Principal Commissioer Of Income Tax-2 v. M/S Kunj Infrastructure Pvt Ltd

C/TAXAP/1314/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1314 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO ========================================================== 1 Whether Reporters of Local Papers may be allowed to NOsee the judgment ?2 To be referred to the Reporter or not ?NO3 Whether their Lordships wish to see the fair copy of the NOjudgment ?4 Whether this case involves a substantial question of law NOas to the interpretation of the Constitution of India or any order made thereunder ? 4 Whether this case involves a substantial question of law NOas to the interpretation of the Constitution of India or any order made thereunder ?========================================================== PRINCIPAL COMMISSIOER OF INCOME TAX-2, Versus M/S KUNJ INFRASTRUCTURE PVT LTD ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 RULE SERVED BY DS(65) for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 05/08/2019 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1.The respondent – assessee although served with the notice issued by this Court, yet has chosen not to appear before this Court either in person or through an advocate and oppose this tax appeal at the instance of the Revenue. 2.This tax appeal under Section 260A of the Income Tax Act, 1961 [for short 'the Act, 1961'] is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal in the ITA No.2891/AHD/2016, dated 11/05/2018 for the A.Y 2010-11. 3.The Revenue has proposed the following substantial question of law for the consideration of this Court:- “Whether the Appellate Tribunal has erred in law and on facts in dismissing the appeal on the ground of low tax effect despite the fact that case falls under the exceptions laid out in the CBDT's Circular?” 4.The impugned order passed by the Income Tax Appellate Tribunal reads as follow:- “This Revenue's appeal for A.Y. 2010-11, arises from order of the CIT(A)-2, Ahmedabad dated 22-08-2016, in proceedings under section 143(3) r.w.s. Of the Income Tax Act, 1961; in short “the Act”. 2.The Revenue's sole substantive ground challenges the lower appellate order deleting the addition made on account of disallowance of cash payment of Rs.4,35,000/- toward legal fees invoking provisions of section 40A(3) of the Act. There is no dispute that the net tax effect in the instant appeal is less than Rs.10 lacs. We find that the Central Board of Direct Taxes; hereafter the 'Board' has issued the circular no.21/2015 dated 10-12-2015 clearly envisaging therein that department's pending appeals before the tribunal/ high courts are to be withdrawn/not pressed as per the above stated circular. The same has been declared to be having retrospective effect in other words. We take into consideration the above stated Board's circular and dismiss the instant appeal accordingly. 3.This Revenue's appeal is dismissed as having low tax effect.” 5.Thus, it appears that the Tribunal relying upon the Circular No.21/2015 dated 10[th] December 2015 dismissed the appeal on the ground of low tax effect without going into the merits of the matter. 6.Mrs. Mauna Bhatt, the learned senior standing counsel appearing for the Revenue pointed out that the case was reopened on the basis of revenue audit objection and in such circumstances, the same would be covered under the exception mentioned in the Circular No.3/2018 of the C.B.D.T. 3.This Revenue's appeal is dismissed as having low tax effect.” 5.Thus, it appears that the Tribunal relying upon the Circular No.21/2015 dated 10[th] December 2015 dismissed the appeal on the ground of low tax effect without going into the merits of the matter. 6.Mrs. Mauna Bhatt, the learned senior standing counsel appearing for the Revenue pointed out that the case was reopened on the basis of revenue audit objection and in such circumstances, the same would be covered under the exception mentioned in the Circular No.3/2018 of the C.B.D.T. 7.The Circular No.3/2018 issued by the Government of India, Ministry of Finance dated 11[th] July, 2018 is with respect to the revision of monetary limits for filing of the appeals by the department in the Income Tax Appellate Tribunal, High Courts and appeals before the Supreme Court. The Clause-10 of the Circular reads thus:- “10. 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 is 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, or (d)Where the addition relates to undisclosed foreign assets/ bank accounts.” 8.In such circumstances referred to above, the Appellate Tribunal ought to have decided the issue on merits rather than dismissing the appeal on the ground of low tax effect. 9.This appeal succeeds and is hereby allowed. The impugned order passed by the Appellate Tribunal is quashed and set aside. The question of law is answered in favour of the Revenue and against the assessee. The matter is remitted to the Income Tax Appellate Tribunal for fresh consideration on merits. (J. B. PARDIWALA, J) aruna (A. C. RAO, J)