COMMISSIONER OF INCOME TAX RAJKOT-III vs. M/S. JAIN BRIGHT STEEL TRADERS

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TAXAP/1880/2006HC GujaratGJHC24038842200606 August 2008Bench: HONOURABLE MR. JUSTICE K.A.PUJ,HONOURABLE MR. JUSTICE BANKIM.N.MEHTA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court of Gujarat dismissed all the Tax Appeals filed by the Revenue. The Court answered the substantial question of law in the affirmative, meaning in favour of the assessee and against the Revenue. This indicates that the Court agreed with the ITAT's decision to dismiss the appeals on the ground of low tax effect, implicitly accepting that the ITAT's reliance on the CBDT circular, even if internal, was justified in the context of deciding whether to pursue appeals with a low tax effect. The reasoning is based on a detailed order passed in similar Tax Appeals (No. 1402 to 1405 of 2007 and other cognate matters) where the Court had already decided the issue in favour of the assessee. The operative direction is the dismissal of all the Revenue's Tax Appeals.

What were the facts?

The Commissioner of Income Tax (Revenue) filed multiple Tax Appeals before the High Court of Gujarat against the orders of the Income Tax Appellate Tribunal (ITAT). The appeals challenged the ITAT's decision to dismiss the Revenue's appeals on the grounds of low tax effect. The Revenue contended that the ITAT wrongly relied on an internal CBDT circular, which is for departmental use and not equivalent to circulars issued under Section 119 of the Income-tax Act, 1961. The High Court had previously dealt with similar issues in other Tax Appeals and had decided them in favour of the assessee. The present appeals were heard together with those prior matters.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in dismissing the appeal on the ground of low tax effect relying upon an internal Circular issued by the CBDT which is meant for department use and cannot be equated to a circular issued under Section 119 of the I.T. Act? (Question of law) The Revenue argued that the ITAT erred in dismissing its appeal based on low tax effect by relying on an internal CBDT circular. The Revenue contended that such internal circulars are not binding and cannot be used to deny the Revenue its right to appeal, especially when they are not issued under Section 119 of the Income-tax Act, 1961, which provides for binding circulars. The Revenue's argument was that the ITAT's reliance on such a circular for dismissing the appeal was legally unsustainable. The Assessee's contentions were not explicitly recorded in the provided text, but the judgment implies they were in favour of the ITAT's decision to dismiss the appeal on low tax effect grounds.

Which sections of the Income-tax Act were involved?

Section 260A,Section 119

AI-generated summary — verify with the full judgment below

TAXAP/962/2006 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 962 TO 966 of 2006 WITH TAX APPEAL No. 1493 TO 1495 of 2006 WITH TAX APPEAL No. 1880 of 2006 TAX APPEAL No. 406 of 2007 TAX APPEAL No. 496 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ Sd/- HONOURABLE MR.JUSTICE BANKIM.N.MEHTA Sd/- ==================================== 1. Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2. To be referred to the Reporter or not ? NO 3. Whether their Lordships wish to see the fair copy of the judgment ? NO 4. Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5. Whether it is to be circulated to the civil judge ? NO

TAXAP/962/2006 2/3 JUDGMENT ==================================== COMMISSIONER OF INCOME TAX - Appellant(s) Versus DEEPAL H. MEHTA - Opponent(s) ==================================== Appearance : MR MANISH R BHATT for Appellant. MR SN SOPARKAR, SENIOR ADVOCATE WITH MRS SWATI SOPARKAR for Opponent. ==================================== CORAM : HONOURABLE MR.JUSTICE K.A.PUJ and HONOURABLE MR.JUSTICE BANKIM.N.MEHTA Date : 06/08/2008 COMMON ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE K.A.PUJ) 1. The revenue has filed these Tax Appeals under Section 260A of the Income-tax Act, 1961 proposing to formulate the following substantial question of law for the consideration and determination of this Court :- Whether the Appellate Tribunal is right in law and on facts in dismissing the appeal on the ground of low tax effect relying upon the internal Circular issued by the CBDT which is meant for department use and cannot be equated to circular issued under Section 119 of the I.T. Act ? 2. All these tax appeals were admitted by this Court on different dates and more or less, substantial question of law is framed in similar manner. All these Tax Appeals were heard together by this Court. Similar

TAXAP/962/2006 3/3 JUDGMENT question was involved in Tax Appeals No.1402 to 1405 of 2007 and other cognate matters and a detailed order is passed by us in the said Tax Appeals. We have decided the said Tax Appeals in favour of the assessee and against the revenue and the question paused therein was answered in affirmative i.e. in favour of the assessee and against the revenue. 3. For the reasons stated and conclusions drawn therein and subject to the directions issued therein, we dismiss all these Tax Appeals filed by the revenue and question paused in all these Tax Appeals is answered in affirmative i.e. in favour of the assessee and against the revenue. 4. All these Tax Appeals are accordingly disposed of without any order as to costs. Sd/- [K. A. PUJ, J.] Sd/- [BANKIM N. MEHTA, J.] Savariya

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