COMMISSIONER OF INCOME TAX, RAIPUR vs. M/S PANCHA RAGHU RAM TAUNK,RAJNANDGAON

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ITA/92/2000HC ChhattisgarhCGHC01003108200009 April 2009Author: HON'BLE SHRI JUSTICE DHIRENDRA MISHRA,HON'BLE SHRI JUSTICE RAJESHWAR LAL JHANWAR9 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal first considered the preliminary objection raised by the respondent regarding the maintainability of the appeal. The Tribunal referred to CBDT Instruction No. 5/2008 dated 15.5.2008, which supersedes earlier instructions and sets monetary limits for filing departmental appeals. Clause 3 of this instruction specifies a monetary limit of Rs. 4,00,000 for appeals before the High Court under Section 260A. Clause 4 defines 'tax effect'. The Tribunal noted that Section 268A of the Income Tax Act, inserted by the Finance Act, 2008, with retrospective effect from April 15, 1999, empowers the Board to issue orders and instructions fixing monetary limits for filing appeals. The instant appeal was filed by the Revenue on 10.8.2000. The tax effect in this matter was indisputably Rs. 42,035. The Tribunal, considering the negligible tax effect and the binding instructions of the Board, found no justification to proceed with the appeal. Consequently, the Tribunal dismissed the appeal without going into the merits of the case, citing the late instruction and Section 268A of the Income Tax Act. No issue was expressly left undecided.

What were the facts?

The assessee, M/s Pan Rajnand, converted land into stock-in-trade valued at Rs. 1,89,000 for its return for assessment year 1993-94. The Assessing Officer (AO) adopted the fair market value of the land at Rs. 98,343 and treated the difference as long-term capital gain, taxed at 30%. The actual sale consideration was Rs. 2,13,000. The AO treated the entire land as stock-in-trade, calculating business income as Rs. 3,210. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal, directing the AO to compute gain from conversion into stock-in-trade as long-term capital gain and profit arising from converted land as business income. The Income Tax Appellate Tribunal (ITAT) dismissed the assessee's appeal, confirming the CIT(A)'s order.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that conversion of stock-in-trade should be treated as capital gain? (Question of law) 2. Whether, in the facts and circumstances of the case, the learned Tribunal was justified in holding that the sale of land was assessable as business income? (Question of law) 3. Whether, on the facts and circumstances of the case, the learned Tribunal has correctly interpreted the provisions of section 2(47)(iv) of the Income Tax Act? (Question of law) Assessee's contentions: The respondent (assessee) raised a preliminary objection regarding the maintainability of the appeal, citing CBDT Circular No. 1979 dated 27.3.2000, which stipulated a monetary limit of Rs. 2 lakhs for filing appeals by the department to the High Court. The respondent argued that the tax effect in this case was below this limit, making the appeal not maintainable. Revenue's contentions: No specific contentions were recorded for the revenue on the merits of the case. The revenue filed the appeal against the order of the CIT(A).

Which sections of the Income-tax Act were involved?

Section 260A,Section 2(47)(iv),Section 268A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
q; 15p §T JgggLFuE (arising nut af arder passéd by tha #ppeliate Tribunal in IT No.295/Nag 1.3.2QQE) V §FFELLQET2 @ Division Bensh QCMI) § Incame Tax {9 dated T& Lx& 7 SEW, Wm, WEE W 200 mm mam (W) mam mmm mum-31m: WWW wm #éfémm Appellant Vr e Respondent M/s Pan Rajnand Per Dhirendra Mishra‘J Shri S. Rajeshwar Rao, lea Shri Neelabh Dubey, couns D.B. HON'BLE SHRI DHIRE DRA MISHRA & HON'BLE SHRI R.L. JH NWARI JJ I.T.A No.9 2 of 2000 ha Raghu Ram Taunk, aOn. “ned‘counsel for the appellant. el fo‘r the respondent. The appellant has preferred this appeal under Section 260A of the Income Tax Act, 19161 ojn the following substantial questions of law; “Whether, in the facts the case, Income Tax justified in holding that in—trade should be treat and: circumstances o Appellate Tribunal is : conversion of stock— ed as capital gain?” \1 1 /2008 1 ,oo,ooo. \ \ Commissioner of Income Tax, Raipur ‘US f \ WW, m, famm Wm 1H 200 mm<q§fma> mmfm airysmiwm mam-«m L WW‘Ewm $aif‘aqmr and circumstances of ribunal is justified in in the circumstances income arising from 02. its return for income for the assl‘essment year 1993-94 treated 38,825 sq.ft. of land converted i of Rs.1,89,000/—. The Assessing The difference in the above two amounts was treated as long term capital *gain and tax at a concess “Whether in the facts the case, the learned W recording findings that and facts of the case, sale of land was assessible as business income?” “Whether, on the facts the case the learned 'i holding as above and Tribunal has correctl provisions of section 2( Tax Act?” Briefly stated, facts of the caseare that the respondent in nto stock—in—trade at the value Officer by adoptingfair market value assessed the above property at Rs.98,343/—. and circumstances of ribunal is justified ' in whether the learned y interpreted the 47)(iv) of the Income onal rate of 30% was charged. The actual sales consideration was ‘Rs.2,13,000/-. This was reduced from the value of converted stock-in—trade and difference was treated as bus iness income of Rs.3,210/-. However, the Assessing Officer treated the entire land as stock— in-trade and accordingly, worke intimation sheet on record and vide Annexure P/1.h\ swath :l out business income as per paSSed the assessment

order

3a W, mm, W mm 1:1 zoo anamw (W) mwféaiss mmm mmm 5 Wam f5'z‘tm lavaif‘aqm The Commissioner, Income Tax (Appeals), allowed the id the Assessing Officer to nversion into stock-in-trade as : arising out of converted land P/2). The appellate Tribunal llant herein, and confirmed the ne Tax (Appeals).

04.

The respondent has challei appeal by way of preliminary 0t ground that the departmental cit to monetary limits for filing refé the department. _ At the releva circular, monetary limit for filing the Revenue was'fixed at Rs.2 . could have been filed by the No.1979 dated 27.3.2000. 03. assessee’s appeal and directe compute the gain arising from cc Iong term capital gain and profii as business income (Annexure dismissed the appeal of the appe order of the Commissioner, Incor iged the maintainability of this ljection (IA No.189/04) on the rculars, including those relating :rence/appeals, are binding on nt time, as per departmental appeals to the High Court by lacs, and therefore, no appeal Revenue in view of Circular

05.

Before entering into the meritsiof the case, we propose to consider the preliminary objecti n of the respondent regarding maintainability of the instant ap eal.

06.

The Central Board of Dire tTaxes (in short “the Board”) issues instructions to the inco e-tax authorities by way of issuing circulars from time to ti e. The Board, vide Instruction wrfr’i @‘a’ra 1::

WWW wmm WW W®ER *Wm supersession 70f the earlier instructions, instructed the inco e—tax authorities regarding the monetary limits and conditions or filing departmentai appeals before the Appellate Tribunals, High Courts and Supreme Court. Instruction No.3 deals with th monetary limits, Instruction No.4 defines the tax effect, w ereas Instructions No. 8 & 9 mention the conditions, in whic adverse judgments are to be contested irrespective of the tax ffect.

dated 15.5.2008, i

07.

Clauses No. 3, 4, 8 and of the Instruction dated 15.5.2008, are reproduce as under:

“3. Appeals wi/l henceforth b filed only in cases where the tax effect exceeds monetary 'mits given hereunder:— si’nta‘a‘lzi mm 1a zoo mm(W) mmm

4.

Sl. No. Appeals in Income-tax matters Monetary Limit (In Rs.)

1.

Appeal before Tribunal Appellate 2,00,000

2.

Appeal under 260A before High Court section 4,00,000

3.

Appeal before Court Supreme 10,00,000

WW, WW, W Wm m 200 .amamaa; (Wu) mmm § mwm “mm WW fge3W $a1'rmm affect’ means the difference income assessed and the tax reab/e had such total income t of income in respect of the intended to be filed (hereafter s’). However, the tax will not eon. Similarly, in loss cases taken into account. In the cases of penalty orders, the x effect will mean quantum of penalty deleted or reduced in the order to be appealed against.

8.

Adverse judgments relatii'yg to the following: should ,be contested irrespective of the ax effect. (a) Where the Constitu 'onal validity of the provisions of an Act or Rule are under challenge. (b) Where Board’s 0rd r, Notification, Instruction or Circular has been he d to; be illegal or ultra vires. (c) Where-revenue Audi objection in the case has been accepted by the Dep rtment.

4.

For this purpose, ‘taX between the tax on the total that would have been chart been reduced by the amoun issue against which appea/ is referred to as 'disputed issue be inc/ude any interest ther notional tax effect should b‘ \

9.

The proposal for fili g Special Leave Petition under Article 136 of the Constit tion before the Supreme Court should, in all cases, be sent to: the Directorate of Income- ?IRE‘sK’S 1"“ tax (Legal_§( Research), New Delhi and the decision to file I i

«M' mm wt zoo mm (W) mmfwz‘ mmm L Wwnsiwwm 3211mm ayaimm l be in consultation with the II Special Leave Petition s Ministry of Law and Justi Section 268A, which was inserted by the Finance Act, 2008, deals with filing of the ap eal or application for reference by income—tax authorities. The bove provision has'been made feCt from 15t April, 1999. Section 268A of the Income Tax ct is reproduced as under: applicabie with retrospective “268A. Filing of app al ‘or application for reference by income-ta authority. (1) The Board may, from ime to time, issue orders, instructions or directio s to other income-tax authorities, fixing such netary limits as it may . deem fit, for the purpo e of regulating filing of appeal or application for reference by any income- tax authority under the pr visions of this Chapter. (2) Where, in pursuance of the orders, instructions or directions issued u der i sub—section (1), an income-tax authority ha not filed any appeal or application for reference n ahy issue in the case of an assessee for any ass ssrrient year, it shall not preclude such authority from filing an appeal or application for reference n the same issue in the case of- (a) the same assessee for any other assessment year; or l h c f o

3am, m, Wamtg mm '83 200 wadaaw mmm 9 «imam WW wW $e§§mamam br the same or any other (b) any other assessee 1 assessment year. (3) Notwithstanding that for reference has been authority pursuant to the directions issued under 5L be lawful for an assesse appeal or reference, to co authority has acquiesced disputed issue by not filin- for reference in any case. (4) The Appellate Tribun appeal or reference, shall i instructions or directions (1) and the circumstances or application for referenc respect of any case. (5) Every order, instructl been issued by the Board filing an appeal or applica deemed to have been i554 and the provisions of sub shall apply according/y. ” The instant appeal has b eenifiled by the Revenue on 10.8.2000. Indisputably, the tax effect in the matter is Rs.42,035/—.

08.

O9. mute? Learned counsel for the a; 1. circumstances enumerated in Cl ' no appeal or application filed by an income-tax orders or instructions or 'b-section (1), it shall not e, being a party in any ritend that the income-tax in ‘ the decision on the g an appeal or application a/ or Court, hearing such have regard to the orders, issued under sub-section under which such appeal e was filed or not filed in ons for direction which has fixing monetary limits for tionwfor reference shall be led ‘ under sub-section (1) -sections (2), (3) and (4) )peHant fairly submits that the ause‘s 8 & 9 of the Instruction m

@ , mm m 2oo amm (W) mmm mmfaih? mmm § mm%ié1m $aft‘ananéw No.5/2008 dated 15.5.2008, do not exist in the present case. X, Taking into consideration that he tax effect, in the instant case, is the negligible amount' f Rs.42,035/— and keeping in view the binding instructions f the Board, we are of the ck opinion that there is no justifica ion to proceed with the instant appeal pending since 2000 havin negligible tax effect.

10.

Thus, in view of the late t Instruction dated 15.5.2008 and Section 268A of the Incom Tax Act we do not deem it necessary to go Into the merit of the case Accordingly, we dismiss this appeal havmg negli Ible tax effect

11.

However, there shall be n order as to costs. r1” l . _ Dhirendra Mishra . .1. ,h Judge /gjpg ‘ l- R.L. Jhan‘war ;" Judge ’

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