Commissioner Of Income Tax, Jaipur v. M/S. Shri Ganesh Sizing Factory

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR D.B. Income Tax Reference No.13/1997 Commissioner of Income Tax, Jaipur Vs. M/s. Shri Ganesh Sizing Factory Date of order : 19.02.2016 Hon'ble Mr. Justice Ajay RastogiHon'ble Mr. Justice J.K. Ranka Mrs. Parinitoo Jain Adv., for applicant Mr. P.K. Kasliwal Adv. , for respondent. By the Court 1.This reference u/sec. 256(2) of the Income Tax Act, 1961, at the instance of Revenue seeks our opinion on the following questions of law :- “1. Whether on the facts and in the circumstances ofthe case Income-tax Appellate Tribunal was justified innot holding that there was no mistake in its orderdt.14.11.83 in ITA No.592/JP/82 apparent from therecord to be rectified u/s.254(2) of the I.T. Act, 1961. 2.Whether on the facts and in the circumstances ofthe case the Income Tax Appellate Tribunal wasjustified while passing order u/s.254(2) of the I.T. Act,1961, in restoring the issue regarding grant ofregistration to the firm for the assessment year 1978-79to the file of the Income-tax officer for redeterminingthe issue after considering the quantum of profits anddistribution thereof amongst partners while it had neverbeen the case of the assessee that it had ever distributedprofits on supressed sales of Rs.1,78,687/- and bogus purchases of Rs.49,570/- as confirmed by the Tribunalin their quantum appeal. 3.Whether on the facts and in the circumstances ofthe case the Income-tax Appellate Tribunal wasjustified in not affirming the finding given in its originalorder dated 14.11.83 in ITA No.592/JP/82 that theassessee firm failed to distribute profits on suppressedsales of Rs.1,78,687/- and bogus purchases ofRs.49,570/- and, therefore, not entitled to theregistration under the Income-tax Act.” 2.It is brought to our notice that a Circular has been issued by the Central Board of Direct Taxes dated 10.12.2015 bearingNo.21/2015 in exercise of powers u/sec. 268A(1) of the Income-Tax Act laying down revision of monetary limits for filing ofappeals by the Department before the Tribunal and High Courtsand SLP before Supreme Court keeping in view the measures forreducing litigation. The relevant paras 3, 8, 9 and 10 of theCircular are quoted hereunder :- “3.Henceforth, appeals/SLPs shall not be filed in caseswhere the tax effect does not exceed the monetary limits givenhereunder :- It is clarified that an appeal should not be filed merely becausethe tax effect in a case exceeds the monetary limits prescribedabove. Filing of appeal in such cases is to be decided on meritsof the case. 4.xxx5.xxx6.xxx7.xxx xxxxxxxxxxxxxxxxxxxxxxxx 8.Adverse judgments relating to the following issuesshould be contested on merits notwithstanding that the taxeffect entailed is less than the monetary limits specified in para3 above or there is no tax effect:(a) Where the Constitutional validity of the provisions ofan Act or Rule are under challenge, or (b)Where Board's order, Notification, Instruction orCircular has been held to be illegal or ultra vires, or (c)Where Revenue Audit objection in the case hasbeen accepted by the Department, or(d)Where the addition relates to undisclosed foreignassets/bank accounts. 9.The monetary limits specified in para 3 above shall notapply to writ matters and direct tax matters other than Incometax. Filing of appeals in other Direct tax matters shall continueto be governed by relevant provisions of statute & rules.Further, filing of appeal in cases of Income Tax, where the taxeffect is not quantifiable or not involved, such as the case ofregistration of trusts or institutions under section 12 A of the ITAct, 1961, shall not be governed by the limits specified in para3 above and decision to file appeal in such cases may be takenon merits of a particular case. (c)Where Revenue Audit objection in the case hasbeen accepted by the Department, or(d)Where the addition relates to undisclosed foreignassets/bank accounts. 9.The monetary limits specified in para 3 above shall notapply to writ matters and direct tax matters other than Incometax. Filing of appeals in other Direct tax matters shall continueto be governed by relevant provisions of statute & rules.Further, filing of appeal in cases of Income Tax, where the taxeffect is not quantifiable or not involved, such as the case ofregistration of trusts or institutions under section 12 A of the ITAct, 1961, shall not be governed by the limits specified in para3 above and decision to file appeal in such cases may be takenon merits of a particular case. 10.This instruction will apply retrospectively to pendingappeals and appeals to be filed henceforth in HighCourts/Tribunals. Pending appeals below the specified taxlimits in para 3 above may be withdrawn/not pressed. Appealsbefore the Supreme Court will be governed by the instructionson this subject, operative at the time when such appeal wasfiled.” 3.And laying down other conditions as well which has to be considered by the Assessing Officer or Appellate Authority as well, the CBDT in paras 9 and 10 of the Circular it has been observed that the monetary limits specified in para 3 above shallnot apply to writ matters and direct tax matters other than income tax, and at the same time these instructions will applyretrospectively to the pending appeals and appeals to be filedhenceforth in High Courts/Tribunals, and also before the SupremeCourt. The Circular in para 8 carves out four exceptions asreferred to hereinabove. 4.However, instant is a case of reference u/sec. 256(2) of theIncome Tax Act, as it then was, and plea raised is that the aforesaidCircular may not be applicable as it relates only to appeals. 5.In our view, taking into consideration the judgment renderedby the Bombay High Court in the case of CIT v. M/s. SunnySounds P. Ltd. Mumbai Income Tax Reference No.213/1997, dated8.1.2016, where this issue came up for consideration and it washeld that there is no reason why the Circular should not apply topending references where the tax effect is less than Rs.20 lac andobject of the Circular to reduce litigation would be frustrated andbe applicable even to pending references. We also concur with theview expressed by the Bombay High Court (supra). 6.In view of the above, we hold that as admittedly the tax effectis less than Rs.20 lac in the instant reference at the instance ofRevenue, the same is returned unanswered. However, we make itclear that the question of law as raised for our opinion, is left open to be considered in an appropriate case. In case the instantreference falls in any of the exceptions as referred to in theCircular, the Revenue will be at liberty to move an application forrecalling of the order. 7.The reference is disposed of accordingly. No order as tocosts. (J.K. Ranka) J. (Ajay Rastogi) J. S.Kumawat-65 Certificate- All corrections made in the judgment/order have been incorporated in thejudgment/order being e-mailed. S.Kumawat Jr. P.A