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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI C. N. PRASAD & SHRI RAMIT KOCHAR
Revenue by : Shri Vivek Anand Ojha,DR Assessee by: Shri. Sanjiv M. Shah and Mr Rajesh Chamaria सुनवाई की तारीख /Date of Hearing : 04.07.2019 घोषणा की तारीख /Date of Pronouncement : 08.07.2019 आदेश / O R D E R PER Bench: These three appeal(s) filed by the Revenue in 820/Mum/2017 are disposed off because the tax effect in these three appeals is less than Rs. 20 lacs ( in each of the appeals separately, tax effect is not exceeding Rs. 20 lacs ) as per CBDT Circular No. 3/2018, F. No. 279/Misc.142/2007-ITJ (Pt) dated 11th July, 2018 issued by Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, which stood later modified vide F.No.279/Misc 142/2007-ITJ-(Pt) dated 20.08.2018.
The learned counsel for the assessee at the outset pleaded that these appeals filed by Revenue are covered by CBDT circular dated 11.07.2018 1 I.T.A. No.818-820/Mum/2017 and should be dismissed owing to low tax effect . The learned counsel for the assessee has placed on record computation of tax effect in these appeals which in these there appeals comes to less than Rs. 20 lacs each of the appeal. The Ld. DR rebutted the contentions of the assessee‟s counsel and submitted that these three appeals filed by Revenue relates to additions made in the hand of the assessee based on information received from Investigation Wing, Mumbai in pursuance of searches conducted by Revenue u/s 132 on Mr Bhanwarlal Jain group and it is claimed that DGIT(Inv.), Mumbai is an „external source‟ who is an „law enforcement agency‟ who has forwarded information to learned Assessing Officer( “AO”) based on which additions were made to the income of the assessee and hence these appeals are covered by exception in para 10(e) of CBDT circular No. 3/2018 dated 11.07.2018 which was later modified vide F.No.279/Misc 142/2007-ITJ-(Pt) dated 20.08.2018, wherein scope of exceptions were widened by amending circular dated 11.07.2018 and hence these three appeals cannot be disposed of as low tax effect appeals . The learned DR requested that apart from oral arguments as advanced before the Bench, the Revenue may be granted liberty to file written submissions. The Bench granted liberty to learned DR to file written submissions as well evidences in case these appeals are covered by exception carved out by circular dated 11.07.2018 and its modification dated 20.08.2018. The learned DR has filed written submissions dated 04.07.2019 , which are reproduced hereunder:
I.T.A. No.818-820/Mum/2017 I.T.A. No.818-820/Mum/2017 2.2 The learned DR has also enclosed aforesaid circular dated 11.07.2018 and its modification dated 20.08.2018, along with its aforesaid letter dated 04.07.2019 which is reproduced herein below The learned DR however did not file any evidence of receipt of an information by Revenue from „external sources‟ in the nature of „law enforcement agencies‟ such as CBI/ED/DRI/SFIO/ Directorate General of GST Intelligence (DGGI) except that contending that Directorate of Income-tax(Investigation), Mumbai is an „external sources‟ in the nature of law enforcement‟ agency being external to „assessment unit‟ of the Income Tax Department and hence exception 10(e) is applicable , so the appeal may not be dismissed as low tax effect appeal covered by CBDT circular dated 11.07.2018.The learned DR although agreed that tax effect in these three appeals are less than Rs. 20 lacs but owing to the fact that information was received by AO from Directorate of Income- Tax(Investigation) , claim has been set up by Revenue that these appeals should not be dismissed owing to low tax effect because these appeals are covered by exceptions given under aforesaid circular dated 11.07.2018 as modified on 20.07.2018, vide para 10(e) because as per learned DR , information received from Directorate of Income-tax(Inv.), Mumbai is all I.T.A. No.818-820/Mum/2017 together an information received from „external sources‟ in the nature of „law enforcement agencies‟ so far as assessment unit of Income-tax Department is concerned. . It is important at this stage to reproduce para 10(e) of aforesaid circular dated 11.07.2018 as modified on 20.08.2018., as under:
10 *** *** (e) Where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence 2.3 It is also pertinent to reproduce hereunder , the CBDT circular dated 11.07.2018 and also its modification dated 20.08.2018 , for disposing of low tax effect filed by Revenue, which are reproduced hereunder:-
Circular No. 3/2018 F No 279/Misc. 142/2007-ITJ (Pt) Government of India Ministry of Finance Department of Revenue Central Board Direct Taxes New Delhi the 11th July, 2018 Subject: Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court- measures for reducing litigation-Reg. Reference is invited to Board's Circular No. 21 of 2015 dated 10.12.2015 wherein monetary limits and other conditions for filing departmental appeals (in Income-tax matters) before Income Tax Appellate Tribunal, High Courts and SLPs/ appeals before Supreme Court were specified.
2. In supersession of the above Circular, it has been decided by the Board that departmental appeals may be filed on merits before Income Tax Appellate Tribunal and High Courts and SLPs/ appeals before Supreme Court keeping in view the monetary limits and conditions specified below.
3. Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder: Monetary Limit (Rs.) S. No. Appeals/ SLPs in Income-tax matters 1, Before Appellate Tribunal 20,00,000 2. 50,00,000 Before High Court I.T.A. No.818-820/Mum/2017
3. Before Supreme Court 1,00,00,000 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.
4. For this purpose, ‘tax effect' means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter referred to as 'disputed issues'). Further, 'tax effect’ shall be tax including applicable surcharge and cess. However, the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against.
The Assessing Officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal can be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeals shall be filed in respect of all such assessment years even if the tax effect is less than the prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which tax effect exceeds the monetary limit prescribed. In case where a composite order/ judgement involves more than one asscssee, each assessee shall be dealt with separately.
Further, where income is computed under the provisions of section 115JB or section 115JC, for the purposes of determination of 'tax effect', tax on the total income assessed shall be computed as per the following formula- (A — B) + (C — D) where, A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions); B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of the disputed issues under general provisions; C = the total income assessed as per the provisions contained in section 115JB or section 115JC; D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC was reduced by the amount of disputed issues under the said provisions: However, where the amount of disputed issues is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.
In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Pr. Commissioner of Income-tax/ Commissioner of Income Tax shall specifically record that "even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this Circular". Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The 7 -820/Mum/2017 Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits.
In the past, a number of instances have come to the notice of the Board, whereby an assessee has claimed relief from the Tribunal or the Court only on the ground that the Department has implicitly accepted the decision of the Tribunal or Court in the case of the assessee for any other assessment year or in the case of any other assessee for the same or any other assessment year, by not filing an appeal on the same disputed issues. The Departmental representatives/counsels must make every effort to bring to the notice of the Tribunal or the Court that the appeal in such cases was not filed or not admitted only for the reason of the tax effect being less than the specified monetary limit and, therefore, no inference should be drawn that the decisions rendered therein were acceptable to the Department. Accordingly, they should impress upon the Tribunal or the Court that such cases do not have any precedent value and also bring to the notice of the Tribunal/ Court the provisions of sub section (4) of section 268A of the Income-tax Act, 1961 which read as under : "(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under sub-section (1) and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case."
9 As the evidence of not filing appeal due to this Circular may have to be produced in courts, the judicial folders in the office of Pr.CsIT/ CsIT must be maintained in a systemic manner for easy retrieval.
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 is 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 and rules. Further, in cases where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A/12AA of the IT Act, 1961 etc., filing of appeal shall not be governed by the limits specified in para 3 above and decision to file appeals in such cases may be taken on merits of a particular case.
It is clarified that the monetary limit of Rs. 20 lakhs for filing appeals before the ITAT would apply equally to cross objections under section 253(4) of the Act. Cross objections below this monetary limit, already filed, should be pursued for dismissal as withdrawn/ not pressed. Filing of cross objections below the monetary limit may not be considered henceforth. Similarly, references to High Courts and SLPs/ appeals before Supreme Court below the monetary limit of Rs. 50 lakhs and Rs. 1 Crore respectively should be pursued for dismissal as withdrawn/ not pressed. References before High Court and SLPs/ appeals below these limits may not be considered henceforth.
I.T.A. No.818-820/Mum/2017
This Circular will apply to SLPs/appeals/cross objections/references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/appeals/cross objections/references. Pending appeals below the specified tax limits in para 3 above may be withdrawn/ not pressed.
The above may be brought to the notice of all concerned. 15. This issues under Section 268A of the Income-tax Act 1961. 16. Hindi version will follow. Sd/- (Neetika Bansal) Director (ITJ), CBDT, New Delhi. Copy to:
1. 1. The Chairman, Members and all other officers in CBDT of the rank of Under Secretary and above.
2. All Pr. Chief Commissioners of Income Tax and All Directors General of Income Tax with a request to bring to the attention of all officers.
3. ADG (PR, PP& OL)t Mayur Bhawan, New Delhi for printing in the quarterly Tax Bulletin and for circulation as per usual mailing list.
4. The Comptroller and Auditor General of India. 5. ADG (Vigilance), Mayur Bhawan, New Delhi. 6. The Joint Secretary & Legal Advisor, Ministry of Law & Justice, New Delhi. 7. All Directorates of Income-tax, New Delhi and DGIT (NADT), Nagpur. 8. ITCC (3 copies). 9. The ADG (System)-4, for uploading on the Department's website.
10. Data Base Cell for uploading on irsofficersonline.gov.in. 11. njrs_support@nsdl.co.in for uploading on NJRS.
12. Hindi Cell for translation.
13. Guard file. Director (ITJ) CBDT, New Delhi”
I.T.A. No.818-820/Mum/2017 I.T.A. No.818-820/Mum/2017 2.4 The ld. Counsel for the assessee submitted that as per CBDT Circular No. 3/2018, F. No. 279/Misc.142/2007-ITJ (Pt) dated 11th July, 2018 issued by Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India as further modified on 20.08.2018, no appeal shall be filed by the Revenue in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3 of the circular .
Para 3 of the Circular No. 3/2018 S No. Appeals in Income tax matters Monetary Limit (in Rs) 1 Before Appellate Tribunal 20,00,000/- 2 Before High Court 50,00,000/- 3 Before Supreme Court 10,000,000/- 2.5 In the said circular vide para 13, it is stipulated that this instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in Hon‟ble High Courts/Tribunals. Thus, it is stipulated in said circular that pending appeals below the specified tax limits may be withdrawn/not pressed. The learned counsel for assessee also stated before the Bench that even these three appeals are not covered by exceptions as provided in circular dated 11.07.2018 which exceptions were later enlarged vide communication dated 20.08.2018 as the additions were not made based on any information received from „external sources‟ in the nature of „law enforcement agencies‟ such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence(DGGI). It was submitted by learned counsel for the assessee that Directorate of Income-tax(Investigation) is an internal sources of Income-tax Department and not an external sources and hence not covered by exception as is provided under clause 10(e) of said CBDT circular as modified.The learned counsel for the assessee has also filed written submissions dated 04.07.2019, which are also placed in file.
We have considered rival contentions and perused the material on records. We have observed that undisputedly tax effect in all these three appeals filed by Revenue is not exceeding Rs. 20 lacs(computed in each of the appeal separately ) . The CBDT came out with circular on 11.07.2018 wherein it is stipulated that wherein tax effect does not exceed monetary limit of Rs. 20 lacs , the appeals shall not be filed henceforth by Revenue with Income-Tax Appellate Tribunal and further all pending appeals filed by Revenue with ITAT shall be withdrawn or not pressed. The aforesaid CBDT circular stood modified on 20.08.2018 wherein exceptions were enlarged. Both CBDT circular dated 11.07.2018 as well its modification dated 20.08.2018 are reproduced in preceding para‟s of this order. The Revenue main bone of contention in these three appeals is that these three appeals are covered by exceptions as carved out in para 10(e) vide modification dated 20.08.2018 to CBDT Circular dated 11.07.2018 , which provides that when additions are based on information received from „external sources‟ in the nature of law enforcement agencies such as CBI/ED /DRI /SFIO / Directorate General of GST Intelligence(DGGI) , then these appeals shall not be withdrawn owing to low tax effect. The para 10(e) of the aforesaid CBDT circular is reproduced hereunder: “10 *** *** (e) Where addition is based on information received from external sources in the nature of law enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence”
We are afraid that contentions of learned DR cannot be accepted because para 10(e) clearly stipulates that additions should be based on information received from „external sources‟ in the nature of „law enforcement agencies‟ such as CBI/ED / DRI/SFIO/Directorate General of GST Intelligences(DGGI) and as could be seen from para 10(e) that the thrust in this exception is that additions should be based on information received from „external sources‟ and secondly these external sources should be in the nature of „law enforcement agencies‟ . These two conditions are necessarily and mandatorily required to be fulfilled to be covered under exception. Since, these exceptions take away the benefit granted by Revenue to the tax-payers by way of withdrawal of pending appeals with low tax effect, the onus is on the Revenue to show that taxpayer‟s case is covered by these exceptions and the taxpayer is not entitled to seek protection granted by CBDT circular. Further, these exceptions are penal in nature as it seeks to withdraw the I.T.A. No.818-820/Mum/2017 benefit granted by Revenue to tax-payers , it is to be strictly construed. Thus, it is for Revenue to demonstrate that additions were made based on information received from external sources being law enforcement agencies. It can be further seen that para 10(e) further listed certain agencies as illustrations which are not exhaustive . Thus, agencies as listed in para 10(e) vide illustrations can be expanded provided these are „external sources‟ and secondly they are in the nature of „law enforcement agencies‟ . Thus, fulfillment of these two conditions of being „external source‟ and being „law enforcement agency‟ is a mandatory stipulation which must be adhered to come within the ambit of exception. When language used is simple, plain , unambiguous and clear, there is no scope of intendment. Taxing statutes are to to be strictly construed. There is no scope of intendment when the language is simple, plain, clear and unambiguous. The word „External Sources‟ in our considered view, is used by CBDT to be an information received from sources which are external to Income-Tax Department and various departments/ wings which works under its aegis. Directorate of Income-tax (Investigation) is „law enforcement agency‟ under the Ministry of Finance and controlling authority is Investigation division of CBDT. Thus, Directorate of Income-tax(Investigation) an internal agency/wing of Income- tax Department which works under the aegis of its controlling authority CBDT and can not be considered to be an „external source‟ as is referred to vide communication dated 20.08.2018 in para 10(e). When CBDT is referring to an external sources , it is certainly referring to sources which are not internal sources within Income-tax Department and various wings functioning within its aegis. Our view is further fortified by careful perusal of illustrations referred to in para 10(e) of modification dated 20.08.2018 namely CBI/ED/DRI/SFIO/Directorate General of GST Intelligence , none of these agencies listed in para 10(e) works under the aegis of Income-tax Department and are in-fact „external sources‟ so far as Income-tax Department is concerned . Thus, this plea of learned DR cannot be accepted that Directorate of Income-tax(Investigation) is an „external source‟ for the purposes of interpreting para 10(e) of CBDT circular , and we hold that information received by AO from Directorate of Income-tax (Investigation) is an information received from internal sources and is not covered by exception as is contained in para 10(e) of CBDT circular dated 11.07.2018 as modified on 20.08.2018 as this information is received from sources which I.T.A. No.818-820/Mum/2017 are from sources „internal‟ to Income-tax Department. The interpretation placed by learned DR that CBDT meant in the aforesaid circulars as to all information received by AO from sources which are outside of the „assessment unit‟ to be taken as „external source‟ cannot be accepted as such interpretation is too wider and could not have been intended by CBDT. Moreover, as we have seen above that in para 10(e) , none of the agencies listed therein work under the aegis of Income-Tax Department, while Directorate of Income-tax(investigation) works under the aegis of Investigation Division of CBDT who is its controlling authority and hence could not be called as an „external source‟. The policy of non filing of appeal by Revenue in low tax effect matter is part of litigation policy followed by Revenue wherein keeping in view low tax effect in its appeal , the Revenue choose not to persue its appeal further with higher forums keeping in view cost benefit analysis. The Revenue has chosen to free its resources by not persuing un-important and routine low tax effect appeals and instead direct its limited resources to bigger and important matters to generate higher resources more effectively and efficiently. This is purport of litigation policy wherein appeals filed by Revenue below threshold limits of tax effects are withdrawn by Revenue before Hon‟ble Courts/tribunal. Thus keeping in view CBDT circular no. 3/2018 dated 11-07-2018 and as modified vide communication dated 20.08.2018, we are inclined to dismiss these three appeal filed by Revenue due to low tax effect involved in this appeal which is below Rs. 20 lacs being covered by circular dated 11.07.2018 as further modified on 20.08.2018. While disposing of these three appeals filed by Revenue due to low tax effect vide CBDT Circular no. 3/2018 dated 11.07.2018 and as further modified by communication dated 20.08.2018, we clarify that we have not commented on the merits of the issue‟s in these three appeals. However, at the same time we are granting liberty to Revenue that if at any stage Revenue wants to agitate the matter/issue in these three appeals in accordance with the clauses as are contained in the afore-stated circular number 3/2018 dated 11.07.2018 and modification dated 20.08.2018 based on cogent reasons/evidences that these appeals are covered under exceptions carved out in aforesaid CBDT circular , the Revenue is hereby granted liberty to file miscellaneous application(s) praying for recall of these orders in accordance with law. We order accordingly.
I.T.A. No.818-820/Mum/2017
In the result, all the three appeals filed by the Revenue in are dismissed owing to low tax effect as indicated above.
Order pronounced in the open court on 08.07.2019. आदेश की घोषणा खुऱे न्यायाऱय में ददनांकः 08.07.2019 को की गई ।