DCIT,CIRCLE-10(1), KOLKATA, KOLKATA vs. M/S AKZO NOBEL COATINGS INDIA PVT. LTD., KOLKATA

At the outset itself, the Ld. Counsel for the assessee has brought to our attention in respect of Rs. 20 lacs, therefore, the revenue’s appeal is not maintainable in the light of the CBDT Circular No.3/2018 dated 11.07.2018 wherein CBDT has directed as under: “3 . Henceforth, appeals/ SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder: Sl. No. Appeals/SLP’s 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 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.

In para-13 of the said circular it has further been clarified that the revised monetary limits will apply retrospectively. The relevant para-13 of the Circular reads thus: “13. 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 Pending appeals below the specified tax limits in para 3 above may be withdrawn/not pressed.

In the present case, the tax effect in this appeal by the revenue is less than Rs.20,00,000/-. Though this appeal had been filed by the revenue on 16.12.2016 and was within the monetary limit in the form of tax effect for filing appeal before Tribunal, in view of para-13 of the Circular of CBDT, even such appeal will be governed by the new monetary limits laid down in the CBDT Circular No.3/2018 referred to above.

It is a settled law that the Circulars issued by CBDT are binding on the Revenue. This position was confirmed by the Apex Court in the case of Commissioner of Customs vs Indian Oil Corporation Ltd. reported in 267 ITR 272 wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circular and laid down that when a circular issued by the Board remains in operation then the Revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute.

In view of the above, we hold that the appeal filed by the Department, against the impugned order of the Ld. CIT(A), is contrary to the policy decision of the Department and as such the appeal filed by the Department is dismissed in limine.

Briefly stated facts are that the AO levied penalty u/s. 271(1)(c) of the Act on the basis of the assessment order dated 11.03.2014 u/s. 143(3)/144C of the Act for the AY 2010-11 wherein, inter-alia, an amount of Rs.73,87,000/- was added back on account of provision for employees’ benefits even though offered by the assessee suo moto at the time of assessment proceeding on the ground that since the same was not made in the return of income. In the penalty proceedings the assessee has not disputed the fact that the said debited amounts were disallowable under the Act, however since it had already offered an amount of Rs.55,00,000/- for the AY 2009-10 and due to inadvertence, the assessee claimed the impugned amount as deduction for which it was readily rectified by way of offering the same during the course of the assessment proceeding and pleaded not to levy penalty before the AO because it was a bonafide mistake. However, the AO did not agree and levied penalty. Aggrieved by the said order of AO, assessee preferred appeal before the Ld. CIT(A), who deleted the penalty imposed by the AO u/s. 271(1)(c) of the Act. Aggrieved, revenue is before us.

We have heard rival submissions and gone through the facts and circumstances of the case. We note that though in the Tax Audit Report the provision for employees’ benefits was clearly reported, the assessee company while computing the income due to inadvertent error has not offered the same for taxation in the return of income. However, we note that the assessee realizing the mistake had suo moto offered the same for taxation during the first hearing fixed by the AO for assessment. When the fact of “provision for employee’s benefit” was discernible from the Tax Audit Report, the question of concealment of income does not arise and further the conduct of the assessee company offering it for taxation at the first instance itself, reveals that it was an inadvertent error on the part of assessee company and, therefore, does not warrant levying penalty. In a similar case the Hon’ble Supreme Court in Pricewaterhouse Coopers Private Limited Vs. CIT (2012) 348 ITR 306 (SC), held that where the assessee has made an inadvertent and a bonafide error and has not intended to conceal the particulars of income, penalty need not be levied. In view of the facts and circumstances discussed above, we hold that there was an inadvertent mistake on the part of the assessee and since the provision for employee’s benefit was reported in Tax Audit Report also we are of the opinion that there was no concealment of income as alleged by the AO, therefore, the Ld. CIT(A) has rightly deleted the penalty as imposed by the AO u/s. 271(1)(c) of the Act and we confirm the same. Therefore, the appeal of the revenue is dismissed.

In the result, both the appeals by the Revenue are dismissed.