Department can file appeal notwithstanding Monetary Limits if issue decided by the CIT-Appeals or Tribunal is contrary to the judgments of the Supreme Court-High Court
ABCAUS Case Law Citation:
ABCAUS 2119 (2017) (11) HC
Under the Income Tax Act, 1961 (the Act), section 268A authorises the Central Board of Direct taxes (CBDT) to issue orders, instructions or directions to other income-tax authorities by way of fixing appropriate monetary limits, for the purpose of filing of appeal or application for reference by any income-tax authority. It has been further provided that the Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions so issued.
Also, section 199 The CBDT may issue appropriate orders, instructions and directions to other income-tax authorities for the proper administration of the Act, and such authorities and all other persons employed in the execution of the Act shall observe and follow such orders, instructions and directions of the Board.
In 2011, CBDT issued Instruction No. 3/2011 under section 268A. By the said instruction, the CBDT, in order to reduce the litigation, revised the monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and Supreme Court as under:
|Appeals in Income-tax matters||
Monetary Limit (In Rs.)
|1||Appeal before Appellate Tribunal||3,00,000/-|
|2||Appeal u/s 260A before High Court||10,00,000/-|
|3||Appeal before Supreme Court||25,00,000/-|
In 2005, the CBDT vide Instruction No. 21/2015, further revised the monetary limits for filing of appeals as under
|S. No.||Appeals in Income-tax matters||Monetary Limit (In Rs.)|
|1||Appeal before Appellate Tribunal||10,00,000/-|
|2||Appeal u/s 260A before High Court||20,00,000/-|
|3||Appeal before Supreme Court||25,00,000/-|
In the instant case, the issue before the Hon’ble High Court was whether the Department can act contrary to the Circular/Instruction issued by the CBDT u/s 268A of the Act, fixing the monetary limits for filing appeals by income tax authorities.
The Hon’ble High Court, by way of reference had framed the following reference for consideration by the larger Bench,
“Whether the Department can take a contrary view than the circular which has been issued for reduction of arrears in the Supreme Court, High Courts and Tribunals and insist for arguing the matter on merit.”
The Department relied on plethora of judgments pronounced by the Hon’ble Supreme Court. The main plank of the defence of the Department was that Circulars and instructions issued by the Board though binding on the income tax authorities but when the Supreme Court or the High Court declares the law on the question arising for consideration, the circular shall have no effect but the view expressed in a decision of Supreme Court or the High Court. It was urged that if the Tribunal takes a view contrary to the judgments of the Apex Court then the appeal should be held maintainable irrespective of value of the tax effect. A contrary view would be against the Article 141 of the Constitution which provides that the law declared by the Supreme Court shall be binding on all courts within the territory of India.
The Hon’ble High Court observed that the intention of the legislation is to reduce the pendency of the tax appeal and to have a uniform policy for the department through-out the Country, therefore, the direction issued by the CBDT is binding on all subordinate officers and Section 268A(4). The intention of the legislation is very clear to prohibit the appeal analogous to the provisions of Code of Civil Procedure where there is a prohibition that appeal upto the value will not be entertained by the Court.
The Hon’ble High Court observed that in view of majority of High Court decisions if two views are possible, then one view which is in favour of the assessee is required to be upheld.
It was observed that section 263 and 154 of the Act contains enough powers to meet the ends of justice and writ can also be filed by the department if it is a gross case decided by any officer or authority but to that extent the appeal is not maintainable and would amount to give over riding effect to the statutory provisions.
It was observed that the Courts are flooded with litigation where the State Government and Central Government or the Department or Corporation are the largest litigants, therefore, frivolous litigation is curb for larger interest of avoiding more Tribunals or Courts to decide the matters on merits. Therefore, when the legislation had thought it fit to put some prohibition on the department, in our considered opinion the issue is required to be answered in favour of the assessee and against the department inasmuch as the circular of the CBDT is binding on the subordinate officers.
It was observed that if an issue has been decided by the Apex Court then the ratio propounded therein is to be applied as a precedence. If the Tribunal or the CIT (Appeals) takes a view contrary to the settled law then rider imposed by the CBDT on filing of appeal cannot be applied. If it is held that appeal would not be maintainable even if the Tribunal or the CIT (Appeals) has taken view contrary to the judgment of the Supreme Court then Article 141 of the Constitution of India would be violated. No statutory provision can stand or be read contrary to the constitutional provision.
The Hon’ble High Court opined that Circular of the CBDT are to be read in consonance to the provisions of the Constitution of India otherwise it would not only cause judicial indiscipline but give rise to the anarchy, leading to serious consequences.
The Circular issued by the CBDT under Section 268A of the Act held as binding on the Department and appeal cannot be filed, if it is barred. It was, however, clarified that if the issue decided by the CIT (Appeals) or Tribunal is contrary to the judgments of the Supreme Court, the Department can prefer an appeal, however, care would be taken to file it only in those cases where the order passed by the CIT (Appeals) or the Tribunal is contrary to the ratio propounded by the Supreme Court on the same issue. The Department may incorporate it in the Circular to avoid further controversy.