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Income Tax Appellate Tribunal, BENCH ‘B’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ]
ORDER PER N.V.VASUDEVAN, JM: is an appeal by the Revenue. Both of these are against the order dated 09.01.2012 of CIT(A)-XXX, Kolkata relating to A.Y.2007-08.
As far as the appeal by the revenue is concerned the tax effect in this appeal is less than Rs.10 lakhs. Recently the CBDT has issued Circular No. 21/2015, dated 10th December, 2015, whereby the monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal and High Courts and SLP before Supreme Court have been increased as measure for reducing Litigation. The revised monetary 842/Kol/2012-Shri Mukesh Kumar Dhuria, A.Y.2007-08 limits laid down in para-3 of this Circular and the manner of computing tax effect as laid down in para-4 of this Circular are as follows: “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 in Income-tax matters Monetary Limit (in Rs) 1. Before Appellate Tribunal 10,00,000/- 2. Before High Court 20,00,000/- 3. Before Supreme Court 25,00,000/- It is clarified that an appeal should not be filed merely because the tax effect in a case xceeds 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"). 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.”
In para-10 of the said circular it has been further been clarified that the revised monetary limits will apply retrospectively. The relevant para-10 of the Circular reads thus:
“10. This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/ Tribunals. Pending appeals below the specified tax limits in para 3 above may be withdrawn/ not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.”
In the present case, the tax effect in this appeal by the revenue is less than Rs.10,00,000/-. Though this appeal had been filed by the revenue on 13.07.2012 and was within the monetary limit in the form of tax effect for filing appeals before Tribunal, in view of para-10 of the Circular of CBDT, even such appeals will be governed by the new monetary limits laid down in the CBDT Circular No.21/2015 referred to above. 842/Kol/2012-Shri Mukesh Kumar Dhuria, A.Y.2007-08
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. The appeal under consideration has certainly been filed contrary to the Circular issued by the CBDT Circular No.21 dated 10.12.2015.
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.
In the result the appeal of the revenue is dismissed.
As far as the appeal by the assessee is concerned there is a delay of 119 days in filing this appeal by the assessee. The delay in filing the appeal has been explained by the assessee as owing to serious illness of the assessee. Though the required medical certificate in this regard was not filed by the assessee, taking the statement made by the learned counsel for the assessee across the bar, we condone the delay in filing the appeal. None appeared on behalf of the department.
Grounds of appeal
raised by the assessee in this appeal reads as follows :- “1. For that the Order of the Learned CIT(A) is arbitrary, illegal and bad-in-law.\
2. For that the Learned CIT(A) erred in confirming the addition of Rs.3,22,987/- was completely erroneous, illegal and baseless.”
10. The Assessee is an individual. He carries on trading in metal scraps. During the previous year relevant to A.Y.2007-08 the asssessee filed return of income declaring total income of Rs.1,30,842/-. In the course of assessment proceedings the AO noticed 842/Kol/2012-Shri Mukesh Kumar Dhuria, A.Y.2007-08 that the gross profit and net profit shown by the assessee was 2.10% and 1.15%. According to him this was a very low profit margin considering the turn over of the assessee and the profit earned generally in the business of trading in metal scraps. AO noticed that the assessee had not produced the books of account to substantiate various expenses claimed in the profit and loss account along with subsidiary records. In the above circumstances the AO estimated the profit of the assessee at 4% of the turn over which resulted in an addition of Rs.3,22,987/- to the total income of the assessee. (4% of Rs.1,1`3,45,718 = Rs.4,,53,829/-). AO observed that u/s 44AF of the Act which is applicable in a case where turnover is below Rs.40 lakhs and the Assessee engaged in retain trading the presumptive percentage of profit was 5% of the turnover. Taking the clue from the aforesaid provision, the AO estimated 4% of the turn over as profit of the assessee.
11. On appeal by the assessee the CIT(A) confirmed the order of AO. Aggrieved by the order of CIT(A) the assessee is in appeal before the Tribunal.
We have heard the submissions of the learned counsel for the assessee. His submissions was that the books of account of the assessee has been audited and therefore the addition in question was not justified. We have considered his submissions and we find that when the books of account are rejected and income of the assessee is determined on the basis of estimate, the sum has to be made keeping in mind the past history in assessee’s own case. AO has not adopted such course. We do not have the benefit of profits earned by the assessee in the past. Taking into consideration all aspects of the case, we are of the view that estimate of 2.5% of the turnover will meet the ends of justice. Accordingly the addition is directed to be made adopting 2.5% as net profit percentage to be applied. Thus the appeal of the assessee is partly allowed.
842/Kol/2012-Shri Mukesh Kumar Dhuria, A.Y.2007-08
In the result the appeal of the assessee is partly allowed and the appeal of the revenue is dismissed.
Order pronounced in the Court on 03.02.2016.