Date Of Judgment 16-08-2018 I.t.a v. Shraddha Trust

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THILS THE 1 DAY OF AUGUST, 2018 PRESENT| THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND| THE HON’BLE Mrs. JUSTICE S.SUJATHAINCOME TAX APPEAL No./732 OF 2O1 BETWEEN: 1)Pr. COMMISSIONER OF INCOME-TAX,EXEMPTIONSEXEMPTIONS MISSION ROAD, BENGALURU. 2.INCOME TAX OFFICER (EXEMPTIONS),WARD-3, BENGALURU.WARD-3, BENGALURU. APPELLANTS (By Mr. E.ILSANMATHI, ADV.) AND: SHRADDHA TRUSTNo.37/10, YELLAPPA CHETTY LAYOUTULSOOR ROADBENGALURU - 560 042. RESPONDENT| Date of Judgment 16-08-2018 I.T.A.No.732/2017 Pr. Commissioner of Income Tax & Anr Vs. Shraddha Trust 2/13 THIS I.7T.A. IS FILED U/s.260A OF I.T.ACT, 1961,PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS.OF LAW STATED THEREIN AND MODIFY THE APPELLATE.ORDER DATED 07.04.2017 PASSED BY THE ITAT, B|BENCH, BENGALURU, IN APPEAL PROCEEDINGS ITA.No.899/BANG/2016 AS SOUGHT FOR IN THIS APPEAL, IN-THE INTEREST OF JUSTICE. THIS I.T.A. COMING ON FOR ORDERS THIS DAY,Dr. VINEET KOTHARIJDELIVERED THE FOLLOWING:-. JUDGMENT Mr.E.I.Sanmathi,Adv. for Appellants- |Revenue 1.Learned counsel for the Appellants-Revenuenas brought to the notice of this Court that the Central|Board of Direct Taxes, Department of Revenue, Ministry ofFinance, Government of India, New Delni, nas recently|issued a revised.Circular No.3/2018, dated 11[th]July, 2018,revising the monetary limits for filing appeals by theDepartment before the Income Tax Appellate Tribunal,High Courts and Supreme Court and the earlier monetary|limits for the High Courts is upwardly revised from.Rs.20,00,000 to Rs.50,00,000/- w.e.f. 11[th]July,2018.The said Circular is quoted below: | “Circular No. 3/2018 F No. 279/Misc. 142/2007-ITJ (Pt)Government of IndiaMinistry of FinanceDepartment of RevenueCentral Board Direct Taxes New Delhi the 1]|[th]July, 2018 | Subject:Revision of monetary Iimits|for filing of appeais Dy the Departmentbefore Income Tax Appellate Tribunal,High Courts and SLPs/ appeals beforeSupremeCourt-measuresforreducinglitigation-Reg. Reference is invited to Board’s CircularNo.721 of 2015 dated 10.17.7015 whereinmonetary limits and other conditions for filing:departmental appeals (in Income-tax matters)before Income Tax Appellate Tribunal, Hign-Courts and SLPs/ appeals before SupremeCourt were specified. ?.Tn.SsupersessionOf|theabove|Circular, it nas been decided by tne Board tnatdepartmental appeals may be filed on meritsbefore [ncome TaX3ppellate Tribunal and Hign—Courts and SLPs/ appeals before SupremeCourt Keeping in view the monetary limits andconditions specified below. Pr. Commissioner of Income Tax & Anr Vs. Shraddha Trust 4/13 3. Henceforth, appeals/ SLPs shall not befiled in cases where the tax effect does not|exceed the monetary limits given nereunaer: It is clarified that an appeal should not be filedmerely because the tax effect in a caseexceeds the monetary limits prescribed above.Filing of appeal in such cases is to be decideaqon merits|of the case. 4. For this purpose, ‘tax effect’ meansthe difference between the tax on the total|Income assessed and the tax that would have|been chargeable nad such total income beenreduced by the amount of income in respect ofthe issues against wnhicn appeal is intended tobe filed (hereinafter referred to as ‘disputedissues’),Further, ‘tax effect’ shall be tax§including applicable surcnarge and cess.|However, the tax will not include any interest thereon, except where chargeability of interest:itself is in dispute. In case the chargeability ofinterest is the issue under dispute, the amountof interest sha//l be the tax effect. I[n casewhere returned loss Is reduced or assessed asincome, the tax effect would include notional!tax on disputed additions. In case of penaltyorders, the tax effect will mean quantum ofpenalty deleted or reduced in tne order to beappealed against. thereon, except where chargeability of interest:itself is in dispute. In case the chargeability ofinterest is the issue under dispute, the amountof interest sha//l be the tax effect. I[n casewhere returned loss Is reduced or assessed asincome, the tax effect would include notional!tax on disputed additions. In case of penaltyorders, the tax effect will mean quantum ofpenalty deleted or reduced in tne order to beappealed against. 5. The Assessing Officer shall calculatethe tax effect separately for every assessmentyear in respect of the disputed issues in thecase of every assessee. If, in the case of anassessee, the disputed issues arise|in morethan one assessment year, appeal can be fileqin respect of such assessment year or years inwhich the tax effect in respect of the disputedissues exceeds the monetary limit specified inpara 3. No appeal shall be filed in respect of anassessment year or years in whicn tne taxeffect is less than the monetary limit specifieqin para 3. In otner words, hencefortn, appealscan be filed only with reference to the taxeffectIntherelevantassessmentYear. However, in case of a composite order of any 6/13 Hign Court or appellate authority, wnhicninvolves more tnan one assessment year anacommon issues [In more than one assessmentyear, appeals snali be filed in respect of allsucn assessment years even if tne tax effect isless than the prescribed monetary limits in anyof the year(s), if it is decided to file appeal inrespect of the year(s) in which tax effectexceeds the monetary limit prescribed. In casewhere a composite order/ Judgment involvesmore than one assessee, eacn assessee snail|be dealt with separately. 6. Further, wnere income is computedunder the provisions of section 115JB orsection 115JC,fortheDUT DOSESOf|determination of tax effect’, tax on the totalincome assessed snail be computed as per thefollowing formula-_ (A - B)+(C - D) wnere, A = the total income assessed as per theprovisions otner than tne provisions containeaqin section 115JB or section 115JC (nereincalled general provisions); B = the total Income that would have peen|chargeable had tne total income assessed asper the general provisions been reduced by theamount of tne disputed issues under generalDrovisions; C = tne total income assessed as per theprovisions contained in section 115JB orsection 115JC; D = the total Income tnat would nave peen|chargeable had tne total income assessed asper the provisions contained in section 115JBor section 115JCwas reduced by the amount ofaisputed issues under the Said provisions:| However, where the amount of disputed issuesIS|CONSIGerecbotn>UndertheProvisionscontained In section 115JB or section 115JC|ana under general provisions, such amountShall not be reduced from total income|assessed while determining the amount underItem D. 7. In a case where appeal before aTribunal or a Court ts not filed only onaccount of the tax effect being fess thanthe monetary limit specified above, the Pr. Date of Judgment 16-08-2018 I.T.A.No.732/2017 Pr. Commissioner of Income Tax & Anr Vs. Shraddha Trust 8/13 Commissionerof|Income-tax/CommissionerofIncome.Taxshal]specifically record that “even tnough thedecision Is not acceptable, appeal is notbeing filed only on the consideration tnatthe tax effect is less than tne monetarylimit specified tn this Circular”. Further, tn.sucn cases, there will De no presumption.tharthe|Income-taxDepartmenthasacquiesced in tne decision on the disputedissues, The Income-tax Department snail notbe preciuded from filing an appeal against thedisputed issues in the case of the sameassessee for any other assessment year, or inthe case of any other assessee for the same orany other assessment year, if the tax effectexceeds the specified monetary limits. 8/13 Commissionerof|Income-tax/CommissionerofIncome.Taxshal]specifically record that “even tnough thedecision Is not acceptable, appeal is notbeing filed only on the consideration tnatthe tax effect is less than tne monetarylimit specified tn this Circular”. Further, tn.sucn cases, there will De no presumption.tharthe|Income-taxDepartmenthasacquiesced in tne decision on the disputedissues, The Income-tax Department snail notbe preciuded from filing an appeal against thedisputed issues in the case of the sameassessee for any other assessment year, or inthe case of any other assessee for the same orany other assessment year, if the tax effectexceeds the specified monetary limits. 8. In the past, a number of instanceshave come to the notice of the Board, wherebyan assessee has claimed relief from theTribunal or the Court only on tne ground tnatthe Department nas implicitly accepted thedecision of the Tribunal or Court In the case of the assessee for any other assessment year orin the case of any other assessee for the sameor any other assessment year, by not filing an appeal on tne same aisputed issues. TheDepartmental representatives/counsels mustmake every effort to bring to tne notice of theTribunal or the Court that the appeal in sucncases was not filed or not admitted only for thereason of the tax effect being less than thespecified monetary limit and, therefore, noinference should be drawn thet the decisions|renderea therein were acceptable to theDepartment. Accordingly, they snould impressupon the Tribunal or the Court that such casesqo not nave any precedent value and alsobring to the notice of the Tribunal/ Court theprovisions of sub section (4) of section 268A ofthe Income-tax Act, 1961 wnich read as under: (4) Tne Appellate Tribunal or Court, nearing:such appeal or reference, shall have regard tothe orders, instructions or directions issuedunder sub-section (1) and the circumstancesunder which such appeal or application forreference was filedqd or not filed in respect oany case.” 9. As the evidence of not filing appealque to this Circular may nave to be produced Date of Judgment 16-08-2018 I.T.A.No.732/2017 Pr. Commissioner of Income Tax & Anr Vs. Shraddha Trust 10/13 in courts, the judicial folders in the office ofPr.CsIT/ CsIT must be maintained in assystemic manner for easy retrieval. 10. Aaverse judgments relating to tnefollowing issues should becontested onsmeritsnotwithstanding that the tax effectentailed is fess tnan the monetary § limitspecified in para 3 above or tnere is no taxeffect: (a) Where the Constitutional validity of theprovisions of an Act or Rule is under challenge, — OF| (D)Where|Board’sorder,Notification,[Instruction or Circular has been held to pbiilegal or ultra vires, or| (c) Where Revenue Auait objection in the casenas been accepted by tne Department, or (ad) Where the aadition relates to undiscloseaforeign assets/ bank accounts. 11. The monetary limits specified in para3 above shall not apply to writ matters andDirect tax matters other than I[ncome tax.Filing of appeals in otner Direct tax matterssnail continue to be governed by relevantprovisions of statute and rules. Further, incases where the tax effect is not quantifiable ornot involved, such as the case of registration oftrusts or institutions under section 12A/ 12AA|of the IT Act, 1961 etc., filing of appeal snailnot be governed by the limits specified in para3 above and decision to file appeals in sucn—cases may be takenon meritsof a particularCdSe. 12. It is clarified that the monetary limit|of Rs. 20 lakhs for filing appeals before tneITAT would apply equally to cross objectionsunder section 253(4) of the Act. Crossobjections below this monetary limit, alreaaqyfiled, should be pursued for dismissal aswithdrawn/Not|pressed.Filing:ofCrossobjections below the monetary limit may notbe considered henceforth. Similarly, referencesto High Courts and SLPs/ appeals beforeSupreme Court below the monetary limit of Rs.50 lakns and Rs. 1 Crore respectively snould 12/13 12. It is clarified that the monetary limit|of Rs. 20 lakhs for filing appeals before tneITAT would apply equally to cross objectionsunder section 253(4) of the Act. Crossobjections below this monetary limit, alreaaqyfiled, should be pursued for dismissal aswithdrawn/Not|pressed.Filing:ofCrossobjections below the monetary limit may notbe considered henceforth. Similarly, referencesto High Courts and SLPs/ appeals beforeSupreme Court below the monetary limit of Rs.50 lakns and Rs. 1 Crore respectively snould 12/13 be pursued for dismissal as withdrawn/ notpressed. References before High Court andSLPs/ appeals below these limits may not beconsidered henceforth. 13.ThisCircular.wi}applytoSLPs/appeals/cross objections/references to befiled henceforth in SC/HCs/Tribunal and it shall)also apply retrospectively to pending SLPs/appeals/ cross objections/references.Pendingappeals below the specified tax timits inpara 3 above may be withdrawn/ notpressed.” 2D The tax effect in the present case as stated bythe Appellants-Revenue is less than the prescribed limit ofRs.50.00 lakhsfor filing an appeal before High Court. 3.|LearnedcounselfortneAppellants-|Revenue does not press this appeal and seeks leave of the.Court to withdraw tne present appeal in terms of.paragrapn-13)of the said Circular. 4Accordingly, in view of the aforesaid Circularissued by the Central Board of Direct Taxes, the present.appeal is disposed of as withdrawn without answering the purported substantial questions of law. | Copy of this order be sent to the Respondent- Assessee fortnwitn. Sd/-| JUDGE. Sd/-| JUDGE sac*