Is the CBDT instruction fixing monetary limit for appeals retrospective in nature?
It has been recently held in the case of Commissioner of Income Tax-II, Agra and another (Appellants) vs. Shyam Biri Works, Allahabad (Respondent), being Income Tax Appeal No.172 of 2004 that CBDT Instruction which has fixed monetary limit for appeals is not retrospective in nature.
The judgment was passed by the bench comprising of Hon’ble Tarun Agarwala, J. and Hon’ble Dr. Satish Chandra, J. on 6.5.2015.
Backgrounds of the case:
The appeal was related to the Assessment Year 1993-94. The appeal was presented on 24.12. 2004 based on the Instruction No.1979 dated 27.3. 2000 as the tax effect was over Rs.2 lacs.
When the appeal was taken up for hearing, an objection was raised by the learned counsel appearing on behalf of the respondent-assessee regarding maintainability of the appeal. Section 268A of the Income Tax Act as well as the Instructions No.3 of 2011 dated 9.2.2011 by the Central Board of Direct Taxes (CBDT) laying down the monetary limits for filing of appeals were referred.
The learned counsel appearing on behalf of the assessee contended that as per Instructions of 2011, the monetary limit for filing an appeal by the Revenue was fixed at Rs.10 lacs; as such the tax effect in the appeal being less than Rs.10 lacs, the appeal should be dismissed as the same was not maintainable.
Since the preliminary objection could affect pending appeals in the High Court, the appellate Court asked other counsels to argue on the issue.
Sri Bharat Agarwal, Sri Shambhu Chopra and Sri Govind Krishna, the learned counsels for the Department were heard on the issue. Thereafter Sri R.P. Agarwal, Sri Piyush Agarwal and Sri Suyash Agarwal, the learned counsels appearing on behalf of the assessee were also heard.
The arguments on behalf of the department:
The learned Senior Counsel for the Department repudiated the objection of the learned counsel for the assessee. The learned Senior Counsel argued that the instructions issued by CBDT only laid down the monetary limits for filing of the appeals which were to be filed and not those which had already been filed.
It was contended that the appeals already filed should be decided on merits irrespective of the fact that the tax effect was less than the limit provided in the latest instructions. It was urged that the right to file an appeal is a right granted under Section 260A of the Act which cannot be affected by Section 268A or by the instructions of the CBDT.
It was contended that the instructions are merely guidelines and are not mandatory for the department. The following decisions were relied upon:
1. Mrs. Hoosein Kasam Dada (India) Ltd. vs. The State of Madhya Pradesh and others, AIR 1953 SC 221, 2. Garikapati Veeraya vs. N. Subbiah Choudhry and others, AIR 1957 SC 540
It was also contended that the instructions were prospective in nature and hence were not applicable to pending appeals and that the language was clear on the point and the Court should not interpret the same in a different way.
The arguments on behalf of the assessee:
The counsels for the assessee urged that the instructions were issued pursuant to the National Litigation Policy which provided for review of pending cases in order to reduce the number of litigations in Courts so that courts could resolve other vital issues.
The underlying object under the policy was to dismiss frivolous appeals where the stakes were less than the amount framed by the authorities.
It was also urged that the instructions were beneficial and would be retrospective. It was also urged that the provisions relating to the right of appeal under Section 260A is presently regulated by Section 268A of the Act. The learned counsel placed reliance on various decisions.
It was held that the Instruction would also apply to appeals pending in Courts or Tribunals unless the appeal would have a cascading effect in other assessment years or it is within the exception provided in the instructions.
In view of the aforesaid, the appeal was dismissed based on the ground of monetary limit without expressing any opinion on the merits. It was also stated that it would be open to the department to proceed against the assessee later on in any other year if it is above the prescribed monetary limit.