COMMISSIONER OF INCOME TAX Vs. OM TRADING COMPANY

JUDGEMENT

(1.) The two questions referred for the opinion of this Court in both the references are : 1. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law to hold that there was no prejudice to Revenue so as to enable the CIT to revise the assessment of the firm for the asst. yr. 1979-80 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the payment of annuity to the widow is not an application of income of the firm but is diversion at source ?

(2.) In these references the assessee is the same. The learned counsel for the respondent-assessee points out that the tax involved is less than Rs. 500 and relying on the decisions of the Bombay High Court in CWT vs. Executors of Late D. T. Udeshi (1991) 189 ITR 319 (Bom) and of the Rajasthan High Court in CWT vs. Girdhari Lal Saraf (1991) 190 ITR 264 (Raj) submits that we should decline to answer the references in view of the negligible tax involved. In the Bombay case (supra) the Division Bench referred to Instruction No. 1573 issued by the Central Board of Direct Taxes ('CBDT' for short) in its Circular dt. 12/07/1984 and Instruction No. 1764 of the CBDT in its Circular dt. 14/07/1987 and held that the Board had taken a policy decision not to file references in cases where the tax effect was going to be less than Rs. 30,000 per year and in that view of the matter rejected the application for reference, finding that in that matter the tax effect in no year exceeded Rs. 8,500. Girdhari Lal Saraf's case (supra) is also one on reference application and relying on the decision of the Supreme Court in CGT vs. Executors & Trustees of the Estate of Late Sh. Ambalal Sarabhai (1988) 170 ITR 144 (SC) wherein it was held that

(3.) The present references are at the instance of the Department. The learned counsel for the Department, Mr. S. R. Ashok, states that he has received instructions from the Chief CIT, Hyderabad to permit the Department to withdraw the reference cases in view of the fact that the amount of tax involved is undoubtedly very much less than Rs. 1,000.