it by placing reliance on the Instruction No. 07/2017 which are general instructions laying down standard procedure for prescribing receipt/revenue audit objections in supersession of Instruction No. 09/2006 dated 07.11.2006, Instruction No. 16/2013 dated 31.10.2013 and Circular No. 08/2016 dated 17.03.2016. In supersession of all existing instructions on this subject, the instructions have been issued for strict compliance by all concerned who has defined the role and responsibilities of each functionary in the hierarchy. The timeline for each step to be executed by the officer concerned also has been laid down. It provides that the Comptroller and Auditor General of India ( CAG for short) carry out normal audit of assessment referred to as compliance audit. With the technological assistance in Income Tax Business Application ( ITBA for short) the CAG portal in place, the Standard Operating Procedure ( SOP for short) have been aligned to workflow in ITBA with defined roles and responsibilities and timeline so as to achieve the desired goal. It provides for the detailed guidelines and it also reveals that the PCIT after cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference was a must so as to bring home the point that there is a detailed mechanism provided in the lastly issued instruction on 21.07.2017 for accepting or not accepting the audit objections. Once accepted in case of a particular person, it falls within the exception to the circular issued for withdrawal of the matters which would have a low tax effect. 9. Learned Senior Advocate Mr. Tushar Hemani has urged that the Tribunal s earlier order was of 16.12.2015. The department had 5 years before the application has been moved. According to him, in Circular No. 03/2018 filing of appeal shall need to be read with para 10 contested on merit . It is thus not of contest but filing of appeal assumes importance. All circulars are within the public domain and are binding to the Revenue. 9.1. According to him, the Instruction No. 07/2017 clarifies that there also, on merit, it should be regulated. It provides that adverse order of the first appellate authority in cases involving revenue audit objections should be carefully scrutinized by the Principal CIT. The appeal to the ITAT shall be filed only if the appeal order is not acceptable on merits. Thus, the emphasis is on preferring the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department in contravention of such Circulars prescribing the monetary limit were ordered to be dismissed. Almost all Courts are agreeable on this issue. 18. The real controversy arose when certain exceptions are carved out in the Circulars and despite the fact that many of these cases before the Tribunal are covered by those exceptions, which require the Tribunal to go into the merits of the matter, the Tribunal has straightway dismissed those appeals. There is a cleavage of opinion amongst the different Courts on this issue. One view is that while applying the Circular issued by the Board, the Tribunal has to take into consideration as to whether the exceptions carved out in the Circular apply to the case on hand and if any of those exceptions is applicable in that case the Tribunal will have to ignore the monetary limit and decide the appeal on merits. In Kodanand Tea Estate Co's case (Supra), before the Tribunal, the applicability of the circular was questioned. The Madras High Court, therefore, took the view that the question comes within the ambit of exception and the Tribunal was directed to hear appeal on the merits. 19. Another view is that if any particular Circular i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Circulars are internal matters of the Department and 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 direct that the Circular issued by the Board prescribing the monetary limit should be given effect to and not the decision of Hon'ble Supreme Court or the territorial High Court. It is, however, equally true that the Tribunal's attention must be drawn by the departmental representative to such decision of the Hon'ble Supreme Court or the High Court. An objection must be raised by the Departmental representative. 23. Considering all the aforesaid issues we dismiss a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptance of this rectification application is not on the ground of non-existence of such material, once the Tribunal overlooks Clause 10 of the said Circular which carves out the exception to the withdrawal of appeal on low tax effect. Disregard of the same would fall under the error apparent on the face of the record, therefore, seeking invocation of the powers under Section 254 was also not misplaced. 11.1. Rejection of these Misc. Applications on the strength of the earlier order without any whisper on individual case, more particularly, relying on the order of the Bombay High Court which was essentially because the Revenue never pointed out such audit objections,having been accepted by the department and in absence of the record, the Bombay High Court passed the order. There is nothing to point out that such record was missing before the Tribunal when it dismissed the appeal in each case. That examination will be a must, hence, we deem it appropriate to interfere and allow the Misc. Applications. Let the Tribunal examine each case and remand the matter back to the Tribunal for it to examine every matter. We remit the matter to the Tribunal for fresh consideration. Each matter sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. well before 15.5.2008. Be that as it may, it is possible for us to draw yet another inference in favour of the respondent - assessee, namely, that the instruction prevalent prior to the instruction dated 15.5.2008, has expressly been made applicable to appeals preferred before 15.5.2008. We, therefore, must inevitably revert back to the instruction dated 27.3.2000, for determining the veracity of the filing of the instant appeal. 30. While disposing of the instant controversy, we would like to expressly notice, that it is not a matter of dispute at the hands of the learned counsel for the rival parties, that the tax effect in the present appeal is below the monetary limits prescribed, for preferring an appeal under the instruction dated 27.3.2000. It would also be pertinent to mention, that it is not the case of the appellant - revenue, that inspite of the tax effect, the instant appeal could have been preferred under one of the four exceptions recorded in paragraph 3 of the instruction dated 27.3.2000. Thus viewed, we are satisfied that, even though, the instant appeal was filed when Section 268-A of the 1961 Act had not been inserted into the 1961 Act, yet since Section 268-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those matters which were still undecided. With money value having gone down and cost of litigation expenses having gone up, the Court held that there was no justification to proceed with the decades old references having negligible tax effect. 13.4. The Guahati High Court in case of Commissioner of Income-Tax vs. Kironmoy Roy Choudhury [[2011] 330 ITR 316 (Gauhati)], was considering the CBDT Instruction No. 05/2008, the Court examined Section 268(A) which empowered the Board to issue orders/instructions/directions to income-tax authority and fix monetary limits as may be deemed fit for the purpose of regulating the filing of appeal or application with reference by income-tax authority under the provision of that chapter. It enjoys the same legislative status as Section 260(A) designed by parliament. According to the Guahati High Court, the CBDT Circular issued in exercise of the powers conferred can neither be undermined nor rendered ineffective and all orders/instructions/directions are binding on the Revenue. 13.5. The Rajasthan High Court in the case of Commissioner of Income Tax, Jaipur-II, Jaipur vs. GAD Fashion, G-152, RIICO Sanganer Industrial Area Jaipur [2017 LawSuit(Raj) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying the Circular issued by the Board, the Tribunal has to take into consideration as to whether the exceptions carved out in the Circular apply to the case on hand and if any of those exceptions is applicable in that case the Tribunal will have to ignore the monetary limit and decide the appeal on merits. In Kodanand Tea Estate Co's case (Supra), before the Tribunal, the applicability of the circular was questioned. The Madras High Court, therefore, took the view that the question comes within the ambit of exception and the Tribunal was directed to hear appeal on the merits. 17. Another view is that if any particular Circular is pressed into service seeking dismissal of appeal on the ground of low tax effect and if no objection is raised by the Department either in the appeal memo or at the time of hearing of appeal, the Tribunal is not bound to consider as to whether exceptions are applicable or not. In Smt. Madhu Bai Lodha's case (Supra) the M.P. High Court took the view that in a case which falls within the excepted category, it would always be open to the Department to bring it to the notice of the forum approached and to insist that the question being covered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gone up as well as huge pendency of cases, the Board should evolve a policy of applying the circulars even to the old references which are still undivided. The Department should not have proceeded with the appeals/references wherein the tax impact is minimal, irrespective of their date of filing. 19. There is no dispute about the fact that where substantial question of law of importance is involved or where question of law is repeatedly arising or where the issue is covered by the judgment of territorial High Court or Supreme Court, the Tribunal will have to decide the appeal on merits and in terms of the law declared by the Supreme Court or by the territorial High Court. However, on this ground the matters cannot be remanded to the Tribunal directing the Tribunal to decide the same afresh. If no objections are raised by the departmental representative at the time of hearing of the appeal against the applicability of the Circular despite there being an exception, the Department has missed the bus and second inning cannot be granted for that purpose. However, in matters where such objections are raised and despite those objections or without dealing with those objections if the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is expected from the Tribunal to consider this broad parameters while applying the relevant Circular to the facts of the case at the time of deciding appeals. The Court has kept the window open in this decision that where the department has missed the bus and has not drawn the attention of the Tribunal at the time of hearing of the appeal against the applicability of the circular, no second inning can be given however, where the objections have been raised and without dealing with such objections, the Tribunal has dismissed the appeal on the ground of low tax effect, the indulgence is required to be shown by the Court. 14. As noted, while applying monetary limit to the pending cases, the Commissioner (DR) had urged to the Tribunal that liberty be given upon necessary further verification to seek recall of the dismissal of appeals and restore those appeals in which the appeals are covered by the exception and which are inadvertently included in the bunch of appeals wherein the tax effect in terms of the CBDT circular exceeded 50 lakhs. Nobody has opposed this prayer and it has been accepted. It has also been clarified by the Tribunal that the appellant shall be at liberty to po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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