Principal Commissioner Of Income Tax, Vadodara v. M/S Emtici Engineering Ltd. ==========================================================

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 9995 of 2021With R/SPECIAL CIVIL APPLICATION NO. 10832 of 2021With R/SPECIAL CIVIL APPLICATION NO. 12985 of 2020With R/SPECIAL CIVIL APPLICATION NO. 13452 of 2020With R/SPECIAL CIVIL APPLICATION NO. 12735 of 2021With R/SPECIAL CIVIL APPLICATION NO. 13211 of 2021With R/SPECIAL CIVIL APPLICATION NO. 13505 of 2021With R/SPECIAL CIVIL APPLICATION NO. 14367 of 2021With R/SPECIAL CIVIL APPLICATION NO. 14263 of 2020With R/SPECIAL CIVIL APPLICATION NO. 14652 of 2020With R/SPECIAL CIVIL APPLICATION NO. 15351 of 2020With R/SPECIAL CIVIL APPLICATION NO. 16972 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE SONIA GOKANI andHONOURABLE MS. JUSTICE NISHA M. THAKORE of India or any order made thereunder ? ==========================================================PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA VersusM/S EMTICI ENGINEERING LTD. ========================================================== Appearance: MR. M.R.BHATT, MR.VARUN K.PATEL, MRS KALPANA K RAVAL, MS MAITHILI MEHTA, for the Petitioner(s) No. 1DARSHAN R PATEL, MS VAIBHAVI K PARIKH, MR SUDHIR MEHTA with MS. SHAILEE MEHTA, MR VANDAN K BAXI, MR MANISH J SHAH for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MS. JUSTICE SONIA GOKANIandHONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 08/07/2022 CAV JUDGMENT (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1.All the petitions since involve identical question of law and almost similar question of facts, they are being decided bya common judgment where the lead matter shall be SpecialCivil Application No. 9995 of 2021 and the facts shall bedrawn from the same for the purpose of adjudication. 2.The present petition is preferred under Articles 226 and227 of the Constitution of India against the judgment passedby the Income Tax Appellate Tribunal, Ahmedabad (ITAT forshort) on 09.09.2020 dismissing the Misc. Application No. 46/Ahd/2020 in ITA No. 2772/Ahd/2017 filed by the petitioner – department against the order passed by the Tribunal on14.08.2019 in ITA No. 2772/Ahd/2017. 2.1.By this earlier order of 14.08.2019, the appeal of thedepartment had been dismissed by the Tribunal on the groundthat the tax effect involved is below the limit prescribed by theCentral Board of Direct Taxes (CBDT for short) in its CircularNo. 17/2019 dated 08.08.2019. 2.2.The assessee- company had filed return of income for theassessment year 2010-11 on 01.10.2010 declaring the totalincome of Rs. 13,88,16,545/-. The scrutiny assessment underSection 143(3) of the Income Tax Act (hereinafter referred toas the ‘IT Act’) was finalized on 11.01.2013 assessing the totalincome at Rs. 14,12,48,300/-. The case was reopened and theassessment was finalized under Section 143(3) read withSection 147 of the IT Act on 01.03.2016 assessing the totalincome at Rs. 15,23,02,290/- after making the additions of Rs.38,30,974/-. 2.3.Aggrieved assessee had preferred an appeal against thisorder dated 01.03.2016 before the Commissioner of IncomeTax (Appeals). The appeal was partly allowed on 28.08.2017 by the Commissioner (Appeals). The Tribunal was approachedby the petitioner against the order of CIT (Appeals) whereby ithad deleted the additions on account of the excess claim ofdepreciation and disallowances under Section 14(A). The saidappeal was registered as ITA No. 2772/Ahd/2017. 2.4.It is the grievance on the part of the Revenue that theTribunal by a common order dated 14.08.2019 dismissed 628appeals and cross-objections filed by the department includingthe ITA No. 2772/Ahd/2017 as withdrawn, on the ground oflow tax effect in view of the monetary limit prescribed by theCBDT in Circular No. 17/2019. 2.3.Aggrieved assessee had preferred an appeal against thisorder dated 01.03.2016 before the Commissioner of IncomeTax (Appeals). The appeal was partly allowed on 28.08.2017 by the Commissioner (Appeals). The Tribunal was approachedby the petitioner against the order of CIT (Appeals) whereby ithad deleted the additions on account of the excess claim ofdepreciation and disallowances under Section 14(A). The saidappeal was registered as ITA No. 2772/Ahd/2017. 2.4.It is the grievance on the part of the Revenue that theTribunal by a common order dated 14.08.2019 dismissed 628appeals and cross-objections filed by the department includingthe ITA No. 2772/Ahd/2017 as withdrawn, on the ground oflow tax effect in view of the monetary limit prescribed by theCBDT in Circular No. 17/2019. 2.5.The petitioner – department preferred Misc. ApplicationNo. 46/Ahd/2020. According to the department, therespondent – assessee is covered by the exception of therevenue audit objection provided in para 10(c) of the CBDTCircular No. 03/2018 issued on 11.07.2018 and the said auditobjection also accepted by the department and hence, theappeal is erroneously dismissed as withdrawn applying thecircular no. 17/2019 instead of letting the matter to bedecided on merits. The copies of circular nos. 03/2018 dated11.07.2018 and 17/2019 dated 08.08.2019 have been brought on record. 2.6.This has seriously aggrieved the Revenue who hasapproached this Court seeking following reliefs: - “(A)Be pleased to issue writ of certiorari and/orany other appropriate writ, direction in the likenature quashing and setting aside the order dated09.09.2020 passed in Misc. Application No.46/Ahd/2010 in ITA No. 2772/Ahd/2017 and befurther pleased to allow the said Misc. ApplicationNo. 46/Ahd/2010 by restoring the appeal of thedepartment being ITA No. 2772/Ahd/2017 fordeciding the same on merits; (B)Any other appropriate and just relief/s begranted.” 3.This Court issued notice on 10.08.2021. LearnedCounsels in different matters appeared and resisted thesepetitions strenuously. This Court issued notice on 10.08.2021. Learned 4.No affidavit-in-reply is filed by the respondent, however, additional affidavit on behalf of the petitioner has been filedstating therein that Misc. Application filed by the departmentbefore the Tribunal had been directed to be placed on recordon 13.07.2021 and accordingly, a copy of Misc. ApplicationNo. 46/Ahd/2020 has been brought on record. 4.1.It appears that Misc. Application in respect of the assessee for the assessment year 2010-11 along with the truecopies of the Memorandum dated 20.01.2020 issued by thePrincipal Commissioner of Income-Tax, Vadodara-2 waspreferred under Section 254(2) of the IT Act requesting theTribunal to recall its order dated 14.08.2019 wherein theRevenue’s appeal was dismissed on account of the low taxeffect in view of the Board Circular No. 17/2019 dated08.08.2019. It has pleaded exception para 10(c) of the BoardCircular No. 03/2018 dated 11.07.2018 and its amendmentdated 20.08.2018 for the Court to recall its order. This hadbeen done along with authorization to prefer the Misc.Application under Section 254(2) of the IT Act. 5.The group of Misc. Applications, according to theTribunal had been directed pressing into service the CBDTCircular No. 17/2019 dated 08.08.2019 whereby it wasprovided that the appeals of the Revenue will not bemaintainable before the Tribunal if the tax effect involved byvirtue of the relief given by the CIT(Appeals) is below Rs. 50Lakhs. The Tribunal further noted that at Sr. No. 8 ofCircular, certain exceptions have been carved out. Afterissuance of circular, the Tribunal had identified 628 appeals 5.The group of Misc. Applications, according to theTribunal had been directed pressing into service the CBDTCircular No. 17/2019 dated 08.08.2019 whereby it wasprovided that the appeals of the Revenue will not bemaintainable before the Tribunal if the tax effect involved byvirtue of the relief given by the CIT(Appeals) is below Rs. 50Lakhs. The Tribunal further noted that at Sr. No. 8 ofCircular, certain exceptions have been carved out. Afterissuance of circular, the Tribunal had identified 628 appeals including certain cross-objections where the tax effect byvirtue of relief given by the CIT(Appeals) was less than Rs. 50lakhs. All these appeals have been dismissed on 14.08.2019 byapplying the aforesaid circular of the Board. 5.1.The Tribunal also took note of one of the exceptionsprovided in the said Circular which states that if any auditobjection was raised in case of any assessee and such auditobjection was accepted by the department, then those appealswill not be decided on the basis of the circular. By referring tothe said exception, it was contended by the department thatas in all these appeals the department raised audit objectionswhich were accepted by the Revenue, and hence the requestwas made to the Tribunal to allow the Misc. Application byapplying the Circulars. 5.2.According to the counsels for assessee, this aspect hasalready been considered by the Tribunal in MA No.389/Ahd/2019 (in ITA No. 790/Ahd/2019) for the assessmentyear 2012-13, relying on the decision of Bombay High Courtand the Tribunal dismissed all similar applications. It appearsthat the Tribunal relied on its own earlier decision rendered incase of Bhavi Tours and Travels and also noticing that there were no disparity on the facts so far as 628 applications wereconcerned, it chose to dismissed all Misc. Applications of theRevenue. 5.3.What is revealing is that reliance is placed on theBombay High Court Decision in case of Principal CIT vs.Nawany Construction Co.(P.) Ltd. [98 taxmann.com 294 (Bombay)] where the Bombay High Court while consideringthe circular has held that merely raising the audit objection isnot sufficient for recall of order. Apt would be to refer to theBombay High Court’s findings thus: - “8. It is conceded that while seeking to restoreIncome Tax Appeal No.254 of 2013 on the file of thisCourt, neither the Revenue's Circular dated 11-72018 is referred nor any condition therein. If thecondition now relied upon is with regard to theRevenue Audit Objection, then, mere raising of thisobjection in terms of this Circular is not enough. TheRevenue will have to point out that this auditobjection has been accepted by the Department. Wehave no such record before us. 9. In the circumstances, we find that this is anattempt to get over the binding Circulars and in anycase we shall not allow the Revenue to get over themin this manner. The Circulars continue to bind theRevenue and if they contain any conditions, whethersuch conditions are attracted or not would have to beproved and established by the Revenue. Once there isno such record before us, we do not countenance theoral request of Mr. Pinto. Consequently, we do notsee any reason to entertain this appeal. It isdismissed.” 5.4.The Tribunal in case of Bhavi Tours and Travels, onperusal of three Misc. Applications found that the departmenthad not demonstrated the fact that the materials wereevaluated before challenging the order of CIT(Appeals) inappeal before the Tribunal. Hence, there was no disparity onthe facts between the finding recorded by the Tribunal in caseof Shri Ashokkumar Harikishanbhai Bhavsar vis-a-vis in thosethree Misc. Applications and accordingly, they did not find anymerit in the applications. 5.4.The Tribunal in case of Bhavi Tours and Travels, onperusal of three Misc. Applications found that the departmenthad not demonstrated the fact that the materials wereevaluated before challenging the order of CIT(Appeals) inappeal before the Tribunal. Hence, there was no disparity onthe facts between the finding recorded by the Tribunal in caseof Shri Ashokkumar Harikishanbhai Bhavsar vis-a-vis in thosethree Misc. Applications and accordingly, they did not find anymerit in the applications. 5.5.We notice that the Tribunal in a very cryptic manner,without even referring as to whether in case of these 628applications the department had demonstrated that thematerials whether had been evaluated before challenging theorder of CIT(Appeals), has chosen to dismiss the same. It isquite obvious from the Bombay High Court decision which hasrelied on the 11.07.2018 Circular saying that if the conditionsrelied upon is with regard to the Revenue Audit Objection, themere raising of the objection in terms of the circular is notenough. The Revenue will need to point out that such auditobjection receives acceptance of Revenue. 5.6.We could not find anywhere such satisfaction of theTribunal where it has even cared to examine whether theRevenue has carried out such exercise as to whether the auditobjection has been accepted by the department or not. Even ifthe Misc. Applications on the part of the Revenue isessentially on the ground that there is exception clause andthe audit objection since has been raised by the department,that per se if cannot furnish the ground as believed by theTribunal, the least it could have done was to undertake theexercise to know as to whether the Revenue had undertakenthat before it approached the Tribunal. 5.7.It is needed to be made a mention that all the 628appeals and the cross-objections pertaining to these appealswere filed by various assessing officers and these appealswere called into question for the correctness of the reliefgranted to the tax payers by the Commissioner of Income-Tax(Appeals). The tax effect, according to the Tribunal, involvedin these appeals did not exceed Rs. 50 lakhs in each of theappeals. The cross-objections were taken up for hearing whichwere broadly in support of the orders passed by theCommissioner (Appeals). 5.8.The Tribunal took a pragmatic view and took intoconsideration taxpayer friendly policy decision of theGovernment of India for reducing the income tax litigation. Itreferred to the CBDT circular dated 08.08.2019 whereby thedepartment has further liberalized the policy for not filingappeals against the decisions of the appellate authoritieswherein the tax involved is below certain threshold limits.Thus, it took a note that when a Commissioner (Appeals) givea taxpayer tax relief upto Rs. 50 lakhs in an appeal in anassessment year, the matter should receive the quiets and therelief so granted cannot be challenged before the Tribunal.When the Tribunal provides relief upto Rs. 1 Crore in aparticular assessment year, the matter then cannot bechallenged before this Court and likewise, if the High Courtprovides succor to the assessee to the tune of Rs. 2 Crores, nofurther challenge can lie before the Apex Court. 5.9.Noticing this threshold set-out by the circular of theCBDT except when the penalty itself is a subject matter oflitigation, even the interest and other corollaries of the taxdemands such as penalties are not to be regarded eulogizingthe huge steps taken by the Government of India for cutting down the litigation, all the appeals have been dismissed aswithdrawn and the related cross-objections also have beendismissed terming the same as infructuous. 5.9.Noticing this threshold set-out by the circular of theCBDT except when the penalty itself is a subject matter oflitigation, even the interest and other corollaries of the taxdemands such as penalties are not to be regarded eulogizingthe huge steps taken by the Government of India for cutting down the litigation, all the appeals have been dismissed aswithdrawn and the related cross-objections also have beendismissed terming the same as infructuous. 5.10. The Court also gave 08.08.2019 circular theretrospectivity. It sought to rely on the old circular 03/2018and it was urged that the same enhances the monetary limitsand gives further relaxation, therefore there shall need to be aretrospectivity as all the circulars merely modify the monetarylimit, it has been held to be retrospective in nature. TheTribunal applied the concession extended by the CBDT to thepending appeals which had not been disposed of as yet andholding that the circular dated 08.08.2019 was not standalonecircular and the same needed to be read in conjunction withthe CBDT circular 03/2018, it dismissed all the appeals andcross-objections. 6.We have heard extensively learned Senior Advocate Mr.M.R. Bhatt, learned senior advocate Mr. Varun Patel, learnedadvocate Mrs. Kalpana K. Raval and learned advocate Ms.Maithili Mehta for the respective petitioner and learnedadvocate Mr. Darshan R. Patel, learned advocate Ms.Vaibhavi K Parikh, learned advocate Mr. Sudhir Mehta appearing with learned advocate Ms. Shailee Mehta, learnedadvocate Mr. Vandan K. Baxi and learned advocate Mr.Manish J. Shah for the respective Respondent No. 1. 7.We have heard learned Senior Advocate Mr. M.R.Bhatton behalf of the Revenue Department. On the part of theRevenue, it has been argued that there was a mad rush on thepart of the Tribunal. The Revenue has statutory right to preferthe appeal. According to him, the CBDT circular wouldrequire the interpretation. It is not the statute which providesthe guiding factor only. Once, there is an audit objection, themerit need not be seen and the appeal needs to be filed. Thefiling could be mechanical and the contest has to be on merit.Once in a circular, there are certain exceptions pleaded inrelation to the low tax effect, they shall need to be contested.He in the alternative has urged that the grounds of appealwould justify the merit in a given case. 7.1.According to learned Senior Advocate Mr. M.R.Bhatt,when animus disposal has been made, the assessee had neverquestioned on the ground of lack of satisfaction on merit. It isfurther urged that there could not be any shortcut to beadopted by the Tribunal. The merit aspect to be agitated at the time of filing appeal and not when the Misc. Applicationwas filed. According to him, the entire exercise of applicationof mind is carried out and this has been done in each matter,however, that was not placed before the Tribunal at therelevant time as there was no opportunity made available soeven if the judgment of Bombay High Court was to befollowed, the question also was with relation to theretrospectivity and even if that aspect was not to beconsidered in Misc. Application preferred under Section 254,the Tribunal could not have dismissed them withoutconsidering the recommendation of range head on thescrutiny report by the Assessing Officer. 7.2.According to learned Senior Standing Counsel Mr.Nikunt Raval, the circular is of the year 2015 being theCircular No. 21/2015 dated 10.12.2015 and the appeal is ofthe year 2014. The Revenue cannot be non-suited for thecircular which was not even in the existence. 7.3.Learned Senior Advocate Mr. Bhatt has also relied onthe decision rendered in case of Commissioner of IncomeTax, Chennai vs. Acurus Solutions (P.) Ltd. [[2020] 120taxmann.com 206 (Madras)], where it was a case where 7.2.According to learned Senior Standing Counsel Mr.Nikunt Raval, the circular is of the year 2015 being theCircular No. 21/2015 dated 10.12.2015 and the appeal is ofthe year 2014. The Revenue cannot be non-suited for thecircular which was not even in the existence. 7.3.Learned Senior Advocate Mr. Bhatt has also relied onthe decision rendered in case of Commissioner of IncomeTax, Chennai vs. Acurus Solutions (P.) Ltd. [[2020] 120taxmann.com 206 (Madras)], where it was a case where the Tribunal by an order dismissed the appeal of Revenue onaccount of low tax effect. The Court held that if the case fellwithin the exception pointed out under para 10(c) of theCircular No. 03/2018 dated 11.07.2018 the Tribunal, as heldby the Madras High Court, erred in dismissing the appeal ofthe Revenue on the ground of low tax effect. The Substantialquestion of law raised before the Court was as follows: - “1. Whether on the facts and circumstances of thecase the Tribunal was right in dismissing thedepartmental appeal on the ground of low tax effectwithout taking note of the fact that the case iscovered by exceptions provided under clause (10)(c)of Circular No.3 of 2018 wherein it has been clearlystated that the cases involving revenue auditobjection which had been accepted by thedepartment are to be disposed off on merits? 2. Is not the finding of the Tribunal bad, especiallythe last fact finding authority should have disposedoff the matter on merits especially in cases where theRevenue audit objections had been accepted by thedepartment?” 2. The first Substantial Question of Law raised by theRevenue is whether the Tribunal was right indismissing the appeal filed by the Revenue on theground that the appeal is hit by the Circular No.3 of2018 dated 11.07.2018 issued by the Central Boardof Direct Tax ('CBDT') fixing the monetary limit withregard to the appeals filed by the Revenue. It is theargument of Ms.R.Hemalatha, learned SeniorStanding Counsel that the Tribunal erred in applyingthe Circular, since the assessee's case falls withinClause 10(c) of the Circular which deals withexceptional circumstances in which though the taxeffect is low, within the threshold limit, the Revenue would be able to pursue the appeal before theTribunal or before this Court. 3. Upon perusal of the relevant papers, we find thatthere is an audit objection which has been raised andif this is so, the case would fall within the exceptionpointed out under Section 10(c) of the Circular No.3of 2018 dated 11.07.2018. Subsequent circularissued in the year 2019 also contains the very sameexceptional clauses and even in the new Circular, theRevenue would be entitled to pursue the remedy. 4. In the light of the above, we have no hesitation tohold that the Tribunal erred in dismissing theRevenue's appeal on the ground of low tax effect. Forthe above reason, the Substantial Question of LawNo.1 is answered in favour of the Revenue andconsequently the order passed by the Tribunal is setaside. The natural consequence that will follow, whensuch orders are passed by the Courts, is to remit thematter to the Tribunal for fresh consideration. 7.4.This Court in case of The Principal Commissioner of Income Tax, Vadodara-1 vs. M/s. Fine Line CircuitsCompany [Misc.Civil Application No. 01/2019 in Tax AppealNo. 465/2019, decided on 03.09.2021], before this Court theRevenue had sought the recall of the order passed by thisCourt on 01.10.2019 while disposing of the Tax Appeal No.465/2019 on the ground that the tax effect involved was belowthe prescribed monetary limit of Rs. 1 Crore as per the CBDTCircular No. 17/2019 dated 08.08.2019. Since the auditobjection had been accepted by the department, it was a caseof the Revenue that the matter would fall under the 7.4.This Court in case of The Principal Commissioner of Income Tax, Vadodara-1 vs. M/s. Fine Line CircuitsCompany [Misc.Civil Application No. 01/2019 in Tax AppealNo. 465/2019, decided on 03.09.2021], before this Court theRevenue had sought the recall of the order passed by thisCourt on 01.10.2019 while disposing of the Tax Appeal No.465/2019 on the ground that the tax effect involved was belowthe prescribed monetary limit of Rs. 1 Crore as per the CBDTCircular No. 17/2019 dated 08.08.2019. Since the auditobjection had been accepted by the department, it was a caseof the Revenue that the matter would fall under the exceptional clause (c) of para 10 of the amended circular ofBoard Circular no. 03/2018 dated 20.08.2018 as modified bythe Circular No. 17/2019 dated 08.08.2019. The objectionraised by the respondent was to an effect that when theRevenue was seeking to recall the order, it could not have notplaced the audit objection on record. This Court held thus: - “3.2 According to the respondent, this request ofseeking to recall of the order is on account of theaudit objection, which has not been placed on record.If the audit objections pertained to the originalassessment and as a consequence to such auditobjection, a notice under Section 148 of the I.T.Actwas issued, then such audit objections cannotbecome an exception to the present Tax Appeal,which have originated out of the notice under Section263 of the I.T.Act and not as a consequence to theaudit objection. It is further contended that a merereliance on the exceptional clause of the CBDT’scircular may not substantiate the stand of theapplicant and the applicant will have to show that itis the audit objection that has given a rise to thenotice under Section 263 of the I.T.Act and thepresent litigation. 3.3 Reliance is also placed on the decision of theBombay High Court rendered in case of PrincipalCommissioner of Income Tax, Mumbai vs. NawanyConstruction Private Limited, reported in (2018)taxman.com 294 (Bombay), where the Bombay HighCourt had not permitted a mere reliance on thecircular without any adequate material on the record. 4. We have heard the learned advocate, Mr.VarunPatel and learned advocate, Mr.B.S.Soparkar. At theoutset, we need to make a note that in Tax AppealNo.460 of 2019 and allied matters decided by thisCourt (Coram:Justice J.B.Pardiwala and JusticeA.C.Rao), the Court has upheld the order of the ITAT and has not disturbed the same. This was in relationto the assessment under Section 143 (3) of the I.T.Actfinalised in the year 2006 for the assessment year2004-2005. The matter was reopened under Section147 of the I.T.Act by issuance of the notice underSection 148 of the I.T.Act and the assessment underSection 143(3) read with Section 147 of the I.T.Actwas finalized on 14.12.2011 at a total income ofRs.82,63,600/- restricting the deduction underSection 10B of the I.T.Act at Rs.2,21,19,603/- asagainst Rs.2,83,46,239/- claimed by the assessee inhis return of income. With these facts, the order ofthe ITAT had been upheld. 5. The department is before this Court seeking to and has not disturbed the same. This was in relationto the assessment under Section 143 (3) of the I.T.Actfinalised in the year 2006 for the assessment year2004-2005. The matter was reopened under Section147 of the I.T.Act by issuance of the notice underSection 148 of the I.T.Act and the assessment underSection 143(3) read with Section 147 of the I.T.Actwas finalized on 14.12.2011 at a total income ofRs.82,63,600/- restricting the deduction underSection 10B of the I.T.Act at Rs.2,21,19,603/- asagainst Rs.2,83,46,239/- claimed by the assessee inhis return of income. With these facts, the order ofthe ITAT had been upheld. 5. The department is before this Court seeking to reopen the assessment of the respondent based onthe audit objections raised at the relevant point oftime. While noticing that the Assessment Orderpassed under Section 143 (3) read with Section 148of the I.T.Act has already been decided by this Courtin Tax Appeal No.460 of 2019 and allied matters on16.09.2019, the notice had been issued under Section263 (1) of the I.T.Act on 17.10.2013 for the sameassessment year seeking the dis-allowance of theincremental subsidy from exemption available underSection 10 B of the I.T.Act. On the part of therespondent, we could notice the objectionsessentially since the recall of the order dated01.10.2019 passed by this Court if is if has arisen dueto audit objections, the same ought to be placed onthe record and without placing that material onrecord, no order of recall can be sought. 6. So as not to curtail the rights of the parties inraising all the contentions including that of the auditobjections, more particularly, when raised keeping inmind the decision of the Bombay High Court, we havechosen to examine the material which has beenplaced before us and on satisfying ourselves on thisissue, we are of the opinion that the request of thedepartment to permit the recall of the order dated01.10.2019 passed in Tax Appeal No. 465 of 2019should be allowed. It is necessary to make a mentionof the fact that the decision of the Bombay High Court in case of Principal Commissioner of IncomeTax, Mumbai vs.Nawany Construction PrivateLimited, there was an attempt to get over the bindingcircular without placing any material before theCourt, which is not the case here. Therefore, withoutfurther elaborating on this aspect so as not to curtailthe rights of the parties while recalling the order, wepermit the Tax Appeal No.465 of 2019 to be revivedand to be placed before the Bench as per the roster.” 8.The other side has contested it by placing reliance onthe Instruction No. 07/2017 which are general instructionslaying down standard procedure for prescribingreceipt/revenue audit objections in supersession of InstructionNo. 09/2006 dated 07.11.2006, Instruction No. 16/2013 dated31.10.2013 and Circular No. 08/2016 dated 17.03.2016. Insupersession of all existing instructions on this subject, theinstructions have been issued for strict compliance by allconcerned who has defined the role and responsibilities ofeach functionary in the hierarchy. The timeline for each stepto be executed by the officer concerned also has been laiddown. It provides that the Comptroller and Auditor General ofIndia (‘CAG’ for short) carry out normal audit of assessmentreferred to as compliance audit. With the technologicalassistance in Income Tax Business Application (‘ITBA’ forshort) the CAG portal in place, the Standard Operating Procedure (‘SOP’ for short) have been aligned to workflow inITBA with defined roles and responsibilities and timeline so asto achieve the desired goal. It provides for the detailedguidelines and it also reveals that the PCIT after calling forthe report from the Assessing Officer and Range Head, ifneeded, take a decision as to whether the objection isacceptable or not. Procedure (‘SOP’ for short) have been aligned to workflow inITBA with defined roles and responsibilities and timeline so asto achieve the desired goal. It provides for the detailedguidelines and it also reveals that the PCIT after calling forthe report from the Assessing Officer and Range Head, ifneeded, take a decision as to whether the objection isacceptable or not. 8.1.Where the Revenue Audit objection is accepted, the PCITshall decide if the relevant order under audit requires revisionunder Section 263 as remedial action. If yes, he can call forthe relevant records and proceed accordingly. In all othercases, the PCIT shall communicate its decision not to invokeSection 263 to the Assessing Officer who shall need toexamine the facts of each case and take a suitable action asper his independent application of mind on the facts of eachcase. In case the Assessing Officer decides to choose as perSection 154 as the appropriate remedial measure, he shallinitiate the action after approval of the Range head. Theremedial action in case of accepted audit objection shall beinitiated within three months and shall be completed withinfurther period of six months from initiation. The objectionshall be treated as settled once the intimation of completion of remedial action and issue of demand notice is given toconcerned CAG officer. 8.2.Where the audit objection is not accepted, the PCIT alsowill send a reply to the concerned CAG officer specifyingreasons for non-acceptance of objection within two months ofreceiving LAR. A copy of this also to be marked to theCIT(Audit). Once the view of PCIT is accepted, the objectionwill be dropped and no further action would be required, but,where the view of PCIT is not accepted and a rejoinder isreceived from concerned CAG officer with reasons fordisagreement, the PCIT shall first get the contents ofrejoinder entered in ITBA system. He shall then reconsiderthe objection in the light of points raised in the CAG rejoinderand if the PCIT agrees with the views of the ITRA, theprocedure as provided at para 5.3 to 5.6, when the objectionis acceptable, shall be followed. However, if the PCIT does notaccept the objection, he shall take up such cases ofdisagreement, in inter-departmental meeting with DirectorGeneral of Audit or Principal Director of Audit (Central), alongwith cases where there is no response to PCIT’s replies fromthe CAG officer after lapse of two months. The CIT(Audit) alsois invited to the meeting and he shall play an active role for maintaining consistency of approach on a particular issue. Thereasons for this reference was a must so as to bring home thepoint that there is a detailed mechanism provided in the lastlyissued instruction on 21.07.2017 for accepting or notaccepting the audit objections. Once accepted in case of aparticular person, it falls within the exception to the circularissued for withdrawal of the matters which would have a lowtax effect. 9.Learned Senior Advocate Mr. Tushar Hemani has urgedthat the Tribunal’s earlier order was of 16.12.2015. Thedepartment had 5 years before the application has beenmoved. According to him, in Circular No. 03/2018 filing ofappeal shall need to be read with para 10 “contested onmerit”. It is thus not of contest but filing of appeal assumesimportance. All circulars are within the public domain and arebinding to the Revenue. 9.1.According to him, the Instruction No. 07/2017 clarifiesthat there also, on merit, it should be regulated. It providesthat adverse order of the first appellate authority in casesinvolving revenue audit objections should be carefullyscrutinized by the Principal CIT. The appeal to the ITAT shall 9.Learned Senior Advocate Mr. Tushar Hemani has urgedthat the Tribunal’s earlier order was of 16.12.2015. Thedepartment had 5 years before the application has beenmoved. According to him, in Circular No. 03/2018 filing ofappeal shall need to be read with para 10 “contested onmerit”. It is thus not of contest but filing of appeal assumesimportance. All circulars are within the public domain and arebinding to the Revenue. 9.1.According to him, the Instruction No. 07/2017 clarifiesthat there also, on merit, it should be regulated. It providesthat adverse order of the first appellate authority in casesinvolving revenue audit objections should be carefullyscrutinized by the Principal CIT. The appeal to the ITAT shall be filed only if the appeal order is not acceptable on merits.Thus, the emphasis is on preferring the appeal only if theappellate order is not acceptable on merits. There wasnothing before the ITAT at the time when it had dismissed theappeal on the low tax effect. That ought to have been basebefore filing the appeal itself. 9.2.He has relied on the decision rendered in case ofCommissionerofIncome-Tax-1vs.ConcordPharmaceuticals [[2009] 317 ITR 395], where this Courthas laid down that appeal is a statutory right but it cancertainly be regulated by the Board by issuance of orders,instructions or circulars which would not amount to takingaway right to file appeal or that such right is prohibited byexecutive instructions. The Court however held that when noobjection has been raised by the departmental representativesat the time of hearing of the appeal against the applicability ofthe circular despite there being an exception and the Tribunaldismisses the appeal by applying that circular, matter cannotbe remanded to the Tribunal for deciding the appeal onmerits. However, in matters where such objections are raisedand despite those objections or without dealing with them, Tribunal has dismissed the appeals only on the ground of lowtax effect, an indulgence is required to be shown by the Courtand the department can be permitted to move an appropriateapplication before the Tribunal for deciding the appeals onmerit. Based on this judicial pronouncement and on thestrength of the ambit of the circular, learned counsel hasstrenuously argued that no interference is desirable on thepart of the Court. The relevant observations made by theCourt are reproduced below:- “17. Having heard learned counsels appearingfor the respective parties and having gonethrough the relevant statutory provisions,judgments of various Courts and Circularsissued by the Board from time to time, we are of theview that subject to certain directions, which areissued hereinafter, all these Tax Appeals deserve tobe dismissed and they are accordingly dismissed asno question of law, much less, any substantialquestion of law arises out of the order ofthe Tribunal. In almost all cases the Tribunalhas dismissed the appeals only on the ground of lowtax effect, without entering into merits of thematter. While dismissing the appeals, theTribunal has referred to the Circular issuedby the Central Board of Direct Taxes prescribingthe monetary limit. The appeals filed by theDepartment in contravention of such Circularsprescribing the monetary limit were ordered tobe dismissed. Almost all Courts are agreeable on thisissue. 18. The real controversy arose when certainexceptions are carved out in the Circulars anddespite the fact that many of these cases before theTribunal are covered by those exceptions, which 18. The real controversy arose when certainexceptions are carved out in the Circulars anddespite the fact that many of these cases before theTribunal are covered by those exceptions, which require the Tribunal to go into the merits of thematter, the Tribunal has straightway dismissedthose appeals. There is a cleavage of opinionamongst the different Courts on this issue. One viewis that while applying the Circular issued bythe Board, the Tribunal has to take intoconsideration as to whether the exceptionscarved out in the Circular apply to the case on handand if any of those exceptions is applicablein that case the Tribunal will have to ignore themonetary limit and decide the appeal on merits. InKodanand Tea Estate Co's case (Supra), before theTribunal, the applicability of the circular wasquestioned. The Madras High Court, therefore,took the view that the question comes within theambit of exception and the Tribunal was directed tohear appeal on the merits. 19. Another view is that if any particularCircular is pressed into service seekingdismissal of appeal on the ground of low tax effectand if no objection is raised by the Departmenteither in the appeal memo or at the time ofhearing of appeal, the Tribunal is not bound toconsider as to whether exceptions areapplicable or not. In Smt. Madhu Bai Lodha'scase (Supra) the M.P. High Court took the viewthat in a case which falls within the exceptedcategory, it would always be open to the Departmentto bring it to the notice of the forum approached andto insist that the question being covered by theexceptions contained in the circular, the samedeserves to be considered. In A Rajendra Prasad & Ors., case (Supra), theA.P. High Court took the view that in casethe Department finds a certain matter to be agitatedby way of an appeal although it falls within themonetary limits of the circulars, thedepartment should clearly plead in the memo ofappeal itself that the appeal falls under theexceptions. In absence of such a pleading inthe memo of appeal, normally appeal should not be entertained. In Kurian Abraham Pvt. Ltd.'s case (Supra) theHon'ble Supreme Court took the view that wheneverany binding circular is issued by the Boardgranting administrative relief, as long as suchcircular remains in force, it is not open to thesubordinate officers to contend that thecircular is erroneous and not binding on them. Ifsuch a contention is to be accepted, it would leadto chaos and indiscipline in the administrationof tax laws. In Indian Oil Corporation case (Supra) theHon'ble Supreme Court laid down certainpropositions of law in relation to the bindingnature of circulars issued by the Board. TheCourt held that despite the decision of thisCourt, the Department cannot be permitted to take astand contrary to the instructions issued by the Boardand that it is not open to the Revenue toadvance an argument or file an appealcontrary to the circulars. In Indian Oil Corporation case (Supra) theHon'ble Supreme Court laid down certainpropositions of law in relation to the bindingnature of circulars issued by the Board. TheCourt held that despite the decision of thisCourt, the Department cannot be permitted to take astand contrary to the instructions issued by the Boardand that it is not open to the Revenue toadvance an argument or file an appealcontrary to the circulars. 22. We are of the view that simply becausethe appeal is filed by the Department incontravention of the Circular the Tribunal is notbound to decide the appeal on merits. Due weightageshould invariably be given by the Tribunal to theCircular issued by the Board. Even otherwise, thenewly inserted provisions contained in Section268A(4) make it obligatory for the Tribunal toconsider such Circular. It is not open for theDepartment to contend that Circulars areinternal matters of the Department and assesseecannot object to filing of an appeal on the basis ofsuch Circular. It is true that filing of an appeal is astatutory right but it can certainly beregulated by the Board by issuance of orders,instructions or Circulars. This would notamount to taking away the right of filing ofappeal or that such right is prohibited byexecutive instructions. Section 268A(1) of the Act now recognizes such right of the Board toregulate the filing of appeal or application before theTribunal or the Court. It is also true that when theHon'ble Supreme Court or the territorial High Courthave declared the law on a question, it is notopen to the Tribunal to direct that the Circularissued by the Board prescribing the monetary limitshould be given effect to and not thedecision of Hon'ble Supreme Court or theterritorial High Court. It is, however, equallytrue that the Tribunal's attention must bedrawn by the departmental representative tosuch decision of the Hon'ble Supreme Court orthe High Court. An objection must be raised by theDepartmental representative. 23. Considering all the aforesaid issues wedismiss all these Tax Appeals reserving libertyto the Department only on those cases to apply to theTribunal to decide the appeal on merits where theobjections were raised before the Tribunal eitherin the appeal memo or at the time of hearing ofappeal raising a specific contention that a particularappeal is covered by an exception and despite thisobjection the Tribunal has not dealt with the saidcontention and dismissed the appeal on the ground oflow tax effect. It is expected from the Tribunal toconsider this broad parameters while applyingthe relevant Circular to the facts of the case at thetime of deciding appeals.” 9.3.In our opinion, this decision on the contrary recognizes the obligation of the Tribunal to consider the circular as perthe newly inserted provision contained in Section 268(A)(4).Due weightage is required to be given by the Tribunal to thecircular issued by the Board. The circulars are not the merelyinternal matter of the department. At the same time, filing of the appeal though is a statutory right, but it can certainly beregulated by the Board by issuance of the orders, instructionsor circulars. The Board can regulate the filing of the appeal orapplication before the Tribunal. However, it was obligatory onthe part of the Tribunal also to consider as to whether oncethe Misc. Application was moved before it, that there was anaudit objection raised in these matters. Considering the long-drawn procedure prescribed in the Instruction No. 07/2017dated 21.07.2017 superseding many of other instructions,once accepted by the department, the aspect of low tax effectwill pale into insignificance. the appeal though is a statutory right, but it can certainly beregulated by the Board by issuance of the orders, instructionsor circulars. The Board can regulate the filing of the appeal orapplication before the Tribunal. However, it was obligatory onthe part of the Tribunal also to consider as to whether oncethe Misc. Application was moved