THE COMMISSIONER OF INCOME TAX vs. K.SREEKANTAN PILLAI
What did the High Court hold?
The High Court held that the ITAT's order rejecting the Revenue's appeal solely on the ground of the tax effect being less than Rupees Two Lakhs could not be sustained. The Court referred to paragraph 3 of the Board's Circular dated 24th October, 2005, which clearly states that cases involving a substantial question of law of importance should be considered on merits without being hindered by monetary limits. The Tribunal, by failing to consider this aspect and rejecting the appeal on the monetary limit alone, had erred. Consequently, the High Court set aside the order of the ITAT and remanded the matter back to the Tribunal to consider the Revenue's appeal in accordance with law, keeping in view the Board's Circular dated 24.10.2005. All contentions of the parties were left open for adjudication by the Tribunal.
What were the facts?
The Revenue, the Commissioner of Income Tax, filed an appeal before the High Court of Kerala against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The ITAT had rejected the Revenue's appeal for Assessment Year 2003-04. The sole ground for rejection by the ITAT was that the tax effect in the appeal was less than Rupees Two Lakhs. The Revenue contended that despite the monetary limit, the appeal involved a substantial question of law of importance, which warranted consideration on merits as per a Board's Circular dated 24.10.2005. The High Court was considering the admission of this appeal.
What were the issues?
1. Whether the ITAT erred in rejecting the Revenue's appeal solely on the ground of the tax effect being less than Rupees Two Lakhs, despite the Revenue arguing that the appeal involved a substantial question of law of importance, as per Board's Circular dated 24.10.2005? (Question of law) Assessee's Contentions: The judgment does not record any specific contentions made by the assessee before the High Court. The assessee is represented by an advocate, but their arguments are not detailed. Revenue's Contentions: The Revenue contended that the ITAT should have considered its appeal on merits, notwithstanding the monetary limit of Rupees Two Lakhs, because the appeal involved a substantial question of law of importance. The Revenue relied on the Board's Circular dated 24.10.2005, which provides for exceptions to the monetary limits in such cases.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT H.L.Dattu,C.J.
This Income Tax Appeal is directed against the orders passed by the Income Tax Appellate Tribunal, Cochin Bench, Cochin in I.T.A.No.477 of 2006, for the assessment year 2003-04, dated 9th October, 2006. The Tribunal has rejected the Revenue's appeal only on the ground that the tax effect in the appeal filed by the assessee is less than Rupees Two Lakhs.
In the memorandum of appeal filed, the Revenue has asserted, that, in view of the Board's Circular dated 24.10.2005, even though the monetary limit of tax effect does not exceed more than Rupees Two Lakhs, since it involves a substantial question of law of importance, which is urged in the appeal and which may arise in future cases, the Tribunal should consider the appeal and decide the same on merits without being hindered by the monetary limits.
The Tribunal, without considering the aforesaid aspect of the matter, has rejected the appeal, is the grievance of the Revenue and its learned counsel. Reliance is placed on Board's Circular dated 20.10.2005. 4. The Board's intimation/circular dated 24.10.2005 is as under: “Sub:- Revision of monetary limits for filing appeals - 2 - by Department before various appellate bodies or appellate authorities - clarification therefore - regarding. ---- Reference is invited to Board's instruction No.1979 dated 27.3.2000 [F.No.279/126/98-IT] dt.27.3.2000] and Instruction No.1985 dated 29.6.2000 [F.No.279/126/98-IT] dated 29.6.2000] wherein monetary limits for filing appeals/references before various appellate authorities have been prescribed.
In partial modification of the above Instruction, it has now been decided by the Board that appeals will henceforth be filed only in cases where the tax effect exceeds the revised monetary limits given hereunder:- Sl.No. INCOME-TAX TAX EFFECT (i) Appeal before Appellate Tribunal Rs.2,00,000/- (ii) Appeal u/s 260A Rs.4,00,000/- (iii) Appeal before the Supreme Court Rs.10,00,000/-
The Board has also decided that in cases involving substantial question of law of importance as well as in cases where the same question of law will repeatedly arise; either in the case concerned or in similar cases, should be separately considered on merits without being hindered by the monetary limits. xx xx xx”.
Para 3 of the said Circular would make it clear that in a case involving a substantial question of law, the Tribunal, without being hindered - 3 - by the monetary limit, is expected to decide the question of law raised.
In the instant case, the Tribunal, without adverting to the aforesaid aspect of the matter and merely on the ground that the tax effect would not exceed more than Rupees Two Lakhs, has rejected the appeal. In our view, in view of what has been said by the Board in its Circular dated 24th October, 2005, it is difficult for us to sustain the orders passed by the Tribunal.
Therefore, we pass the following: Order (i) The order passed by the Tribunal is set aside. (ii) The matter is remanded back to the Tribunal to consider the Revenue's appeal in accordance with law, keeping in view the Circular issued by the Board dated 24th October, 2005. (iii) All the contentions of the parties are left open. Ordered accordingly. H.L.Dattu Chief Justice
A.K.Basheer Judge vku/-
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