Patto Plaza, Panjim. .… v. M/S. Velingkar Brothers Veling, Mardol, Goa

1 carev8-11 IN THE HIGH COURT OF BOMBAY AT GOA CIVIL APPLICATION (REVIEW) NO.8 OF 2011AND TAX APPEAL NO. 16 OF 2007 The Commissioner of Income Taxhaving Office at Aayakar Bhavan, Patto Plaza, Panjim. .…... Applicant. V/s M/s. Velingkar Brothers Veling, Mardol, Goa. …..... Respondent. Ms. Amira Razaq, Junior Central Govt. Standing Counsel for theApplicant. Mr. S. M. Singbal, Advocate for the respondent. CORAM :- ANOOP V. MOHTA & NUTAN D. SARDESSAI, JJ. Date :- 15/03/2017. ORAL JUDGMENT :- (PER ANOOP V. MOHTA, J.) This is a review application under the Income Tax Act, 1961 (the Act). By common order dated 12[th] August, 2016, in view of its earlier order in Commissioner of Income Tax, G vs. MeghalayaSteels Ltd., 377 ITR 112, after considering the position of law andspecifically referring to Section 260A(7) of the Act, the Supreme Court 2 carev8-11 has concluded as under : “3. Before this Court, an affidavit has been filed by theRevenue explaining how the notional tax effect is farbeyond the amount of Rs.2,00,000/- (Rupees two lakh).Moreover, in Commissioner of Income Tax, G vs.Meghalaya Steels Ltd., decided on 5[th] August, 2015 aview has been taken by this Court that the reviewwould be available in respect of the orders passed underSection 260A of the Income Tax Act, 1961. 4. In view of the above, we allow the appeals and setaside both the orders dated 25[th] August, 2010 and 28[th]March, 2012 passed by the High Court in Tax AppealNo.7 of 2004 and Civil Application (Review) No.26 of2010 respectively and request the High Court to decidethe review petition and thereafter the appeal itself, if sorequired, on merits. We also make it clear that we haveexpressed no opinion on the merits of any of thecontentions of the parties.” 2. The matters are, accordingly, listed today with other connected matter i.e. Civil Application (Review) No.26 of 2010 in TaxAppeal No. 7/2004. Heard Ms. A. Razaq, learned Counsel appearingfor the applicant and Mr. S. Singbal, learned Counsel appearing for therespondent, finally. Admit. Learned Counsel appearing for the respondent 3 carev8-11 waives service. Heard forthwith, with the consent of the learnedCounsel. 4. The basic event and the back-ground, are as under : On 30/10/2000, the assessee-respondent filed its return ofincome for Assessment Year 2000-01, with all statutory and otherdocuments/particulars and claimed deduction under Section 10B ofthe Act to the tune of Rs.1,25,48,077/-. They declared net loss ofRs.15,39,000/- in mining division and a profit of Rs.1,40,48,077/-under EOU Division and claimed deduction of Rs. 1,25,48,077/-. Thetotal income was nil and refundable was shown as Rs.21,779/-, plusinterest. By order dated 15.11.2000, the Assessing Officer (AO)accepted the tax returns filed by the respondent, ordered refund ofRs.23,515/- towards tax and interest, as claimed in the return underSection 143(1) of the Act. On 28/08/2003, the AssistantCommissioner of Income Tax Circle 2(1), Panaji, issued Notice underSection 148 of the Act to the respondent alleging that the respondent'sincome of Rs.30,80,513/- for the Assessment Year 2000-01 hadescaped assessment within the meaning of Section 147 of the Act andtherefore issued a notice. The respondent filed its reply dated 19[th]September, 2003 to notice dated 28[th] August, 2003 informing the 4 carev8-11 4 carev8-11 ACIT that the respondent had already filed return of income for theAssessment Year 2000-01 on 30[th] October, 2000 which may be treatedas having filed in response to the notice. The AO passed order dated15[th] February, 2005, under Section 147 of the Act, computing taxableincome at Rs.3,51,292/- after allowing deductions under Section 10Bof Rs.97,33,337/- and the tax payable had been shown asRs.2,26,062/- under reassessement under Section 143(3), read withSection 147 of the Act. Though the respondent did not claimdepreciation under Section 32(1) of the IT Act, but the AO allowed thesame stating that depreciation allowance under Section 32 ismandatory and it is bound to allow whether the respondent claims it ornot. The respondent considered the Bank interest as business incomeand business loss from mining division and it has been reduced.However, the AO stated that this income was not business income andthe same had been shown as income from other sources. On 11[th]April, 2005, the respondent filed an appeal challenging order dated15[th] February, 2005 before the Commissioner of Income Tax (Appeals)on the grounds mentioned in the appeal. The Commissioner of Income Tax vide order dated 8[th]November, 2005 dismissed the respondent’s appeal. In the order, theCommissioner of Income Tax allowed depreciation in the mining 5 carev8-11 division not claimed by the respondent and rejected the claim of therespondent that the interest on bank deposits was business income. On 16[th] January, 2006, the respondent challenged orderdated 8[th] November, 2005 before the Income Tax Appellate Tribunal,on the grounds mentioned in said appeal. By an order dated23/02/2006, the Tribunal allowed the appeal accepting therespondent's contention that the depreciation in mining division wasoptional and interest on bank deposit was business income. Being aggrieved, the appellant (the Revenue Department)filed Tax Appeal No.29/2006 for the Assessment Year 2000-01 beforethis Court under Section 260A of the Act. By order dated 28/09/2010,this Court disposed of the Tax Appeal as the total amount of liabilityto tax was Rs.2,26,062/- and as per the Circular No.5/2008 dated15/5/2008 of the C.B.D.T. and the decision of the Court in CIT vs.Pithwa Engg. Works, 2005(5) Bom. C.R. 41, the appeals before theHigh Court were the tax effect is below Rs.4,00,000/- were not to bepursued. The Division Bench of this Court in CIT Vs. Madhukar K.Inamdar (HUF), while dealing with the CBDT Circular No.5 of2008 dated 15.5.2008 and its retrospective effect, held that if the taxeffect is less than Rs.4,00,000/- the Department should not file appealsin such cases and has recorded in paras 4 and 5 of the Judgment thus : 6 carev8-11 “(4) The Appellate Tribunal or Court, hearing suchappeal or reference, shall have regard to the orders,instructions or directions issued under sub-section(1) and the circumstances under which such appealor application for reference was filed or not filed inrespect of any case. (5) Every order, instruction or direction which hasbeen issued by the Board fixing monetary limits forfiling an appeal or application for reference shall bedeemed to have been issued under sub-section (1)and the provisions of sub-sections (2), (3) and (4)shall apply accordingly” Being aggrieved, the appellant filed Review Petition No.8/2011 before this Court seeking review of order dated 28/09/2010 in Tax Appeal No.29/2006. In the application for review, the notional tax effect is shown as Rs.8,48,453/-. This Court vide order dated28/3/2012, dismissed the review petition, along with four otherpetitions holding that the same were not maintainable and the Revenuecould not seek review of the order passed by the Division Bench in thetax appeal. Being aggrieved by orders dated 28/09/2010 and Being aggrieved, the appellant filed Review Petition No.8/2011 before this Court seeking review of order dated 28/09/2010 in Tax Appeal No.29/2006. In the application for review, the notional tax effect is shown as Rs.8,48,453/-. This Court vide order dated28/3/2012, dismissed the review petition, along with four otherpetitions holding that the same were not maintainable and the Revenuecould not seek review of the order passed by the Division Bench in thetax appeal. Being aggrieved by orders dated 28/09/2010 and 28/03/2012, passed by this Court, the Commissioner of Income Taxfiled Special Leave Petition (Civil) before the Supreme Court beingSLP No.10603 – 10604 seeking review of the order of this Court. The 7 carev8-11 appellant filed affidavit in rejoinder before the Hon'ble Supreme Courtstating that in case the notional value is considered, the tax effectwould be Rs.9,92,175/-. The Supreme Court vide Order dated12/8/2016, allowed the appeal and set aside the said orders of thisCourt and directed to decide the review petition and thereafter appealitself if so required, on merits. No opinion on merits of any of thecontentions of the parties was expressed by the Supreme Court. Theissue, therefore, with regard to applicability of such circular, keeping inmind that the tax liability in pending references and/or appeal, hasalready been concluded. 5.The learned Counsel appearing for the parties have placedon record the Circular No.21/2015 which is in reference to the Board'sinstruction No.5/2014 dated 10/07/2014 and basically referring theissue of monetary limits and other conditions for filing departmentalappeals (in income tax matters) before the Appellate Tribunal andHigh Court and SLP before the Supreme Court with a view to takeeffective measures for reducing the litigation. The basic clauses of theCircular No.21/2015 are reproduced below : “3. Henceforth, appeals/ SLPs shall not be filed incases where the tax effect does not exceed themonetary limits given hereunder: - 8 carev8-11 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 differencebetween the tax on the total income assessed and thetax that would have been chargeable had such totalincome been reduced by the amount of income inrespect of the issues against which appeal is intendedto be filed (hereinafter referred to as "disputedissues"). However the tax will not include any interestthereon, except where chargeability of interest itself isin dispute. In case the chargeability of interest is theissue under dispute, the amount of interest shall be thetax effect. In cases where returned loss is reduced orassessed as income, the tax effect would includenotional tax on disputed additions. In case of penaltyorders, the tax effect will mean quantum of penaltydeleted or reduced in the order to be appealedagainst.” This Circular was not placed before the Supreme Court, though in thefield prior to the date of Supreme Court's order. 9 carev8-11 6. A Division Bench of this Court in Commissioner ofIncome Tax vs. Sunny Sounds P. Ltd., (2016) 381 ITR 443 (Bom),after considering the Circular No.21/2015, referring to Section 260A ofthe Act and keeping in mind the tax effect not exceeding the monetarylimits given under the Circular, so referred above, accepted theposition, by giving effect to the Circular, in paras 6, 8 and 9, infollowing words : This Circular was not placed before the Supreme Court, though in thefield prior to the date of Supreme Court's order. 9 carev8-11 6. A Division Bench of this Court in Commissioner ofIncome Tax vs. Sunny Sounds P. Ltd., (2016) 381 ITR 443 (Bom),after considering the Circular No.21/2015, referring to Section 260A ofthe Act and keeping in mind the tax effect not exceeding the monetarylimits given under the Circular, so referred above, accepted theposition, by giving effect to the Circular, in paras 6, 8 and 9, infollowing words : “6. We find that Circular Dt. 10 Dec, 2015 is identicallyworded to the Instructions No. 5, Dt. 10th July, 2014save and except enhancement of the threshold limit forthe purpose of Revenue pursuing its appellate remediesinter alia before the High Court, specifically providingfor the retrospective operation of the 2015 Circular so asto apply to pending appeals and directing that thepending appeals be withdrawn and/or not pressed. In theabove view, we follow our decisions in Computer Points(I) Ltd. (supra), Dempo Mining Corporation (supra) andSanrit Hotel, Madgao, Goa (supra) and hold that eventhough the 2015 Circular does not specifically refer toreferences just as the Instruction No. 5, of 2014, it shouldapply even to pending references under s. 256 of the Act.This is so as the entire objective of the circular in havingbeen made retrospective is that the Court should concernitself with grievances of the Revenue having substantialfinancial stake in terms of the tax involved and normally 10 carev8-11 the decision of the Tribunal upto the value of Rs. 20 lacseven if it is adverse to the Revenue should be accepted.The circular in para 6 thereof protects the interest of theRevenue by providing that where it does not pursueappellate remedies in view of the low tax effect asprovided therein, it would not be held against theRevenue for any other assessment year in respect of thesame assessee or even in respect of any other assessee, ifthe tax effect involved in those cases is higher than thethreshold limits specified in the circular. 8. The need for the CBDT to issue the 15th Dec., 2015Circular and to clarify that it would applyretrospectively to govern even pending appeals aroseon account of the enormous increase in the number ofappeals being filed by the Revenue over the years.….Therefore, to enable the Revenue to focus on matterswhere the tax implication is above Rs. 20 lacs onlysuch matters should be agitated in appeal before theHigh Court according to the circular. This policy ofnon-filing and of not pressing and/or withdrawingadmitted appeals having tax effect of less than Rs. 20lacs has been specifically declared to be retrospectiveby the Circular Dt. 10th Dec, 2015. There is no reasonwhy the circular should not apply to pending referenceswhere the tax effect is less than Rs. 20 lacs as theobjective of the circular would stand fulfilled on itsapplication even to pending references moreparticularly bearing in mind that there are 1,149number of references still awaiting disposal by this 11 carev8-11 Court and a large number of them would have tax effectof less than Rs. 20 lakhs. 9. In the above view, we hold that as admittedly, the taxeffect is less than Rs. 20 lacs in the present referenceapplication at the instance of the Revenue, the same isbeing returned unanswered. However, we make it clearthat the question of law as raised for our opinion is leftopen to be considered in an appropriate case.” 7.The Apex Court in Commissioner of Income-Tax vs. Surya Herbal Ltd., (2013) 350 ITR 300 (SC) has recorded as under : “ Delay condoned. 11 carev8-11 Court and a large number of them would have tax effectof less than Rs. 20 lakhs. 9. In the above view, we hold that as admittedly, the taxeffect is less than Rs. 20 lacs in the present referenceapplication at the instance of the Revenue, the same isbeing returned unanswered. However, we make it clearthat the question of law as raised for our opinion is leftopen to be considered in an appropriate case.” 7.The Apex Court in Commissioner of Income-Tax vs. Surya Herbal Ltd., (2013) 350 ITR 300 (SC) has recorded as under : “ Delay condoned. Liberty is given to the Department to move theHigh Court pointing out that the Circular datedFebruary 9, 2011, should not be applied inspo facto,particularly, when the matter has a cascading effect.There are cases under the Income-tax Act, 1961, inwhich a common principle may be involved insubsequent group of matters or a large number ofmatters. In our view, in such cases if attention of theHigh Court is drawn, the High Court will not apply theCircular ipso facto. For that purpose, liberty is grantedto the Department to move the High Court in twoweeks. The special leave petition is, accordingly, disposedof.” In the present case, there is no issue of substantial nature or issue to 12 carev8-11 have cascading effect. 8.In view of the position of law, as well as the facts sorecorded above, we are inclined to dispose of the present reviewpetition, basically in view of the order passed by the Supreme Courtand the subsequent circular which was admittedly issued on 10[th]December, 2015, prior to the date of order passed by the SupremeCourt 12/August/2016. There is no issue now that review is availableunder the Act. 9.After hearing the parties, we have noted that as rivalssubmissions and monetary value and/or the amount so involved even ifit is accepted the case of the Department that it is more than Rs.4.00lakhs, though the Counsel for the applicant based upon the event sorecorded, submitted that it was always less than Rs.4.00 lakhs, theHigh Court therefore had taken note of the assessee's case and passedthe order. The figure of Rs.8,48,453/- or Rs. 9,92,175/- was placed onrecord, treating it to be within the ambit of “notional tax effect”, asplaced before the Supreme Court. This observation, as made, stillkeeping in mind the effect of the Circular No. 21/2015 and the law solaid down,we are of the view that there is no further discussionrequired to consider the case as the total tax effect is within the ceiling 13 carev8-11 of Rs.20.00 lakhs. 10.Admittedly, the review is maintainable and no furtherdiscussion is required on the maintainability of the review. However,the effect of Circular No.21/2015 just cannot be overlooked at the timeof hearing of the review and even the appeal. The Circulars and theposition of law on the date of hearing of this review petition and/oreven otherwise, as clear and we are inclined to dispose of the presentreview petition, solely on the ground and the reasons so provided inCommissioner of Income Tax vs. Sunny Sounds P. Ltd. (supra)which is based upon Circular No. 21/2015. Based on the law and thefacts so referred above, we have no option, but to dispose of thisreview application, solely on the foundation of the above circular aseven the “notional tax” effect is not more than Rs. 20.00 lakhs. 11.Therefore, taking overall view of the matter andconsidering the position of law and record, without expressinganything on merits of the matter and specifically in view of thesubsequent circulars which go to the root of the matter, we aredisposing of the review accordingly. This, in no way overreaches theorder passed by the Supreme Court as the direction is to hear the 14 carev8-11 11.Therefore, taking overall view of the matter andconsidering the position of law and record, without expressinganything on merits of the matter and specifically in view of thesubsequent circulars which go to the root of the matter, we aredisposing of the review accordingly. This, in no way overreaches theorder passed by the Supreme Court as the direction is to hear the 14 carev8-11 review petition and if necessary to hear the appeal itself on merits asthe review is maintainable. But, as the position of law referred above,in view of the circulars there is no option, but to pass appropriateorders in such review and even the appeals having tax effect includingnotional value of less than Rs.20.00 lakhs. We are inclined to disposeof this review petition & the appeal on this sole ground. This is also toavoid multiplicity and/or keeping the litigation pending. Theinstructions so reflected in the Circular No. 21/2015 of CBDT is in theinterest of both, the Department, so also the assessee. We are justaccepting the position basically on the facts and the record. 12.The review application and appeal dismissedaccordingly. No costs. NUTAN D. SARDESSAI, J.ANOOP V. MOHTA, J. ssm.