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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI A.K. GARODIA
O R D E R Per N.V. Vasudevan, Judicial Member
When these two appeals was taken up for hearing, it was noticed that the tax effect in the appeals for AY 2009-10 & 2011-12 were less than Rs.20 lacs and in view of CBDT Circular No. 3/2018 dated 11th July, 2018, the appeal by the revenue is liable to be dismissed as according to the aforesaid Circulars appeals to the Tribunal should not be filed where the tax effect in less than Rs.20 lacs in one assessment year.
The learned DR however made a reference to para-5 of the aforesaid Circular, 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 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 assessee, each assessee shall be dealt with separately.
She pointed out that the order of the CIT(A) was a common order for AY 2009-10, 2010-11 & 2011 and the issues were common in all the three AYs and the tax effect in appeal for AY 2010-11 is more than the monetary limit of Rs.20 lacs and therefore in view of the later portion of para-5 of the Circular shown in bold in the extracted portion of para-5, the appeal should be held to be maintainable for AY 2009-10 & 2011-12 also.
The learned counsel for the Assessee however brought to our notice that para-5 of the CBDT Circular 3/2018 is identical to Paragraph-5 of Circular No.3/2012 prescribing monetary limits for filing appeal before appellate forums and had a similar clause-5 which provided that 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.
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, the Hon’ble Karnataka High Court held merely because the order of the CIT(A) is consolidated order passed for several years tax effect should not 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 10 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 held to be not maintainable.
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 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 spirit 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)
In view of the aforesaid decision of Hon’ble Karnataka High Court, the revenue cannot take the plea of considering cumulative tax effect also. In the light of the above discussion, we conclude that the aforesaid two appeals of the revenue are not maintainable and are liable to be dismissed as such.
In the result, the appeals are dismissed.
Pronounced in the open court on this 12th day of October, 2018.