CBDT cannot issue circular with retrospective effect-Supreme Court

CBDT cannot issue circular with retrospective effect-Supreme Court. Revised monetary limits for appeals to apply prospectively.

CBDT vide Instruction No. 3/2011 dated 09.02.2011 had revised the monetary limits of tax effect for filing appeals before, Tribunal, High Courts or Supreme Court. The para 11 of the said Instruction stated that it will apply to appeals filed on or after 09.02.2011 and the cases where appeals have been filed before 09.02.2011 it will be governed by the instructions on this subject, operative at the time when such appeal was filed.

Later vide letter dated 02.09.2011 the CBDT further clarified that As per Instruction No 3/2011 the revised monetary limit was applicable only for the appeals filed on or after 09/02/11 ie the date of issue of Instruction.

However the Delhi High Court summarily dismissed the appeals filed by the department prior to 09/02/2011 on the ground that the tax effect involved was less than the revised monetary limits of tax effect involved prescribed by the CBDT.

On this issue the Department had file SLP in the Hon’ble Supreme Court in the case of Surya Herbal came up for hearing before the Hon’ble Supreme Court on 29/08/11. The order passed by the Hon’ble Supreme Court directed that review petition be filed in High Court within two weeks with a prayer not to apply the Instruction No 3/2011 ipso facto in respect of appeals filed prior to 09/02/2011.

CBDT on 10^th December, 2015 issued a circular No. 21/2015 again revising the monetary limits for filing appeals. The para 10 of the said circular said that this instruction shall apply retrospectively to pending appeals.

Now, their Lordships while disposing off a bunch of appeals on the subjected held that the instruction/circular issued on 9.2.2011 directing withdrawal of low tax effect appeals applies only to appeals filed after that date and not to pending appeals.

The question raised in the said batch of Appeals was as to whether the instructions/circular issued by the Central Board of Direct Taxes on 9.2.2011 will have retrospective operation or not?

The Supreme Court observed that though the respondent relied upon circular dated 10th December, 2015 and specifically relied upon paragraph 10, the central board of direct taxes cannot issue any circular having retrospective operation.

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