Commissioner of Income Tax-VIII vs A. Rajack and Sons

K. Raviraja Pandian, J.—These appeals are filed by the revenue against the order of the Income Tax Appellate Tribunal, ''A'' Bench,

Chennai dated 11.12.2003 made in M.P.128,129 & 130/Mds/2003 in ITA. Nos. 1, 2 & 3/Mds/98. The relevant assessent years are 1990-91,

1991-92 and 1992-93.

The facts as culled out from the statement of facts stated in the memorandum of appeals are as follows:

The assessee firm filed its return of income for the assessment years 1990-91, 1991-92 and 1992-93. The assessing officer disallowed the entire

interest payment to certain individuals claimed as a deduction, holding that the money lent has to be treated as belonging to the assessee''s firm

though shown in books as borrowed. Aggrieved by the said order, the assessee filed an appeal before the Commissioner of Income Tax

(Appeals), who disallowed the deletion of interest and allowed the appeal in favour of the assessee. Aggrieved by the order of the Commissioner

of Income Tax (Appeals), the Revenue took up the matter to the Income Tax Appellate Tribunal. The Tribunal dismissed the appeals in limine,

without going into the merits of the case, on the ground that the total tax effect is less than Rs. 1 lakh and in view of the Circular of the Board dated

27.3.2000, which is binding on the Revenue, the Revenue cannot maintain the appeals. The Revenue filed miscellaneous petitions for rectification

of the order, pointing out that the appeals have been filed when the earlier instructions of the Board dated 04.11.1987 was in force, and the

monetary limit prescribed was only Rs. 25,000/- and the wrong instructions had been applied to the cases to dismiss the departmental appeals.

The Tribunal took the view that the question of which instructions would apply is itself a debatable issue which cannot be decided in the

miscellaneous petitions. The petitions were accordingly dismissed. Aggrieved by the order of the Income Tax Appellate Tribunal, the revenue has

come up with the present appeals by formulating the following substantial questions of law:

Whether in the circumstances of the case, the Tribunal was right in dismissing the Department''s appeals merely on the ground that the tax effect

is less than the minimum specified by the Board''s instructions, without going into the merits of the case?

Whether in the circumstances of the case, the Tribunal was right in dismissing the Department''s appeals, when they exceeded the prescribed

minimum monetary limits in force at the time of filing?

Whether in the facts and circumstances of the case, the Tribunal was right in holding that the issue of which instruction to apply is a debatable

one, and refusing to rectify its order?.

We heard the arguments of the learned Counsel appearing for the Revenue.

The binding nature of the Circular F. No. 279/126/98 ITJ issued by the Central Board of Direct Taxes dated 27th March 2000 need not be re-

stated. It is well settled that the circular issued by the Board is binding on the department. The Circular categorically states that in order to maintain

an appeal before the High Court, the tax effect must be more than Rs. 2/-lakhs. It is also stated that the monetary limits would apply with reference

to each case taken singly. In group cases also, each case should individually satisfy the new monetary limits. However, certain exceptions have

been carved out in paragraph 3 of the Circular in order to maintain an appeal though the tax effect is less than Rs. 2 lakhs/. So far as the facts of

the present case is concerned the exception carved for filing an appeal is not available. The total demand in respect of each assessment year is also

less than Rs. 1/- lakh as could be seen from the assessment order wherein the disputed amount is only Rs. 1,15,541/- for the assessment year

1990-91, Rs. 1,81,713/- for the assessment year 1991-92 and in respect of the other assessment year 1992-93 the amount is Rs. 35,013/-.

This Court Court has considered the Circular issued by the Central Board of Direct Taxes dated 27.3.2000 in Commissioner of Income Tax

Vs. Associated Electrical Agencies, and Commissioner of Income Tax v. P.S.T.S. Thiruvirathnam and Sons, to which one of us is a party (K.

Raviraja Pandian, J.) reported in Commissioner of Income Tax Vs. P.S.T.S. Thiruvirathnam and Sons, and held that the appeal is not maintainable

if the tax effect is less than Rs. 2 lakhs.

The learned Counsel appearing for the Revenue apart from the substantial questions of law formulated has contended that at the time of filing the

appeal before the Tribunal the tax effect was only Rs. 50,000/- However, when the matter was taken for orders by the Tribunal the tax effect has

been enhanced to Rs. 1/-lakh. The rightly instituted appeal cannot be dismissed on the simple reason that the tax effect is less than Rs. 1/- lakh as

per the Circular which has been issued on 27th March 2000 with effect from 1.4.2000.

We are not able to subscribe our view in the absence of any specific mention in the circular dated 27.3.2000 about the cases pending for

decision before the Tribunal. In the Instruction No. 5/2008 dated 15.5.2008, it has been clearly stated that the instruction would apply to appeals

filed on or after 15th May 2008. However, the cases, where the appeals have been filed before 15th May 2008 would be governed by the

instructions on the subject operative at the time when such appeal was filed. So far as the present case is concerned, the Circular dated 27th

March 2000 which came into force from 1.4.2000 would be applicable. On the reading of the circular dated 27.3.2000, we are of the view that

the Circular would apply even to the cases, which were filed before the Tribunal even prior to the coming into force of the circular and even such

cases would come within the sweep of the Circular from 1st April 2000. As the circular reflect the policy decision taken by the Board not to raise

disputes where the tax effect is less than the amount prescribed with a view to reduce the litigations before the High Courts and the Supreme

Court, the said circular is binding on the Revenue . The contention of the revenue that so far as the new cases are concerned the circular issued by

the Board is binding on them, however, in respect of the cases, which are already filed and pending before the Tribunal, the circular is not

applicable in our view does not stand to any reason or logic, particularly on the face of the Clasue 7 of the Circular which says that the instruction

would come into effect from 1st April 2000. Hence, the Circular dated 27th March 2000 is very much applicable even to the cases pending for

decision before the Tribunal. Similar view has been taken by the Bombay High Court in The Commissioner of Income Tax Vs. Pithwa Engg.

Works, .

For the foregoing reasons, the appeals are dismissed.