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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI SAKTIJIT DEY, JM
: 24.08.2018 Date of Hearing : 05.09.2018 Date of Pronouncement O R D E R Per Shamim Yahya, A. M.: This appeal by the Revenue and the cross objection by the assessee are directed against the order of the learned Commissioner of Income Tax (Appeals)-5, Mumbai (‘ld.CIT(A) for short) dated 15.11.2016 and pertain to the assessment year (A.Y.)
2008-09.
2. The grounds of appeal raised in Revenue’s appeal read as under:
Dr. Dinesh R. Jain 1. Whether on the facts, in the circumstances of the case and as per law, whether the Ld. CIT(A) was justified in directing to delete the penalty levied by the Assessing Officer by relying on the fact that in the penalty notice issued alongwith the Assessment Order, the AO has not struck whether penalty was levied for furnishing inaccurate particulars of income or concealment of income, without appreciating that in the Assessment Order itself, the AO has clearly mentioned both the defaults committed by the assessee, i.e. furnishing inaccurate particulars of income and concealment of income.
2. Whether on the facts, in the circumstances of the case and as per law, whether the Ld. CIT(A) was justified in directing to delete the penalty levied by the Assessing Officer without appreciating that once the assessment order clearly lists down the reason for initiation of penalty, the mere technical default of not striking off of one of the limbs of penalty initiation in the accompanying penalty notice cannot make the entire Penalty order null and void.
3. Whether on the facts, in the circumstances of the case and as per law, whether the Ld. CIT(A) was justified in directing to delete the penalty by stating that the AO has not concluded in the Penalty Order whether the Penalty was levied for inaccurate particulars of income or for concealment of income, whereas the AO has clearly mentioned in the Penalty Order that the penalty is for furnishing inaccurate particulars of income.
4. Whether on the facts, in the circumstances of the case and as per law, whether the Ld. CIT(A) is correct in holding that the penalty is not sustainable in view of the non-mentioning of correct limb of penalty in the penalty notice, without appreciating that the default was mentioned in the assessment order and further the assessee did get opportunities before the AO to know about the exact default committed by it before the penalty order passed by the AO.
At the outset, it transpires that the tax effect of the relief granted by the ld. Commissioner of Income Tax (Appeals) is below Rs.20 lacs, as per the limit fixed by the CBDT for filing the appeal before the ITAT vide 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. The said CBDT circular dated 11.07.2018 is reproduced as 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:
S. No. Appeals/ SLPs in Income-tax Monetary Limit (Rs.) matters
1, Before Appellate Tribunal 20,00,000
2. Before High Court 50,00,000
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.
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 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.
8. 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.
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. 14. The above may be brought to the notice of all concerned.
This issues under Section 268A of the Income-tax Act 1961.
Hindi version will follow. Sd/- (Neetika Bansal) Director (ITJ), CBDT, New Delhi. Copy to:
Dr. Dinesh R. Jain 1. The Chairman, Members and all other officers in CBDT of the rank of Under Secretary and above.
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).
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”
4. We have gone through the order of the ld. Commissioner of Income Tax (Appeals) and the grounds of appeal. It has been found that the tax effects in the appeals are less than Rs. 20 lacs.
5. The ld. Departmental Representative fairly agreed to the above proposition that this appeal is not maintainable in light of the above said CBDT Circular. He also did not point that these appeals fall in the exceptions carved out in the above said circular.
Accordingly, this appeal filed by the Revenue stands dismissed.
6. The grounds of appeal raised in cross objection reads as under:
1. In the facts & circumstances of the case & in law the Ld CIT erred by ignoring the fact that, the Hon. Bombay High Court had admitted the quantum appeal vide its order dt : 7-10-16 on 2 questions of law.
2. In the facts & circumstances of the case & in law the Ld CIT erred by ignoring the fact that the penalty was levied on an estimation theory, based on prior years average estimation by the AO and which estimate was reduced by the Hon ITAT and also erred by ignoring the factual evidences for the year in question.
Dr. Dinesh R. Jain 3. In the facts & circumstances of the case & in law the Ld CIT erred by ignoring that the addition of Rs, 329,2797- on account of Bank interest was set aside by the Hon ITAT vide its order dt: 25-9-13 for reverification by the AO and consequent to the AO's 2nd order dt: 31-3-15 the said issue was again sub-judice before the FAA.
7. The cross objection by the assessee supports the plea that penalty should not be levied. Since we have already dismissed the Revenue’s appeal against the ld.CIT(A)’s order as above, this cross objection becomes infructuous and is accordingly dismissed as such.
In the result, this appeal by the Revenue as well as the assessee’s cross objections stands dismissed.
Order pronounced in the open court on 05.09.2018