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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI N. V. VASUDEVAN & SHRI JASON P BOAZ
These are seven appeals filed by the Revenue against the common order dated 29.06.2017 relating to assessment years 2009-10 to 2015-16. When these appeals were taken up for hearing, it was submitted that the tax effect involved in these seven appeals was less than Rs.20 lakhs and, therefore, these appeals by the Revenue have to be dismissed as not maintainable in view of the CBDT Circular No.3/2018 dated 11.07.2018.
2.1 The ld DR however submitted para 5 of the aforesaid Circular No.3/2018 dated 11.07.2018 which reads as follows:-
"5. 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 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, appeal shall be filed in respect of all such assessment years even if the "tax effect" is less than the prescribed of the year(s) in which the "tax effect" exceeds the monetary limit prescribed. In case where a composite order/judgment involves more than one assessee, each assessee shall be dealt with separately." to 1838/Bang/2017, C. O. Nos. 115 to 118/Bang/2017
Page 3 of 6 2.2 According to the learned DR, if the order of the CIT(A) is a composite order involving more than one assessment year and common issues in more than one assessment year are involved appeal can be filed in respect of all such assessment years even if the tax effect is less than the prescribed limit for some of the Assessment years comprised in the composite order of the appellate authority. The learned DR pointed out that the CIT(A) in the present case has passed a common order for several AYs and the cumulative tax effect being more than Rs.20 lacs, therefore the appeals for all the AYs 2009-10 to 2015-16 should be held to be falling within the exception contained in paragraph 5 of the circular referred to above.
The ld counsel for the assessee, however, pointed out that paragraph 5 of the Circular on which the ld DR paced reliance in support of his contention that the appeals of the Revenue are not hit by the Circular No. 3/2018 which is similar to paragraph 5 issued by the CBDT viz., Circular No.3/2012 which was the Circular issued by the CBDT prescribing monetary limits for filing appeals before Tribunal. This circular was in force prior to the issuance of CBDT Circulars No.21/2015 and Circular No. 3/2018 dated 11.07.2018 which is issued in supersession of CBDT Circular No. 21/2015 dated 10.12.2015 . He brought to our notice that paragraph 5 of CBDT Circular No.3/2012 had come up for consideration before the Hon'ble Karnataka High Court in the case of CIT, Central Circular Vs. PSI Hydraulics (2014) 226 Taxman 34 (Kar). In the aforesaid decision, Hon'be Karnataka High Court held that merely because the order of the CIT(A) is consolidated order passed for several years tax effect should be seen for each AY separately. The Hon'ble Karnataka High Court held that paragraph 5 of Circular No.3/2013 was discriminatory and offended Article 14 of the Constitution of India. The Hon'ble High Court finally held that even though the cumulative tax effect in a common order passed by CIT(A) for several years is more than 20 lakhs but if the individual tax effect in each assessment year is less than the monetary limit prescribed in Circular No.3/2011, the same should be to 1838/Bang/2017, C. O. Nos. 115 to 118/Bang/2017
Page 4 of 6 held to be not maintainable. He therefore submitted that similarly in view of the CBDT Circular No. 3/2018 dated 11.07.2018, the tax effect for each AY should be seen separately and in that event the appeals for the AYs 2009-10 to 2015-16 would be not maintainable as the tax effect was admittedly less than Rs.20 lacs.
4.1 We have considered the rival submissions and are of the view that the decision of the Hon'ble Karnataka High Court is directly on the point and was rendered in identical circumstances. Para 5 of the Circular No.3/2011 considered by the Hon'ble Karnataka High Court is in pari materia same as that of Para 5 of Circular No.3/2018. For the sake of ready reference, we give below the relevant paragraphs of Hon'ble Karnataka High Court on this issue.
"....Per contra, Sri K.V. Aravind, learned counsel for the Appellants refers to para 5 of Circular No. 3/2011, which reads thus:-
5. 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 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, appeal shall be filed in respect of all such assessment years even if the tax effect" is less than the prescribed of the year(s) in which the "tax effect" exceeds the monetary limit prescribed. In case where a composite order/judgment involves more than one assessee, each assessee shall be dealt with separately."
In case of an assessee, where common order is passed in respect of more than one assessment year, which involves common issues even if in one of the assessment years the tax effect is more than Rs. 10 lakhs, irrespective of the fact that in respect of other assessment years which is part of the common order, the tax effect is less than Rs. 10 lakhs, the revenue is entitled to 1838/Bang/2017, C. O. Nos. 115 to 118/Bang/2017 Page 5 of 6 to file appeal even in respect such assessment years where the tax effect is less than Rs. 10 lakhs. However, in case where there is no common order and an order is passed only in respect of an assessment, year and the tax effect therein is less than Rs. 10 lakhs, the revenue cannot file the appeal.
On thorough scrutiny of para 5 of the Circular No. 3/2011, we find that there appears to be a glaring discrimination offending the sprit of Article 14 of the Constitution. In the case of a common order passed in respect of one or more assessment year/years, if the tax effect is less than Rs. 10 lakhs, the assessee is not entitled to benefit of exemption and the revenue is not debarred from filing an appeal, even though the tax effect in respect of one or more assessment years is less than Rs. 10 lakhs. In other words, the revenue can file an appeal against all the assessment orders which is a part of the common order, irrespective of the fact, whether for one of the assessment year/years, the tax effect is less than Rs. 10 lakhs. However, if it is a solitary order and tax effect is less than Rs. 10 lakhs, the assessee is entitled to the benefit of exemption and the revenue cannot file the appeal.
The para-5 of the circular is highly discriminatory. After all the bunching and clubbing of cases and passing common orders is a procedure adopted for convenient disposal of the cases by the court or quasi judicial authority. The assessee has no say in the matter of clubbing of cases and passing of common orders. Merely because the authority concerned for judicial convenience, clubs the cases and pass common order, the assessee should not be denied of the benefit of circular-3/2011 when the tax effect for the assessment year/years the tax effect is less than Rs. 10 lakhs. Therefore, it is to be held that whether it is a solitary order or common order, the assessee should have the benefit of the tax effect less than Rs. 10 lakhs and in all such cases whether it is a part of the common order or a solitary order, the revenue will not be entitled to file an appeal". (emphasis supplied) 4.2 In view of the aforesaid decision of Hon'ble Karnataka High Court, we hold that the appeals of the Revenue for assessment years 2009-10 to 2015-16 being to 1838/Bang/2017 are dismissed for reason that the tax effect in these appeals are less than Rs.20 lakhs and, therefore, such appeals are not maintainable in view of CBDT Circular No.3/2018.
to 1838/Bang/2017, C. O. Nos. 115 to 118/Bang/2017
Page 6 of 6 5. Since the Revenue’s appeals, inter alia, for assessment years 2009-10 to 2012-13 (viz., to 1835/Bang/2017) have been dismissed in limine for the reason that the tax effect in these appeals are less than Rs.20 lakhs and therefore not maintainable in view of CBDT’s Circular No.3/2018 dated 11.07.2018, the Cross Objections filed by the assessee in C.O. Nos. 115 to 118/Bang/2017 for the assessment years 2009-10 to 2012-13 are rendered infructuous and dismissed accordingly.
In the result, Revenue’s appeals for assessment years 2009-10 to 2015-16 and assessee’s cross objections for assessment years 2009-10 to 2012-13 are dismissed.
Pronounced in the open court on this 11th day of January, 2019.