The Pr. Commissioner Of Income Tax v. M/S. Bandekar Brothers Pvt. Ltd.,Suvarna Bandekar Building,P.b

IN THE HIGH COURT OF BOMBAY AT GOA. Tax Appeal No.60/2016 The Pr. Commissioner of Income Tax,Having its office at Aayakar Bhavan,Patto-Plaza,Panaji-Goa. Appellant Versus M/s. Bandekar Brothers Pvt. Ltd.,Suvarna Bandekar Building,P.B.No.11, Swatantrapath,Vasco-da-Gama, Goa.PAN NO. Respondent ... Ms. A. Razaq, Advocate for the Appellant.Shri P. Karpe, Advocate for the Respondent. CORAM : ANOOP V. MOHTA & NUTAN D. SARDESSAI, JJ.RESERVED ON : 14/03/2017.PRONOUNCED ON : 20/03/2017. JUDGMENT( Per Anoop V.Mohta, J) : 1.Admit. Heard finally by consent. 2. The appellant the revenue department has preferredthis appeal under Section 260 A of the Income Tax Act, 1961(“Act”) and the Income Tax Rules,1962 (“the Rules” madethereunder) whereby challenge the order of the Income TaxAppellate Tribunal, (“ITAT”)Panaji Bench, Panaji dated 5.8.2015(Assessment year 2006-07). By order dated 5.8.2015 ITATBench dismissed the Revenue Appeal against the order ofCommissioner of Income Tax (Appeals), Panaji, dated 22.10.2013. The Commissioner of Income Tax (Appeals) allowedthe respondent-assessee appeal against the assessment orderdated 10.10.2011 thereby direct A.O. to delete addition made onaccount of under valuation of closing stock. This resulted intoreversal of the A.O.Order by both the Appellate Authorities.Therefore, this appeal on 4.1.2016 by the appellant. 3.The issue involved in the appeal is revolving aroundthe relief granted to the assessee in respect of valuation ofclosing stock of low grade iron ore. The issue involved in the appeal is revolving around 4.The points for determination so raised by theappellant as under:- A. Whether the Tribunal is justified in upholding the order of CIT (A) by simplicitor reliance on an order passed by thecoordinate bench in ITA No.29/PNJ/2008 for assessment year2004-05, without discussing and considering the facts interse anapplicability thereof between the assessee's case in the presentproceedings in proper perspective? B. Whether the impugned order passed by the Tribunal issustainable in as much as the order does not disclose applicationof mind assigning any reasons what so ever while dismissing theappeal filed by the revenue save and except observations at para 10 which are cryptic? C.Whether the Tribunal is justified in law in upholding thedeletion on account of under valuation of closing stock in the lightof omission/failure on the part of assessee in filing a revisedreturn u/s 139(5) during the pendency of reassessmentproceedings initiated pursuant to note u/s 148 of the Act? D. Whether the order passed by the Tribunal is contrary to thelaw declared by the Hon'ble Supreme Court reported in 189 ITR(SC) (ALA firm Vs. CIT), 188 ITR 44 (CIT Vs. British Paints IndiaLtd.) & 284 ITR 323 )Goetze India Ltd., VS. CIT)? 5. The background which led to file this appeal is as under:- The respondent-Assessee is a Company engaged in theMining, Transport & Allied activities. I. The assessee e-filed return of income on 31.10.2006,declaring a total income at Rs. 56,83,06,395/- Assessment undersection 143(3) was completed on 18.03.2008 on a total income ofRs. 53,62,65,431/-. Thereafter it was noticed that an income ofRs. 3,20,40,964/- was reduced from total income returned byassessee due to additions made towards closing stock asassessee was not valuing the lumpy ore & low grade iron ore.Said return was processed and the case was thereafter taken upfor scrutiny. II.The Assessing Officer (AO) by order dated 18.10.2011 added the value of lumpy ore of Rs. 6,50,05,000/- (including thevalue of reduction in total income is Rs. 3,20,40,964/- ) to thetotal income of the assessee. I. The assessee e-filed return of income on 31.10.2006,declaring a total income at Rs. 56,83,06,395/- Assessment undersection 143(3) was completed on 18.03.2008 on a total income ofRs. 53,62,65,431/-. Thereafter it was noticed that an income ofRs. 3,20,40,964/- was reduced from total income returned byassessee due to additions made towards closing stock asassessee was not valuing the lumpy ore & low grade iron ore.Said return was processed and the case was thereafter taken upfor scrutiny. II.The Assessing Officer (AO) by order dated 18.10.2011 added the value of lumpy ore of Rs. 6,50,05,000/- (including thevalue of reduction in total income is Rs. 3,20,40,964/- ) to thetotal income of the assessee. III.Aggrieved by AO's order the Assessee filed an appeal beforethe Commissioner of Income Tax (A), Commissioner of IncomeTax (A), Commissioner of Income Tax (A), after hearing theparties by order dated 22.10.2013, allowed the appeal therebydirecting AO to delete the addition made on account of undervaluation of closing stock. IV.Aggrieved by the order passed by the Commissioner(Appeals) (CITA), the appellant filed an appeal Tribunal (ITAT),Tribunal by order dated 05.08.2015, dismissed the appeal of theRevenue upholding the order of CIT (A). 6. A preliminary objection was raised by the learned counsel appearing for the respondent based upon the clarificationof Circulars 21/2015, 8/2016 dated 23[rd] January, 2017 (CircularNo.5/2017) issued by the Government of India, Ministry ofFinance, Department of Revenue Central Board Direct Taxesspecifically referring the following paragraphs 1 to 3 as under:- “Subject:Measures for reducing litigation -Clarification onCirculars 21/2015 and 8/2016 reg.Circulars 21/2015 and 8/2016 reg. Instructions were issued vide CBDT Circular No.21/2015dated 10.12.2015, to the effect that appeals/SLPs should not be filed in cases where tax effect does not exceed themonetary limits specified under para 3 of the saidCircular. It was also clarified therein that an appealshould not be filed merely because the tax effect in acase exceeds the monetary limits prescribed in the saidCircular. 2. In para 8 of the aforesaid Circular No.21/2015, it has been unambiguously and expressly provided that adversejudgments relating to the following issues should becontested on merits notwithstanding that the tax effectentailed is less than the monetary limits specified inCircular or even if there is no tax effect: a. Where the Constitutional validity of the provisions of an Act or Rule are 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 hasbeen accepted by the Department. d. Where the addition relates to undisclosed foreign assets/bank accounts. The direction to contest on merits' negates themechanical filing of appeals in these cases. 3. However, it has been noticed that para 8 (c) ofCircular No.21/2015, regarding cases where additionmade on account of Revenue Audit Objection is deleted,is being erroneously interpreted and appeals are beingmechanically filed by the Department without properexamination of the case on merits. This is contrary to theinstructions contained in Circular No.21/2015 andCircular No.8/2016. It is, therefore, clarified that theimport and intent of para 8 of the Circular No.21/2015 isthat even on issues mentioned in the said para, appeals against the adverse judgment should only be filed onmerits. 4. Accordingly, henceforth, appeals should not be filedby the Department in violation of instructions mentionedabove. Further appeals that may have been filed inviolation of these instructions may be withdrawn. against the adverse judgment should only be filed onmerits. 4. Accordingly, henceforth, appeals should not be filedby the Department in violation of instructions mentionedabove. Further appeals that may have been filed inviolation of these instructions may be withdrawn. 7.To the preliminary objection, the submission is made bythe learned counsel appearing for the appellant that this is thecase where the appellant on verifying the provisions of law andrecord and after due deliberation comes to the conclusion tochallenge the orders on its merit, as contemplated under Circular5 of 2017. The endorsements are made accordingly on therespective assessee file and the record. The files are also broughtin Court in support of the submission and the statement is madethose endorsements can be seen even by the Court. 8. Considering the scheme and purpose of the IncomeTax Act, Rules and the Circulars, and the concern measures forreducing litigation so issued from time to time, still we have toconsider the fact and circumstances of the case including itsmerits specially when once the appellant has taken decision tochallenge the orders in appeal as done in the present case with aclear endorsement on record to proceed and challenge the orderson merits. We are not inclined to accept the case of assessee counsel that those endorsements need to be verified and/or seenby the Court and/ or by the parties. Keeping in mind the Circularsand the position of law including the elements so referred in theCirculars. The appellant, department's points of law soagitated/required to be considered on its own merits. They havefiled this appeal under Section 260 A of the Income Tax Act. Atthis stage, therefore, the Appellate Court would not be in aposition to test or give its opinion on the endorsements so madeby the appellant department after examining the record tochallenge and filed in the appeal. The provisions and power soprovided with the appellant, in our view, need not be interferedwith at this stage of filing of appeal. However, this is alwayssubject to the hearing of appeal of questions of law and/or pointsof law so raised. The Appellate Court required to be consideredthose questions/respective appeals in accordance with law in-spite of endorsements and/or decision so taken by thedepartment to challenge the orders passed by the lower AppellateCourt/Assessment Officer. Merely because there areendorsements made to challenge the appeal on merits that itselfcannot be the reason for the higher Appellate Court or AppellateBench or Court under Section 260 A or such other Sections toaccept the question of law without hearing the parties. Theprocedure so contemplated of hearing of such appeals by thehigher Appellate Forum required to be followed. In the present case, therefore, we are not inclined to accept the preliminaryobjection so raised by the counsel for the assessee. However, weare inclined to proceed with the hearing of the matter on its ownmerits based upon the points so raised in the background of thelitigation so recorded. 9. It is clarified here that there is no issue with regard tothe monetary limits where tax effect does not exceed themonetary limits given. The relevant paragraph of Circular dated21/2015 is reproduced as under: “3. Henceforth, appeals/SLPs shall not be filed in caseswhere the tax effect does not exceed the monetarylimits given hereunder:- 10. Even this contention in the fact and circumstances and in viewof tax effect limit is more that Rs.20,00,000/- need no furtherdiscussion as sought to be contended by learned counsel appearing forthe assessee based upon the Circulars so referred above. If case ismade out, we have to consider clause (2) of the Circular (5/2017)dated 23.1.2017, even if monetary limits is more or less as prescribedin the circular. The Apex Court has expressed in [2013] 350 ITR 300 (SC) Commissioner of Income-Tax Vs. Surya Herbal Ltd.as under:- “3. Henceforth, appeals/SLPs shall not be filed in caseswhere the tax effect does not exceed the monetarylimits given hereunder:- 10. Even this contention in the fact and circumstances and in viewof tax effect limit is more that Rs.20,00,000/- need no furtherdiscussion as sought to be contended by learned counsel appearing forthe assessee based upon the Circulars so referred above. If case ismade out, we have to consider clause (2) of the Circular (5/2017)dated 23.1.2017, even if monetary limits is more or less as prescribedin the circular. The Apex Court has expressed in [2013] 350 ITR 300 (SC) Commissioner of Income-Tax Vs. Surya Herbal Ltd.as under:- “Delay condoned. Liberty is given to the Department to move the HighCourt pointing out that the Circular dated February 9,2011, should not be applied ipso facto, particulaly, whenthe matter has a cascading effect. There are cases underthe Income-tax Act, 1961, in which a common principlemay be involved in subsequent group of matters or a largenumber of matters. In our view, in such cases if attentionof the High Court is drawn, the High Court will not applythe Circular ipso facto. For that purpose, liberty is grantedto the Department to move the High Court in two weeks.” 11. Section 260 A of the Income Tax Act, has been inserted witheffect from 1.10.1998 and amended on 1.6.1999 by Finance Act, 1998.This Section makes the provision for filing an appeal in the High Courtfrom any order passed in appeal by the Tribunal, however, it is subjectto the opinion/satisfaction/decision of the High Court that a substantialquestion of law is involved. What is the meaning of substantialquestion of law has been settled by the Supreme Court in AIR 1962 SC1314(Chunnilal V. Mehta & Sons Vs. Century Spinning & ManufacturingCo.Ltd. & (2005) 273 ITR 50 (SC) M Janardhana Rao Vs. Joint CIT,followed by many judgments. 12.It is also settled that the High Court may frame the questionof law before deciding the appeal or by answering it finally. The HighCourt need to dispose off the appeal after framing the issues, if case is made out. Non-framing of issues and deciding the appeal without it,is unacceptable situation : [2016] 388 ITR 482 (SC) Jai Hind CyhcleCompany Ltd. Vs. Commissioner of Income Tax. It is, therefore,required to frame the proper and correct question of law before givingany opinion by the High Court while deciding such appeal on merits :[2016] 383 ITR 195 (SC) Liberty Footwear Co.Vs. Commissioner ofIncome Tax. 13.The perversity of facts in a given case may also be treatedas, on facts and circumstances, a substantial question of law:Sudarshan Silks & Sarees Vs. CIT 300 ITR 205. There are varioussituations and questions, which may arise where the High Court need toframe the question of law based upon the record as the concept“substantial question of law” has not been defined specifically.Therefore, in a given case the principle of Section 100 of the Code ofCivil Procedure may be kept in mind while dealing with Section 260 A ofthe Income Tax Act. 14.We have to consider in the present case, therefore, whetherthe question, so raised, in the appeal falls within the ambit ofsubstantial question of law, keeping in mind the concurrent findings offact against the department given by two Appellate Authorities andwhether any substantial question of law including of any perversity inthe findings so recorded is made out by the appellant. We have also to 14.We have to consider in the present case, therefore, whetherthe question, so raised, in the appeal falls within the ambit ofsubstantial question of law, keeping in mind the concurrent findings offact against the department given by two Appellate Authorities andwhether any substantial question of law including of any perversity inthe findings so recorded is made out by the appellant. We have also to see whether on facts and circumstances both the Appellate Authoritiesright in passing the order in favour of the assessee and against theappellant. This is specifically in the background of clear observationand the fact that the appellant unable to place any additionalevidence/documents in support of their grounds so raised in appealsexcept the order passed by A.O. We have noted, after going throughthe reasons given by the Appellate Authorities, that no case is made outby the department to interfere with the concurrent findings so given asthe same is not contrary to the record and/or the law. 15. There is no question of law arose for consideration less asubstantial question of law so framed in the appeal so recorded above.We see no infirmity in the order passed by the Appellate authorities. 16.In case in hand the cross-appeal, as such, not filed by theassessee but still on record it reflects that he has been taxed twice bythe A.O. to the extent of Rs.32040964/- . The Appellate Authorities onmerit reversed the order passed by the A.O. and the second AppellateAuthority has maintained the reversal order. The finding, so recordedon facts, therefore, there is no scope for interference by the High Court(M. Janardhana Rao Vs. JCIT, 273 ITR 50 (SC). 17.The explanation offered by the assessee was not taken noteof and not recorded by the A.O. However, the Appellate Authorities have taken into consideration all the facts, evidence and recorded the factualfinding, which according to us, call for no interference. There is noquestion of re-appreciating and/or appreciating the evidence to reach aconclusion other than reached by the Appellate Authorities merelybecause A.O. has taken particular and/or possible view. 18. The following are the additional reasons not to interfere withthe following findings confimred & given by the Tribunals:- “Since the assessee has consistently following themethod of accounting and no such addition has beenmade in earlier years, even though the assessee is inthe business for so many years, we are not persuadedby the contention that the asseee would get benefit ofopening stock in the following year. In fact thecorrect procedure which could have been followed bythe A.O. is to consider the amount of opening stock oflow grade iron ore also while bringing to tax the entirestock available, which might have been produced overa period of many years, in the closing stock of thisyear which certainly distort the profits of this year.Since we are not in agreement with the addition ofclosing stock of unrealisable low grade iron ore, wehave no hesitation in deleting the addition so made bythe A.O. Acccodingly the grounds raised in the crossobjection are considered allowed A.O. is directed todelete the addition.” “8 Departmaental Represetnative simply relied on theorder of the Assessing Officer. He could not point out any specific error in the order of Commissioner ofIncome Tax (Appeals). 10. We have considered the rival submissions of boththe parties and persued the material available onrecord. The Commissioner of Income Tax (Appeals)has deleted the addition made by the AssessingOfficer by following the order of this Bench of theTribunal in assessee's own case in assessment year2004-05 in I.T.A.No.29/PNJ/2008 dated 07/08/2009.Therefeore, we find no good reason to interfere withthe order of the Commissioner of Income Tax(Appeals), which is confirmed and the ground ofappeal of the Revenue is dismissed.” “8 Departmaental Represetnative simply relied on theorder of the Assessing Officer. He could not point out any specific error in the order of Commissioner ofIncome Tax (Appeals). 10. We have considered the rival submissions of boththe parties and persued the material available onrecord. The Commissioner of Income Tax (Appeals)has deleted the addition made by the AssessingOfficer by following the order of this Bench of theTribunal in assessee's own case in assessment year2004-05 in I.T.A.No.29/PNJ/2008 dated 07/08/2009.Therefeore, we find no good reason to interfere withthe order of the Commissioner of Income Tax(Appeals), which is confirmed and the ground ofappeal of the Revenue is dismissed.” 19.Therefore, there is no case made out by the departmentunder Section 260 A of the Income Tax Act to admit the appeal for finalhearing. There is no perversity pointed out and/or referred. Theconclusions so drawn by the Higher Authorities based upon the materialavailable on record and it is well within the framework of law. 20.This is not the case where the question of fact can betreated and convert as question of law for want of additional materialand/or material on record. After hearing the parties and after goingthrough the reasons given by the Appellate Authorities and theconclusions so drawn cannot be stated to be adverse and/or contrary tothe record and/or law. The Tribunal's orders and the conclusions, sodrawn, could not be stated to suffer from any legal infirmities. 21.It is also settled that timely Circulars issued by the CBDTunder the provisions of the Income Tax Act, required to be kept inmind while entertaing/admitting and/or deciding the appeal. Thereasons, therefore, so given referring to those Circulars have been keptin mind while passing this order as on merits also we have noted thatthere is no substantial question of law involved or arose. Therefore,there is no occasion to frame or reframe any additional question of lawfor the reason above recorded. We are dismissing the appeal at theadmission stage itself. 22.In view of the above, we are inclined to observe that there is nosubstantial point for determination involved. There is no non-application of mind. The concurrent finding reflects the position onfacts in the case in hand. There was no question to file the revisedreturn on facts. The orders passed by the Appellate Authorities are notcontrary to law specifically to the judgmnts cited by and referred in theorder of Assessing Officer. The grounds so raised are distinct anddistinguishable on facts itself. Therefore, following resultant order:- Order (a) The appeal is dismissed. (b) No costs. NUTAN D. SARDESSAI, J. ANOOP V. MOHTA, J. ambulkar