COMMISSIONER OF INCOME TAX Vs. UNITARA FINANCE LTD.

JUDGEMENT

(1.) IN this appeal following substantial question of law have been raised :

(2.) THIS appeal has been filed against the order of the Tribunal declining to decide the appeal on merit on the ground that the tax effect in the case was less than Rs. 2,00,000 and, therefore, the appeal was contrary to the explicit instructions of the Board of Direct Taxes to the effect that where the tax effect was less than Rs. 2,00,000, appeal should not be filed. In dismissing the appeal on the said technical ground, the Tribunal took into account the decision of the Bombay High Court in CIT vs. Pithwa Engg. Works : (2005) 197 CTR (Bom) 655 : (2005) 276 ITR 519 (Bom) to the effect that the Circular of the Board also applies to the pending cases. Learned senior counsel for the Revenue has, however, pointed out that Rajasthan High Court in decision in CIT vs. Rajasthan Patrika Ltd. : (2002) 178 CTR (Raj) 414: (2002) 258 ITR 300 (Raj) has held that the High Court ought not to have dismissed appeal or rejected the reference merely on account of the pecuniary limits fixed with regard to the tax effect. Reference has also been made to the decision of the Supreme Court in CIT vs. Hero Cycles (P) Ltd. & Ors. : (1997) 142 CTR (SC) 122 : (1997) 228 ITR 463 (SC) to the effect that circulars are not binding on appellate authorities, Court, Tribunal or assessee. However, we may point out that their Lordships were not considering any question involving interpretation of the circular issued by the CBDT. Learned senior counsel has further pointed out a decision of the Punjab & Haryana High Court in CIT vs. Abhishek Industries Ltd. : (2006) 205 CTR (P&H) 304 : (2006) 286 ITR 1 (P&H). Our attention was, in particular, invited to the discussion contained in para 29 of the said report. However, we find that the said decision follows the case of the Supreme Court in CIT vs. Hero Cycles (P) Ltd. & Ors. (supra) and holds that circular issued by the CBDT can bind the ITO but not the appellate authority or the Tribunal or the Court or even the assessee.

(3.) WE may point out that the circular issued by the CBDT as referred to above carves out only one exception with regard to the permissibility of filing of appeals etc. notwithstanding the embargo contained in the Circular of the monetary limit. It is only in cases involving substantial question of law of importance as well as cases where the same question of law will repeatedly arise either in the case concerned or in similar cases that the Department will not be hindered by the monetary limits. The question, therefore, arises as to whether the Department can be left at liberty to defeat the circular of CBDT restraining its power to file appeal in case of the tax effect being below the monetary limit by capriciously taking subterfuge under the specious plea that the case is one of the excepted category of cases. It has not been brought to our notice that the IT Department has devised any procedure to consider whether a particular case falls within the excepted category thus, permitting the Revenue to agitate the matter before the higher forums. In cases where no such procedure has been devised, it is expected that while filing appeal in non -adherence of the circular, the Department would place material before the appellate forum that the case falls within the excepted category and, therefore, is not covered by the restraint contained in the circular. The learned senior counsel for the appellant has also invited attention to the decision of the Punjab & Haryana High Court in Rani Paliwal vs. CIT : (2003) 185 CTR (P&H) 333 : (2004) 268 ITR 220 (P&H), of Delhi High Court in CIT vs. Blaze Advertising (Delhi) (P) Ltd. : (2002) 173 CTR (Del) 482 : (2002) 255 ITR 460 (Del) and of Madras High Court in CIT vs. Kodananad Tea Estates Co. : (2004) 192 CTR (Mad) 159 : (2005) 275 ITR 244 (Mad). We are, however, of the view that, as held by this Court, in CIT vs. Suresh Chand Goyal (supra), where tax liability of the assessee is below the monetary limit prescribed, Revenue cannot file an appeal in transgression of the circular by which it is bound. However, we may add that in a case which falls within the excepted category, it would always be open to the Department to bring it to the notice of the Forum approached and to insist that the question being covered by the exceptions contained in cl. 3 of the circular dt. 24th Oct., 2005 as modified by the Instruction No. 5 of 2007 dt. 16th July, 2007, the same deserves to be considered by the superior forum, the circular of the CBDT notwithstanding.