" "
IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI
BEFORE SHRI R.C. SHARMA , AM AND SHRI SANDEEP GOSAIN , JM
./I.T.A. No. 6952/Mum/2013
( / Assessment Year: 2009-2010)
ITO -25(2)(3) , Mumbai Smt. Sudha Brijratan Damani
Room No. 105, 1st floor, A-73, Shridhar Smruti, Devidas
Bldg. No. C-11, Pratyakshakar / Extension Road, Borivali (West)
Bhavan, Bandra Kurla Complex, Vs. Mumbai 400 103.
Bandra (East), Mumbai-400051.
./ ./PAN/GIR No. AAAPD 5203 G.
( /Appellant) : ( / Respondent)
Revenue by : Shri G.M. Makwana
Assessee by : Shri Jayant R. Bhatt
/
: 15.10.2015
Date of Hearing
/
: 21.10.2015
Date of Pronouncement
/ O R D E R
Per Sandeep Gosain J. M.:
This appeal has been filed by the Revenue against the order of CIT(A) -35
Mumbai, dated 27-09-2013 thereby allowing the appeal of the assessee against
the order of assessment u/s. 143(3) of the Income Tax Act, 1961 dated 27-12-
2011, on the following grounds:-
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ITO V/s. Smt. Sudha B. Damani
a. "On the facts and in the circumstances of the case and in law,
the Ld. CIT(A) erred in holding the income of the assessee
from share transaction as profits from capital gain and not as
business income."
b. "On the fact and in the circumstances of the case and in law,
the Ld.CIT(A) erred in not appreciating the fact that though the
total transactions during the year is low, the volume of
transactions is very high and the shares are bought and sold
regularly within short period with an intention to earn profit with
minimum risk."
c. "The appellant prays that the order of the Ld. CIT(A) on the
above grounds be set aside and that of the A.O. be restored.
d. "The appellant craves leave to amend or alter any ground or
add a new ground."
However, after going through the grounds taken by the Revenue , we found that the
tax effect in the present appeal is less than 4 lakhs.
3. Ld. DR was specifically asked to give working, wherein he confirmed that
the tax effect in the present appeal is less than Rs.4 lakhs.
4. In view of the recent Instruction No. 5/2014 issued by CBDT on 10-7-2014
revising monetary limits for filing of appeal before ITAT fixing the tax effect limit of
Rs. 4 lacs, the same is not maintainable and liable to be dismissed in limine. The
only issue now remains before us is, whether, this appeal of revenue, which is
below the prescribed limit of tax effect in view of the Board's Instruction
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ITO V/s. Smt. Sudha B. Damani
No.5/2014 issued on 10-7-2014 revising the monetary limits for filing of appeals
by the Department before ITAT is maintainable or not.
5. We have considered the judgment of Hon'ble Delhi High Court in the case
of CIT v. P.S. Jain & Co. (2011) 335 ITR 591 has held as under:
"This court can very well take judicial notice of the fact that by passage
of time money value has gone down, the cost of litigation expenses has
gone up, the assessees on the file of the Departments have been
increased consequently, the burden on the Department has also
increased to a tremendous extent. The corridors of the superior courts
are chocked with huge pendency of cases. In this view of the matter, the
Board has rightly taken a decision not to file references if the tax effect
less than Rs. 2 lakhs. The same policy for old matters needs to be
adopted by the Department. In our view, the Board's circular dated 27-3-
2000 is very much applicable even to the old references which are still
undecided. The Department is not justified in proceeding with the old
references wherein the tax impact is minimal. Thus, there is no
justification to proceeds with decades old references having negligible
tax effect."
6. Similarly, Hon'ble Gujarat High Court in the case of CIT v. Sureshchandra
Durgaprasad Khatod (HUF) (2014) 363 ITR 556/(2013) 214 Taxman 59 has
specifically considered instruction No. 3/2011 and held that the same would
apply to pending cases as well even though there was a specific condition in that
instruction also that the same would apply to appeals file on or after February,
2011. Hon'ble High Court has considered this issue as under:--
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ITO V/s. Smt. Sudha B. Damani
'6. The question about applicability of Instruction No.3 of 2011 had been
considered and decided by the Aurangabad Bench of the Bombay High
Court in Tax Appeal No. 78 of 2007, The Commissioner of Income Tax
v. Smt. Vijaya V. Kavekar decided on 29-7-2011. The Division Bench,
after considering earlier Instructions and various decisions of the Courts
on Instructions, relying on the decision in Commissioner of Income Tax
v. Madhukar K. Inamdar (HUF) (2010) 229 CTR (Bom) 77, has held in
paragraphs 9, 10, 11, 14 and 17 as under:
"9. As stated earlier, the Income Tax Act was amended and Section
268A has been introduced on the Statute book with retrospective
effect. Section 268A carves out an exception for filing of appeals and
References under section 260 A of the Act. The legislature has
prescribed that the CBDT is empowered to issue circulars and
instructions from time to time, with regard to filing of appeals
depending on the tax effect involved.
Thereafter, in 2008, CBDT Instruction No. 5 of 2008 dated 15-5-
2008 was issued. This Court in the case of "Commissioner of Income
Tax v. Madhukar K. Inamdar (HUF) (2010) 229 CTR (Bom) 77,
interpreted the aforesaid Circular. The Circular was issued in
supersession of all earlier instructions issued by the Board. The
monetary limit was increased and appeals were to be filed under
Section 260A, thereafter, only in cases where the tax effect exceeded
Rs. 4 Lacs. Paragraph 11 of that instruction stipulated that it was
applicable to appeals filed on or after 15-5-2008. It was further provided
that in cases, where appeals were filed before 15-5-2008, they would be
governed by the instructions on this subject which were operative at the
time when such appeals were filed. The instruction was issued under
section 268A(1) of the Act. The argument of the learned Counsel for the
revenue in that case was, that the instruction issued on 15-5-2008 did
not preclude the department from continuing with the appeals and/or
Petitions filed prior to 15-5-2008, if they involved a substantial question
of law of a recurring nature, notwithstanding the fact that the total
cumulative tax effect involved in the appeals was less than Rs. 4 Lacs.
It was submitted, such appeals which were filed prior to the issuance of
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ITO V/s. Smt. Sudha B. Damani
Instruction and where substantial questions of law were raised, were
required to be decided on merits. The Court, while considering the issue
observed that paragraph 5 of the Circular made it clear that no appeals
would be filed in the cases involving tax effect less than Rs. 4 Lacs
notwithstanding the issue being of recurring nature. Relying on the
judgement in CIT v. Polycott Corporation, the Court observed as
follows:
"6 The aforesaid judicial verdict makes it clear that the circular dt. 15-
5-2008 in general and para (5) thereof in particular lay down that
even if the same issue, in respect of same assessee, for other
assessment years is involved, even then the Department should not
file appeal, if the tax effect is less than Rs. 4 Lakhs. In other words,
even if the question of law is of recurring nature even then, the
revenue is not expected to file appeals in such cases, if the tax
impact is less than the monetary limit fixed by the CBDT."
7. One fails to understand how the Revenue, on the face of the
above clear instructions of the CBDT, can contend that the circular
dt. 15-5-2008 issued by the CBDT is applicable to the cases filed
after 15-5-2008 and in compliance thereof, they do not file appeals, if
the tax effect is less than Rs. 4 Lakhs; but the said circular is not
applicable to the cases filed prior to 15-5-2008 i.e. to the old pending
appeals, even if the tax effect is less than Rs. 4 Lakhs. In our view,
there is no logic behind this belief entertained by the Revenue."
The Court has further held that the prevailing instructions fixing the
monetary limit for the tax effect would hold good even for pending
cases. Accordingly, the Court dismissed all the appeals having a tax
effect of less than Rs. 4 Lacs.
10. The new CBDT instructions have been issued on 9-2-2011,
being Instruction no. 3 of 2011. The monetary limit has been raised
again and clause 3 of the instructions provides that appeals shall not
be filed in cases where the tax effect does not exceed the monetary
limits prescribed, henceforth. The monetary limits prescribed for filing
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ITO V/s. Smt. Sudha B. Damani
an appeal under section 260A before the High Court has been raised
to Rs. 10 Lacs. This instruction is identical to the CBDT Instruction
no. 5 of 2008. Clause 10 of this circular indicates that monetary limits
would not apply to writ matters and direct tax matters other than
income tax. It further provides that where the tax effect is not
quantifiable, the Department should take a decision to file appeals on
merits of each case. Clause 11, again provides that the instruction
would apply to appeals filed on or after ....2011 and appeals filed
before ....2011 would be governed by the instructions on this subject,
operative at the time when such appeals were filed.
11. In our opinion, when a similar clause has been interpreted by the
Division Bench of this Court in CIT v. Madhukar Inamdar (Supra), the
same principles must apply in the present cases also, as we have
found that the instructions of 15-5-2008 is para-material with the
instruction of 9-2-2011.
14. Similarly, the Delhi High Court in the case of "Commissioner of
Income Tax v. Delhi Race Club Ltd.", decided on 3-3-2011, by relying
on its earlier Judgement "Commissioner Income Tax Delhi-III v. M/s
P.S. Jain and Co. decided on 2-8-2010 has held that the CBDT
circular raising the monetary limit of the tax effect to Rs. 10 Lacs
would be applicable to pending cases also.
17. It is true that this judgement in Chhajer's case (supra) was not
brought to the notice of the Division Bench, while deciding
either Madhukar'scase (supra) or the case of Polycot
Corporation (supra). However, the instruction of 2005 which was
considered in Chhajer's case has also been interpreted in Polycot
Corporation (supra). The consistent view of the Court has been that
the CBDT instruction would apply to pending cases as well. The
main objective of such instructions is to reduce the pending litigation
where the tax effect is considerably small. Therefore, in our opinion,
the tax appeals are required to be dismissed, as they are not
maintainable in view of the provisions of section 268A of the Income
Tax, and theCBDT Instruction No. 3 of 2011."
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ITO V/s. Smt. Sudha B. Damani
7. The same view has been taken by the Karnataka High Court in ITA
No. 3191 of 2005 in The Commissioner of Income-Tax v. M/s. Ranka &
Ranka decided on 2-11-2011, wherein the Division Bench has
considered Instruction No.3 and the National Litigation, Policy, had held
as under:
"(i) Instruction No.3/11 is also applicable to the pending appeals.
(ii) As the tax effect in the instant case is less than Rs.10 lakhs, the
appeal stands dismissed on the ground of monetary limit, without
expressing any opinion on the merits of the claim, making it clear that
the Department is at liberty to proceed against the assessee in
future, if there any amount due from the assessee, on similar issue
and if it is above the monetary limit prescribed."'
7. We find from the above case law of Hon'ble Gujarat High Court in the case
of Sureshchandra Durgaprasad Khatod (HUF), (supra) that in the similar situation
and exactly identical instructions were applied to the retrospectively pending
appeals also. Hon'ble Gujarat High Court has discussed that almost all High
Courts are of the unanimous view, considering the main objective of such
instructions that to reduce the pending litigation, where the tax effect is
considerable low or small, the appeal is not maintainable. The recent instruction
revising the monetary limit to Rs. 4 lakh for filing appeal before ITAT on income
tax matters, as issued vide Instruction No.5/2014 FNo279/Misc.142/2007-ITJ(Pt)
dated 10-7-2014 will apply to pending appeals also for the reason that the same
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ITO V/s. Smt. Sudha B. Damani
is exactly identical to earlier instructions. The relevant circular issued by CBDT
reads as under:
'Reference is invited to Board's instruction No 3/2011 dated 9-2-
2011 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 merits before
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 the monetary limits given hereunder:-
S Appeals in Income-tax Monetary Limits (in
No. matters Rs)
1. Before Appellate Tribunal 4,00,000
2. Under section 260A before 10,00,000
High Court
3. 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 merits of the case.
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 issues against which appeal is intended to be
filed (hereinafter referred to as "disputed issues"). However the tax will
not include any interest thereon, except where chargeability of interest
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ITO V/s. Smt. Sudha B. Damani
itself is in dispute. In case the chargeability of interest is the issue under
dispute, the amount of interest shall be the tax effect. In cases where
returned loss is reduced or assessed as income, the tax effect would
include 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.
5. The assessing officer shall calculate the tax effect separately for
every assessment year in respect of the disputed issues in the case of
every assessee. If, in the case of an assessee, the disputed issues
arise in more than one assessment year, appeal, can be filed in respect
of such assessment year or years in which the tax effect in respect of
the disputed issues exceeds the monetary limit specified in para 3. No
appeal shall be filed in respect of an assessment year or years in which
the tax effect is less than the monetary limit specified in para 3. In other
words, henceforth, appeals can be filed only with reference to the tax
effect in the relevant assessment year. However, in case of a composite
order of any High Court or appellate authority, which involves more than
one assessment year and common issues in more than one
assessment year, appeal shall be filed in respect of all such assessment
years even if the 'tax effect' is less than the prescribed monetary limits
in any of the year(s), if it is decided to filed appeal in respect of the
year(s) in which 'tax effect' exceeds the monetary limit prescribed. In
case where a composite order/judgment involves more than one
assessee, each assessee shall be dealt with separately.
6. In a case where appeal before a Tribunal or a Court is not filed only
on account of the tax effect being less than the monetary limit specified
above, the Commissioner of Income-tax shall specifically record that
"even though the decision is not acceptable, appeal is not being filed
only on the consideration 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
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ITO V/s. Smt. Sudha B. Damani
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
Bard, 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 case 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 o tiled or not admitted only for the reason of
the tax effect being less than the specified monetary limit and, therefore,
no inference should be drawn that the decisions rendered therein were
acceptable to the Department. Accordingly, they should impress upon
the Tribunal or the Court that such cases do not have any precedent
value. As the evidence of not filing appeal due to this instruction may
have to be produced in courts, the judicial folders in the office of CIT
must be maintained in a systemic manner for easy retrieval.
8. Adverse judgments relating to the following issues should be
contested on merits notwithstanding that the tax effect entailed is less
than the monetary limits specified in para 3 above or there is no tax
effect.
(a) Where the Constitutional validity of the provisions of an Act or
Rule are under challenge, or
(b) Where Board's order, Notification, Instruction or Circular has been
held to be illegal or ultra vires, or
(c) Where Revenue Audit objection in the case has been accepted
by the Department.
9. The proposal for filing Special Leave Petition under Article 136 of the
Constitution before the Supreme Court should, in all cases, be sent to
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ITO V/s. Smt. Sudha B. Damani
the Directorate of Income- tax (Legal & Research), New Delhi and the
decision to file Special Leave Petition shall be in consultation with the
Ministry of Law and Justice.
10. The monetary limits specified in para 3 above shall not apply to writ
matters and direct tax matters other than Income tax. Filing of appeals
in other Direct tax matters shall continue to be governed by the relevant
provisions of statute & rules. Further filing of appeal in cases of Income
Tax, where the tax effect is not quantifiable or not involved, such as the
case of registration of trusts or institutions under section 12 A of the IT
Act, 1961, shall not be governed by the limits specified in par 3 above
and decision to file appeal in such cases may be taken on merits of a
particular case.
11. This instruction will apply to appeals filed on or after 10-7-2014.
However, the cases where appeals have been filed before 10-7-2014
will be governed by the instructions on this subject, operative at the time
when such appeal was filed.
12. This issue under section 268A (1) of the Income-tax Act 1961.'
8. Considering the above judicial pronouncements, we found that this appeal
of the revenue is not maintainable as the tax effect in this appeal is below Rs.4
lakhs. Even on merits we found that as per the findings recorded by CIT(A) profit
earned on sale of share are liable to be texted as short term capital precise
findings of CIT(A) is as under:-
"I have gone through the A.O's contentions and the submission of the
appellant. The main contentions of the A.O. are that the appellant has
carried out purchase and sale transactions of shares on a large scale and
that the scrips were held for a very short period and also the A.O. has
focused on the fact that the appellant has in the earlier year also been
engaged in the activity of share trading and so the activities are of
recurring nature. From the submissions of the appellant, however some
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ITO V/s. Smt. Sudha B. Damani
critical facts emerged. In the entire year only 9 sale transactions are seen
and the total volume of transactions including the purchase and sale is at
Rs. 73,69,994/- . In the context that the appellant's own capital is Rs.
2,98,31,760/- and that only 9 scrips were traded in the whole year, it
cannot be inferred that the volume of frequency was inordinately high. It is
also seen that majority of shares were held for more than 6 months. Also in
terms of the value of the total purchase and sale of shares, it seen that the
appellant has earned nearly 64.49% in terms of return of investment and at
the percentage it cannot be inferred that trading was that frequent for the
sale purchase volume in terms of price to be very close to each other. In
the background of the facts of the case, I am inclined to agree with the
appellant that the engagement in the trading of shares is in the nature of
investment for the purpose of generating capital gains and is not to be held
as income from business. The appellant gets relief accordingly."
The above findings of CIT(A) has not been controverter by ld. D.R. by
bringing any positive material on record. Accordingly, we do not find any reasons
to interfere in the findings so recorded by CIT(A), treating the gain on sale of
shares as short term capital gain. Accordingly, we dismiss the appeal of the
revenue.
9. In the result appeal of the Revenue is dismissed.
Order pronounced in the open court on October 21st, 2015
Sd/- Sd/-
( R.C. Sharma ) ( Sandeep Gosain)
/ Accountant Member / Judicial Member
Mumbai; Dated : 21.10.2015
PS:- Pooja
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ITA No6952/Mum/13(A.Y. 09-10)
ITO V/s. Smt. Sudha B. Damani
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent
3. () / The CIT(A)
4. / CIT - concerned
5. , , / DR, ITAT, Mumbai
6. / Guard File
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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ITO V/s. Smt. Sudha B. Damani
Sr. No. Details Date Initials Designation
1 Draft dictation sheets are attached Yes Sr.PS/PS
2 Draft dictated on 16.10.2015 Sr.PS/PS
3 Draft Placed before author 16.10.2015 Sr.PS/PS
4 Draft proposed & placed before JM/AM
the Second Member
5 Draft discussed/approved by JM/AM
Second Member
6 Approved Draft comes to the Sr.PS/PS
Sr.PS/PS
7 Order pronouncement on Sr.PS/PS
8 File sent to the Bench Clerk Sr.PS/PS
9 Date on which the file goes to the
Head clerk
10 Date on which file goes to the AR
11 Date of Dispatch of order
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