, `',
IN THE INCOME TAX APPELLATE TRIBUNAL "E", BENCH MUMBAI
.., ,
BEFORE SHRI R.C.SHARMA, AM
&
SHRI SANJAY GARG, JM
./ITA No.497/Mum/2014
( / Assessment Year :2010-11)
M/s Empire Footwear Shop
ACIT, Cen.Cir-20, Mumbai- Vs.
20 No.1 & 2, York House, Opp.
Electric House, Colaba
Causeway, Mumbai-400039
./ ./ PAN/GIR No. : AAAFE 5754 H
( /Appellant) .. ( / Respondent)
/Revenue by : Shri Neil Philip
/Assessee by : None
/ Date of Hearing : 29/06/2015
/ Date of Pronouncement 22/07/2015
/ O R D E R
PER R.C.SHARMA (A.M):
This is an appeal filed by the revenue against the order of CIT(A),
Mumbai, for the assessment year 2010-11, in the matter of order passed
u/s.143(3) of the I.T.Act.
2. The revenue is aggrieved in deleting the addition of Rs.11,01,436/-
in respect of payment of management fees.
3. After going through the grounds taken by the revenue, we found
that the tax effect in the appeal of the revenue 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
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ITA No.497/14
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 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:--
'6. The question about applicability of Instruction No.3 of 2011 had been
considered and decided by the Aurangabad Bench of the Bombay High
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ITA No.497/14
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 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-
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ITA No.497/14
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
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
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ITA No.497/14
view of the provisions of section 268A of the Income Tax, and
theCBDT Instruction No. 3 of 2011."
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
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.
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ITA No.497/14
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 matters Monetary Limits (in
No. 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 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.
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ITA No.497/14
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 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 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
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ITA No.497/14
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. 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 this 22/07/2015.
Sd/- Sd/-
( ) (..)
(SANJAY GARG) (R.C.SHARMA)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai; Dated 22/07/2015
. ./pkm, ./ PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A), Mumbai.
4. / CIT
5. , , / DR, ITAT, Mumbai
6. / Guard file.
//True Copy//
/ BY ORDER,
/
(Asstt. Registrar)
, / ITAT, Mumbai
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