C.I.T. vs. M/S.SHRI GANESH SIZING FACTORY

This reference u/sec. 256(2) of the Income Tax Act, 1961, at the instance of Revenue seeks our opinion on the following questions of law :- “1. Whether on the facts and in the circumstances of the case Income-tax Appellate Tribunal was justified in not holding that there was no mistake in its order dt.14.11.83 in ITA No.592/JP/82 apparent from the record to be rectified u/s.254(2) of the I.T. Act, 1961. 2. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified while passing order u/s.254(2) of the I.T. Act, 1961, in restoring the issue regarding grant of registration to the firm for the assessment year 1978-79 to the file of the Income-tax officer for redetermining the issue after considering the quantum of profits and distribution thereof amongst partners while it had never been the case of the assessee that it had ever distributed profits on supressed sales of Rs.1,78,687/- and bogus

Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in not affirming the finding given in its original order dated 14.11.83 in ITA No.592/JP/82 that the assessee firm failed to distribute profits on suppressed sales of Rs.1,78,687/- and bogus purchases of Rs.49,570/- and, therefore, not entitled to the registration under the Income-tax Act.”

It is brought to our notice that a Circular has been issued by the Central Board of Direct Taxes dated 10.12.2015 bearing No.21/2015 in exercise of powers u/sec. 268A(1) of the Income- Tax Act laying down revision of monetary limits for filing of appeals by the Department before the Tribunal and High Courts and SLP before Supreme Court keeping in view the measures for reducing litigation. The relevant paras 3, 8, 9 and 10 of the Circular are quoted hereunder :- “3. Henceforth, appeals/SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder :- S. No. Appeals in Income-tax matters Monetary Limit (in Rs.) 1 Before Appellate Tribunal 10,00,000/- 2 Before High Court 20,00,000/- 3 Before Supreme Court 25,00,000/- 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.

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 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 has been accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets/bank accounts.

The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute & rules. Further, filing of appeal in cases of Income Tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12 A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case.

This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/Tribunals. Pending appeals below the specified tax limits in para 3 above may be withdrawn/not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.”

And laying down other conditions as well which has to be considered by the Assessing Officer or Appellate Authority as well, the CBDT in paras 9 and 10 of the Circular it has been observed that the monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than income

However, instant is a case of reference u/sec. 256(2) of the Income Tax Act, as it then was, and plea raised is that the aforesaid Circular may not be applicable as it relates only to appeals.

In our view, taking into consideration the judgment rendered by the Bombay High Court in the case of CIT v. M/s. Sunny Sounds P. Ltd. Mumbai Income Tax Reference No.213/1997, dated 8.1.2016, where this issue came up for consideration and it was held that there is no reason why the Circular should not apply to pending references where the tax effect is less than Rs.20 lac and object of the Circular to reduce litigation would be frustrated and be applicable even to pending references. We also concur with the view expressed by the Bombay High Court (supra).

In view of the above, we hold that as admittedly the tax effect is less than Rs.20 lac in the instant reference at the instance of Revenue, the same is returned unanswered. However, we make it clear that the question of law as raised for our opinion, is left open

The reference is disposed of accordingly. No order as to costs. (J.K. Ranka) J. (Ajay Rastogi) J. S.Kumawat-65 Certificate- All corrections made in the judgment/order have been incorporated in the judgment/order being e-mailed.