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TMI Blog2004 (2) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... inclined to agree with the view canvassed by the learned DR that Instructions issued under subsection (1) of section 119 are more in the nature of administrative instructions, and, therefore, are not binding on the authorities because section itself mandates that such instructions shall be followed by the filed authorities. Therefore, these are binding in nature. Nowhere section 119 provides any exception to Income-tax authorities not to follow such instructions except in a case where such instructions interfere with the discretion of Commissioner (Appeals) or with the jurisdiction and power of particular Income-tax authority in a particular case. Admittedly, instructions issued by the CBDT prescribing monetary limit for filing the appeals before the Tribunal, High Court or Supreme Court arc not in nature which could interfere with the discretion of CIT(A) or interfere with the power and jurisdiction of Income-tax authorities to complete the assessment order to dispose of a particular matter in a particular case in a particular manner. Therefore, these instructions are binding on Income-tax authorities. In the case of Union of India v. Azadi Bachao Andolan [ 2003 (10) TMI 5 - SUPR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , dated 27th March, 2000 of the Central Board of Direct Taxes and such issues fall outside the scope of rectification mentioned u/s 254(2) of the Income-tax Act, 1961. These Miscellaneous Applications filed by the Revenue will now go to the Regular Bench for final disposal for a limited purpose whether the tax effect in these cases exceeds the prescribed monetary limit fixed by the Board. - HON'BLE VIMAL GANDHI, PRESIDENT, JOGINDER PALL, A.M. AND G.S. PANNU, A.M. For the Appellant : K.R. Jain and Subhash Khanna, Advs. For the Respondent : Ashwani Mahajan and R.K. Raina, Advs. ORDER Per Joginder Pall, A.M. 1. In exercise of the powers vested under section 255(3) of the Income-tax Act, 1961 (hereinafter referred as the Act), the President of the Income Tax Appellate Tribunal (in short ITAT) has constituted this Special Bench to decide the following question: Whether, on the facts and in the circumstances of the case the Tribunal committed a mistake under section 254(2) of the Income-tax Act in dismissing the appeal of the Revenue in the light of Circulars of the Board? Before proceeding to answer this question, the background and events leading to present reference need to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 256(2) before the High Court, monetary limit of tax effect is fixed at Rs. 2,00,000 and for appeal before the Supreme Court, monetary limit of tax effect is fixed at Rs. 5,00,000. These instructions have been issued in supersession of all earlier instructions. Some exceptions have been provided where appeals could be filed even if the tax effect is less than the prescribed monetary limit. 3. In spite of these clear instructions of the Board, field officers of the Department have been filing appeals even in cases where the tax effect is less than the above mentioned monetary limit of tax effect, contrary to the aforesaid Instructions of the Board. Such matter came to be considered by ITAT, Chandigarh Bench in the case of ITO v. Dharamvir [2002] 253 ITR (AT) 1 (Chd.), where the matter was discussed in detail. Relying on the judgments of Bombay High Court in the case of Unit Trust of India v. P.K. Unny [2001] 249 ITR 612 and CWT v. Executors of Late D.T. Udeshi [1991] 189 ITR 319 (Bom.) and the judgment of Hon'ble Supreme Court in the case of C.S.T. v. India Industries 122 STC 100, it was held that instructions issued by the Board were binding on the field officers of the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (2) of section 119 are meant for the public. He drew our attention to Rule 111B of the Income-tax Rules, 1962 which provide for publication and circulation of Board's order. He submitted that Circular issued under sub-section (2) of section 119 require to be published in the Official Gazette as these alone are meant for the public use. But instructions issued under sub-section (1) of section 119 are only administrative instructions and in case field officers failed to comply with these directions and filed appeals in cases where the tax effect is below the monetary limit, prescribed by the Board, such officers could be liable for administrative actions like disciplinary proceedings etc. But taxpayers cannot claim benefit by relying on such instructions issued by the Board. He further submitted that while Circulars issued under sub-section (2) of section 119 of the Income-tax are binding on the Income-tax Authorities, instructions issued under sub-section (1) of section 119 are not binding on the Income-tax Authorities. The fact that Circulars are binding on the Authorities is clear from the judgment of the Hon'ble Supreme Court in the case of CIT v. Hero Cycles (P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Customs v. Indian Oil Corpn. Ltd. [2004] 267 ITR 272, the learned DR submitted that this judgment refers only to the circulars of the board, which were binding in nature. He further submitted it is a settled position that the judgment of jurisdictional High Court is binding on the authorities falling in its jurisdiction. The Tribunal and subordinate authorities cannot afford to ignore the law enunciated by the jurisdictional High Court or Supreme Court. For this proposition, he relied on the following judgments: (i) State of Andhra Pradesh v. CTO [1986] 169 ITR 564 (AP) (ii) Air Conditioning Specialists (P.) Ltd. v. Union of India [1996] 221 ITR 739 (Guj.) (iii) K. Subramanian v. Siemens India Ltd. [1985] 156 ITR 11 (Bom.) (iv) Shri Mahabir Industries v. CIT [1996] 220 ITR 459 (Gau.) (v) Siemens India Ltd. v. K. Subramanian [1983] 143 ITR 120 (Bom.) 5.2 He further relied on the judgment of Hon'ble Punjab Haryana High Court (Full Bench) in the case of CIT v. Smt. Aruna Luthra [2001] 252 ITR 76 where the Hon'ble High Court has held that once the jurisdictional High Court or Supreme Court decides a particular issue, the judgment of jurisdictional High Court/Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissing the appeal merely on the ground that the tax effect involved therein was below the monetary limit laid down under instructions of the board. Thus, he also pleaded that the Misc. Applications filed by the Revenue should be allowed. 6. Shri K.R. Jain, the learned counsel for the assessee in M.A. No. 73 (Asr.)/ 2004 submitted that the ITAT, Amritsar Bench had not committed any mistake while dismissing the appeal of the Revenue in limine which was filed against the instructions of the board prescribing monetary limit of tax effect for the purpose of filing appeals before the Tribunal. He relied on the decision of the ITAT, Chandigarh Bench in the case of Dharamvir where the Tribunal has discussed this issue in greater detail and has held that Instruction No. 1979 issued by the Board prescribing the monetary limit for filing the appeal before the Tribunal was binding on the Income-tax authorities and any appeal filed contrary to the instructions of the board was liable to be dismissed. He submitted that the Revenue has not placed any evidence on record to show that this decision of the ITAT Chandigarh Bench was contested in appeal before the Hon'ble High Court. He submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and where two views are possible fall outside the purview of sub-section (2) of section 254 of the Income-tax Act. He relied on the judgment of Hon'ble Supreme Court in the case of T.S. Balaram, ITO v. Volant Bros. [1971] 82 ITR 50 and the judgment of Hon'ble Delhi High Court in the case of Hotze Hotels (P.) Ltd. v. CIT [2001] 248 ITR 647. 7. Sh. Y.K. Sud, CA, appearing for the intervener also adopted the arguments of Sh. K.R. Jain. He submitted that Instructions issued by the Board are binding on all the Income-tax authorities. He also relied on the recent judgment of Hon'ble Punjab Haryana High Court in the case of Jaswant Singh Bambha v. Central Board of Direct Taxes [CWP No. 19040 of 2003] where the Hon'ble High Court by referring to several judgments of the High Court has taken the view that Instructions issued by the board arc binding on the Income-tax authorities. He also placed a copy of the-judgment on our file. He submitted that if instructions issued by the board are not followed by the Income-tax authorities, this would open flood gates of arbitrariness as some authority might accept the claim of the assessee by relying on such instructions and the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State. Thus, he contended that instructions issued by the board which aim at imparting similar treatment in the cases where tax effect is less than the prescribed monetary limit required to be followed by the Income-tax authorities. 10. Shri Ashwani Kalia, CA, appearing for the intervener also adopted the same arguments, which were argued by the earlier counsels and submitted that instructions of the Board were binding on the Income-tax authorities. 11. We have heard both the sides at length and given our careful consideration to the submissions made by the parties and referred to the various judgments relied upon by both the parties. We feel that this Bench is required to address to the following questions: (i) Whether, instructions issued by the Board are binding on the Income-tax Authorities or not? (ii) Whether the observations made by Hon'ble Punjab Haryana High Court in the case of Rani Paliwal v. CIT from part of ratio decidendi and are, therefore, binding on all the authorities working its jurisdiction or these are only in the nature of passing remarks which are not binding? (iii) Whether the mistakes pointed out by the Revenue in the Misc. Applications could be rectif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der this Act for making such application or claim and deal with the same on merits in accordance with law; (c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely:- (i) the default in complying with such requirement was due to circumstances beyond the control of the assessee; and (ii) the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed: (Provided that the Central Government shall cause every order issued under this clause to be laid before each House of Parliament. From a plain reading of section reproduced above, it is clear that subsection (1) of section 119 refers to orders, instructions and directions to the Income-tax authorities by the Board. The section itself provides that all such autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctions issued by the CBDT prescribing monetary limit for filing the appeals before the Tribunal, High Court or Supreme Court arc not in nature which could interfere with the discretion of CIT(A) or interfere with the power and jurisdiction of Income-tax authorities to complete the assessment order to dispose of a particular matter in a particular case in a particular manner. Therefore, these instructions are binding on Income-tax authorities. 11.2 In this regard, we would now like to refer to the various judgments of the Hon'ble Supreme Court and High Courts on the issue of binding nature of instructions issued by the CBDT. This issue came to be considered by the Hon'ble Supreme Court in the case of Navnit Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 where it was held that the Circulars issued by the Central Board of Revenue, would be binding on all officers and persons employed in the execution of the Income-tax Act. This issue was also considered by the Hon'ble Apex Court in the case of UCO Bank. The Hon'ble Supreme Court observed that the CBDT under section 119 of the Income-tax Act, 1961, has power, inter alia, to tone down the rigour of the law and ensure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astings Ltd. v. Commissioner of Customs [2003] 5 SCC 528. After referring to the above referred judgments, the Hon'ble Supreme Court observed on page 277 that the principles laid down by the above referred decisions are as under: (1) Although a circular is not binding on a court or an assessee, it is not open to the Revenue to raise a contention that is contrary to a binding circular by the Board When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plea that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board (3) A show-cause notice and demand contrary to existing circulars of the Board are ab initio bad. (4) It is not open to Revenue to advance an argument or file an appeal contrary to the circulars. As we have noted the provisions of section 151A are in pan materia with the provisions of section 119 of the Income-tax Act, 1961, and section 37B of the Central Excise Act. Parliament introduced section 151A by an amendment to the Customs Act, 1962; in 1985 but with effect from December 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed contrary to the directions of the CBDT. (2) Cameo Colour Co.'s case In this case also the Revenue had filed an appeal contrary to the Board's Instruction No. 1979, dated 27th March, 2000 where the tax effect was below the prescribed monetary limit. The Hon'ble Bombay High Court dismissed the appeal on the ground that the same was contrary to Board's instructions which were binding on the Income-tax authorities. (3) S. Annamalai's case In this case also, the appeal filed by the Department under section 27A of the Wealth-tax Act, 1957 was dismissed on the ground that tax effect was below the prescribed monetary limit fixed by the CBDT and the case was not covered under any of the exceptions mentioned therein. (4) CIT v. Smt. Usha Mathur [2001] 252 ITR 179 (Punj. Har.) Here also an appeal under section 260A was dismissed on account of smallness of tax effect. (5) CIT v. Bhagwan Cloth Store [2002] 170 Taxation 503 (MP) In this case also, the Hon'ble Madhya Pradesh High Court has dismissed the reference by referring to Board's Instruction No. 1903 prescribing monetary limit on the ground that the tax effect was below the monetary limit prescribed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect for filing the appeals before the Tribunal, High Courts and Supreme Court are binding on the Income-tax authorities. This view also finds the support from the commentary of Law and Practice by Kanga, Palkhivala and Vyas where the authors have expressed the view that the instructions of Board prescribing the monetary limit for filing the appeals are binding on the Income-tax authorities. We also feel that if such instructions are not followed by the Income-tax authorities, it would open flood gates of arbitrariness where the Departmental officers may follow the policy of pick and choose as they like. This would give rise to high handedness and discrimination and violate the principles of equality enshrined in Articles 14 and 16 of the Constitution. Further, these instructions are issued by the Board after due deliberations after taking into account the various aspects of the matter including the likely revenue impact. These also reflect the policy of the Government. Therefore, it is the duty of every officer working in the Department to follow the same moreso when these have the statutory backing/force. The judgment of Apex Court in the case of J.R. Raghupathy relied upon by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised before the Tribunal, and, therefore, we are not allowing the assessee to raise this plea for the first time before us. In any case, the Board's circular is only an instruction issued to the income-tax authorities not to file appeals where the tax effect is less than Rs. 1,00,000. The Tribunal is not bound by any such instruction and once the Department files an appeal, the Tribunal was bound to decide the same on the merits. This question, in our opinion, is not a question of law. If we closely analyse the observations of the Hon'ble High Court, the following position emerges:- (i) As per provisions of section 260A, an appeal against the order of the ITAT lies only if there is a substantial question of law. Now in the present case, the Hon'ble High Court has observed with the opening sentence itself that none of the questions raised is a question of law much less a substantial question of law and, therefore, the appeal deserves to be dismissed. (ii) As regards the plea of the Id. counsel that tax effect in the present case being less than Rs. 1,00,000, the Hon'ble High Court observed that the assessee cannot be allowed to raise this plea for the first time b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have been heard and their arguments have been considered. We have referred to the book on jurisprudence by Salmond at page 148 (12th Edition) which enumerates circumstances under which a precedent loses the binding force. Once such circumstances mentioned therein is that if it is a precedent sub silentio or not fully argued. Now in the present case also, the assessee was not allowed to argue the case on this issue. Therefore, when the assessee was not permitted to raise the plea, it cannot be said that such observations were made after hearing the parties at length or after considering all relevant aspects including the nature of instructions issued by the Board in the light of various judgments of the Hon'ble Supreme Court and High Courts on these issues. Thus, we are of the opinion that such observations of the Hon'ble High Court are in the nature of passing remarks only. 12.2 In this regard, it would be appropriate to refer to the judgment of Hon'ble Supreme Court in the case of S. Shanmugavel Nadar v. State of Tamil Nadu [2003] 263 ITR 658. The facts of the case before the Hon'ble Supreme Court were that the constitutional validity of an Amendment Act of 1960 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration of the issues, cannot be deemed to be a law declared, to have binding effect as is contemplated by article 141. A summary dismissal by the Supreme Court, without laying down any law, is not a declaration of law envisaged by article 141. When reasons are given the decision of the Supreme Court would be binding on all courts within the territory of India; when no reasons are given, dismissal simpliciter is not a declaration of law by the Supreme Court. In the present case as discussed above, the appeals were dismissed on the ground that no substantial question of law was involved and the plea regarding tax effect was not taken before the Tribunal and the plea was not allowed to be raised. Therefore, observations were made by the Hon'ble High Court without hearing the parties and without considering the various judgments of the Hon'ble Supreme Court on the issue of binding nature of the instructions. These were only passing remarks, not binding in nature. 12.3 Without prejudice and independent of the view that the observations made by the Hon'ble High Courts were only passing remarks, we wish to mention that even if it is considered that these observations are b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the High Court has held that the Tribunal has powers to rectify only such mistakes which are apparent from the record. It does not have any powers to review its own order. The High Court further observed that the absence of adequate reasons in an order passed under section 254(1) cannot per se be regarded as mistake apparent within the meaning of section 254(2) of the Income-tax Act. Likewise, the possibility of forming a different opinion than one expressed in the order passed under section 254(1) cannot be a ground for entertaining an application under section 254(2). 13.2 This issue also came to be considered by the Hon'ble Delhi High Court in the case of Smt. Baljeet Jolly v. CIT [2001] 250 ITR 113, where the Hon'ble High Court held that powers of the Tribunal to rectify an errors are limited only to rectify mistakes, which were apparent from record. Mistakes discovered by a complicated process of investigation, argument and proof did not fall within the purview of section 254(2) of the Income-tax Act. Further the Hon'ble Calcutta High Court in the case of CIT v. Anamika Builders (P.) Ltd. [2001] 251 ITR 585 has held that once a possible view had been taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f these detailed discussions and legal position discussed above, we are of the considered opinion that the Tribunal did not commit any error in dismissing the appeals by relying on Instruction No. 1979, dated 27th March, 2000 of the Central Board of Direct Taxes and such issues fall outside the scope of rectification mentioned under section 254(2) of the Income-tax Act, 1961. 14. These Miscellaneous Applications filed by the Revenue will now go to the Regular Bench for final disposal for a limited purpose whether the tax effect in these cases exceeds the prescribed monetary limit fixed by the Board. Annexure-A List of cases of the Hon'ble Supreme Court and High Courts cited by Shri S.K. Bansal, Advocate, as Intervener Sr. No. Supreme Court Cases 1. CIT v. Anjum M.H. Ghaswala and Ors. (2001) 252 ITR 1 (SC) 2. UCO Bank v. CIT: (1999) 237 ITR 889 (SC) 3. Collector of Central Excise v. Dhiren Chemicals Inds.: (2002) 254 ITR 554 (SC) 4. Union of India and Anr. v. Azadi Bachao Andolan and Anr. (2003) 263 ITR 706 (SC) 5. CST v. Indra Ind.: (2001) 248 ITR 338 (SC) 6. Berger Paints India Ltd: (2004) 266 ITR 99 (SC) 7. Goodyear v. State of Haryana: (1991) 188 ITR 402 (SC) 8. CIT v. Sun E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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