Deputy Commissioner of Income Tax, Circle -5(1)(1), Bangalore V. M/s. Neobytes Software Solutions Private Limited, Bangalore

ITA 1021/BANG/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8608 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 10-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH G GHA R E
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT ITA NO. 1021/ BANG / 2019 ASSESSMENT YEAR : 2011 - 12 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 5(1)(1), BANGALORE. VS. M/S. NEOBYTES SOFTWARE SOLUTIONS PVT. LTD., NO.50, 1 ST MAIN ROAD, 9 TH CROSS, J P NAGAR 3 RD PHASE, BENGALURU 560 078. P AN: AACCN 50 27 F APP ELLANT RESPONDENT APP ELLANT BY : SHRI GANESH G. GHA R E, STANDING COUNSEL RESPONDENT BY : SHRI PRANAV KRISHNA, ADVO C ATE DATE O F HEARING : 29.08.2019 DATE OF PRONOUNCEMENT : 04 .0 9 .2019 O R D E R THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORD ER DATED 28.02.2019 OF THE CIT(APPEALS)-5, BENGALURU RELATING TO ASSESS MENT YEAR. 2. IN THE LIGHT OF THE CBDT CIRCULAR DATED 8.8.2019 , THE APPEAL BY THE REVENUE HAS TO BE DISMISSED AS THE TAX EFFECT IN TH IS APPEAL IS LESS THAN RS.50 LACS. THE ITAT AHMEDABAD A BENCH, IN THE CASE OF ITO WARD 3 (2), AHMEDABAD VS. DINESH MADHAVLAL PATEL AND 627 OTHER APPEALS VIDE ITS ORDER DATED 14.8.2019 ANALYZED THE AFORESAID CIRCUL AR OF CBDT AND HAS DISMISSED THE APPEALS OF THE REVENUE ON THE GROUND THAT THE TAX EFFECT IN ITA NO. 1021/BANG/2019 PAGE 2 OF 7 THE SAID APPEALS WAS BELOW RS.50 LACS. THE FOLLOWI NG WERE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL:- 2. IT IS IN THIS BACKDROP THAT WE ARE PLEASED TO TAKE NOTE OF A VERY PRAGMATIC AND TAXPAYER FRIENDLY POLICY DECISIO N BY THE GOVERNMENT OF INDIA FOR REDUCING THE INCOME TAX LIT IGATION. VIDE CBDT CIRCULAR DATED 8TH AUGUST, 2019, THE INCOME TA X DEPARTMENT HAS FURTHER LIBERALIZED ITS POLICY FOR NOT FILING A PPEALS AGAINST THE DECISIONS OF THE APPELLATE AUTHORITIES IN FAVOUR OF THE TAXPAYERS, WHEREIN TAX INVOLVED IS BELOW CERTAIN THRESHOLD LIM ITS, AND ANNOUNCED ITS POLICY DECISION NOT TO FILE, OR PRESS , THE APPEALS, BEFORE THIS TRIBUNAL, AGAINST THE APPELLATE ORDERS FAVOURABLE TO THE ASSESSEE IN THE CASES IN WHICH OVERALL TAX EFFECT, EXCLUDING INTEREST- EXCEPT WHEN INTEREST ITSELF IS IN DISPUTE, IS RS 50 ,00,000 OR LESS. WHAT IT MEANS, IN PLAIN WORDS, IS THAT WHEN A COMMI SSIONER (APPEALS) GIVES THE TAXPAYER TAX RELIEF OF UPTO RS 50 LAKHS IN AN APPEAL IN AN ASSESSMENT YEAR, THE MATTER ENDS THERE AND THE RELIEF SO GRANTED BY THE COMMISSIONER (APPEALS) CANNOT BE CHALLENGED BEFORE THIS TRIBUNAL, THAT WHEN THIS TRIBUNAL GIVES THE TAXPAYER RELIEF OF UPTO RS 1 CRORE IN AN APPEAL IN AN ASSESSMENT YE AR, THE MATTER ENDS THERE AND THE RELIEF SO GRANTED BY THE TRIBUNA L CANNOT BE CHALLENGED BEFORE THE HONBLE HIGH COURT, AND THAT WHEN HONBLE HIGH COURT GIVES RELIEF OF UPTO RS 2 CRORE TO THE T AXPAYER IN AN APPEAL IN AN ASSESSMENT YEAR, THAT RELIEF CANNOT BE CHALLENGED BEFORE HONBLE SUPREME COURT. THESE MONETARY THRESH OLD LIMITS FOR FILING OF APPEALS BY THE INCOME TAX AUTHORITIES DO NOT TAKE INTO ACCOUNT INTEREST AND OTHER COROLLARIES OF THE TAX D EMANDS BEING CONFIRMED SUCH AS PENALTIES, EXCEPT WHEN A PENALTY ITSELF IS SUBJECT MATTER OF LITIGATION, AND PROSECUTIONS. THE ENHANCE MENT OF THESE MONETARY LIMITS IS AT AN UNPRECEDENTED SCALE. THE M ONETARY LIMIT FOR APPEALS BEFORE THIS TRIBUNAL, WHICH WAS RS 3,00,000 TILL 10TH JULY 2014, HAS BEEN IN EFFECT ENHANCED TO ALMOST 1,700% IN THE LAST FIVE YEARS. THIS SUBSTANTIAL RELAXATION IS CERTAINLY A H UGE STEP WHICH SIGNIFIES TRUST REPOSED BY THE GOVERNMENT OF INDIA IN THE DECISIONS OF THE APPELLATE FORUMS, AND SUBSTANTIALLY CUTS DOWN T IME TAKEN IN THE FINALITY OF THE APPELLATE PROCESS. IT IS INDEED HEA RTENING TO NOTE THAT IN ONE STROKE, THE GOVERNMENT HAS NOT ONLY PREVENTE D, BUT HAS, IN EFFECT, SET THE STAGE FOR WITHDRAWAL OF THOUSANDS O F APPEALS BEFORE THIS TRIBUNAL AND BEFORE HONBLE COURTS ABOVE. IN A N ENVIRONMENT IN WHICH RETROSPECTIVITY WAS ATTACHED ONLY TO THE TAXA TION AND NOT TO TAX RELIEFS OR CONCESSIONS, SUCH AN APPROACH IS A PLEAS ANT DEPARTURE FROM LEGACY PRACTICES. ITA NO. 1021/BANG/2019 PAGE 3 OF 7 3. IN VIEW OF THE ABOVE FACTUAL BACKGROUND AND THE GENEROUS CONCESSION BY THIS BENEVOLENT CBDT CIRCULAR, ALL TH ESE APPEALS MUST BE DISMISSED AS WITHDRAWN AND THE RELATED CROSS OBJ ECTIONS MUST BE DISMISSED AS INFRUCTUOUS. THERE IS, HOWEVER, A SMAL L ISSUE THAT WE MUST DEAL WITH. 4. SMT APARNA AGARWAL, LEARNED DEPARTMENTAL REPRESE NTATIVE, HOWEVER, HAS A POINT TO MAKE. SHE POINTS OUT THAT T HE CIRCULAR DATED 8TH AUGUST 2019 IS NOT CLEARLY RETROSPECTIVE INAS MUCH AS IT SPECIFICALLY STATES IN PARA 4 THAT (T)HE SAID MODI FICATIONS SHALL COME INTO EFFECT FROM THE DATE OF ISSUE OF THIS CIRCULAR . IT IS THUS POINTED OUT THAT THIS SENTENCE GIVES AN IMPRESSION THAT IS ONLY AFTER THE DATE OF THE SAID CIRCULAR THAT THE DEPARTMENTAL APPEALS WILL NOT BE FILED IN THE CASES WITHIN THE SPECIFIED TAX EFFECT LIMITS. W E ARE URGED TO BEAR IN MIND THE IMPACT OF THIS OBSERVATION WHILE GIVING EFFECT TO THE CIRCULAR DATED 8TH AUGUST, 2019. SHE, HOWEVER, HAST ENS TO ADD THAT SHE IS YET TO HAVE ANY SPECIFIC INSTRUCTIONS ON THE ISSUE AND SHE LEAVES IT FOR THE BENCH TO TAKE THE APPROPRIATE CAL L. LEARNED REPRESENTATIVES APPEARING FOR THE TAXPAYERS VEHEMEN TLY OPPOSE THE SUGGESTION IMPLICIT IN HER SUBMISSIONS. ALL OF THEM ARE UNANIMOUS IN THEIR ARGUMENT THAT THE CIRCULAR MUST BE HELD TO HA VE RETROSPECTIVE APPLICATION AND MUST EQUALLY APPLY TO THE PENDING A PPEALS AS WELL. SHRI J P SHAH, SENIOR ADVOCATE, POINTS OUT THAT THE CIRCULAR DATED 8TH AUGUST 2019 IS NOT A STANDALONE CIRCULAR AND IT IS REQUIRED TO BE READ WITH THE OLD CIRCULAR NO. 3 OF 2018 WHICH IS W HAT IT SEEKS TO MODIFY. THIS CIRCULAR, ACCORDING TO THE LEARNED COU NSEL, ONLY ENHANCES THE MONETARY LIMITS AND GIVES FURTHER RELA XATION. HE URGES US NOT TO READ THE CIRCULAR IN A MANNER SO AS TO NU LLIFY THE UNDERLYING APPROACH AND OBJECT OF REDUCING LITIGATION. SHRI SO PARKAR, LEARNED SENIOR ADVOCATE, SUBMITS THAT ALL THAT THE PRESENT CIRCULAR DOES IS TO MODIFY THE MONETARY LIMITS AND NOTHING MORE, AND, T HEREFORE, IT CANNOT BE TREATED TO FOLLOW ANY OTHER APPROACH OTHE R THAN THE APPROACH FOLLOWED IN THE OLD CIRCULAR. THE OLD CIRC ULAR, BEYOND ANY DISPUTE OR CONTROVERSY, CATEGORICALLY APPLIED TO TH E PENDING APPEALS AS ON THE DATE OF ISSUANCE OF CIRCULAR. SHRI TUSHAR HEMANI, LEARNED SENIOR ADVOCATE, POINTS OUT THAT THE CIRCULAR DATED 8TH AUGUST 2019 ONLY GIVES FURTHER RELIEF NOT ONLY IN TERMS OF THE MONETARY LIMITS BUT ALSO IN TERMS OF THE MANNER IN WHICH THE APPLICATIO N OF CIRCULAR TO ORDERS DEALING WITH MORE THAN ONE YEAR IS TO MADE. SHRI S N DIVETIA, LEARNED COUNSEL FOR THE ASSESSEE, SUBMITS THAT UNLI KE IN THE CASES OF EARLIER CBDT CIRCULARS, WHICH USED TO BE IN SUPERSE SSION OF EARLIER CIRCULARS ON THE ISSUES, THE CIRCULAR DATED 8TH AUG UST 2019 ONLY MODIFIES THE EARLIER CIRCULAR WHICH, INTER ALIA, PR OVIDED FOR ITS RETROSPECTIVE APPLICATION. OUR ATTENTION IS INVITED TO SOME JUDICIAL PRECEDENTS IN SUPPORT OF THE CONTENTION THAT THE BE NEVOLENT CIRCULAR, ITA NO. 1021/BANG/2019 PAGE 4 OF 7 SUCH AS THE ONE IN QUESTION, IS TO BE GIVEN EFFECT IN RESPECT OF THE PENDING APPEALS AS WELL. MS URVASHI SHODHAN, LEARNE D COUNSEL FOR THE ASSESSEE, POINTS OUTS THAT ITS PLAINLY CONTRARY TO THE SCHEME OF THE LITIGATION POLICY OF THE GOVERNMENT OF INDIA TO GIVE THIS CIRCULAR ONLY PROSPECTIVE EFFECT. SHRI S K SADHWANI, LEARNED COUNSEL FOR THE ASSESSEE, INVITES OUR ATTENTION TO THE LETTER DATED 16TH JULY 2018 ISSUED BY MEMBER CBDT TO THE ALL THE PRINCIPAL CHIE F COMMISSIONERS OF INCOME TAX, IN THE CONTEXT OF CIRC ULAR DATED 11 TH JULY 2018 THAT THE PRESENT CIRCULAR SEEKS TO MODIFY , SEEKING REPORT ON WITHDRAWAL OF THE APPEALS COVERED BY THE CIRCULA R. HE THEN POINTS OUT THAT IT IS THE OLD CIRCULAR IS STILL ALIVE TODA Y AND THE ONLY CHANGE IS WITH RESPECT TO THE MONETARY LIMITS. IN ALL FAIRNES S, THEREFORE, THE SAME APPROACH REGARDING WITHDRAWAL OF PENDING APPEA LS MUST BE FOLLOWED FOR THIS CIRCULAR AS WELL. ON THE SAME LIN ES, ARGUMENTS ARE ADVANCED BY THE LEARNED REPRESENTATIVES WHICH, FOR THE SAKE OF BREVITY AND TO AVOID REPETITION, WE ARE NOT REFERRI NG TO IN MORE SPECIFIC DETAILS. IN BRIEF REJOINDER, LEARNED DEPAR TMENTAL REPRESENTATIVE GRACIOUSLY LEAVES THE MATTER TO US. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND HAVI NG PERUSED THE MATERIAL ON RECORD, WE DO NOT HAVE SLIG HTEST OF HESITATION IN HOLDING THAT THE CONCESSION EXTENDED BY THE CBDT NOT ONLY APPLIES TO THE APPEALS TO BE FILED IN FUTURE BUT IT IS ALSO EQUALLY APPLICABLE TO THE APPEALS PENDING FOR DISPOSAL AS ON NOW. OUR LINE OF REASONING IS THIS. THE CIRCULAR DA TED 8TH AUGUST 2019 IS NOT A STANDALONE CIRCULAR. IT IS TO BE READ IN CONJUNCTION WITH THE CBDT CIRCULAR NO 3 OF 2018 (AND SUBSEQUENT AMEN DMENT THERETO), AND ALL IT DOES IS TO REPLACE PARAGRAPH N OS. 3 AND 5 OF THE SAID CIRCULAR. THIS IS EVIDENT FROM THE FOLLOWING E XTRACTS FROM THE CIRCULAR DATED 8TH AUGUST 2019: 2. AS A STEP TOWARDS FURTHER MANAGEMENT OF LITIGATION. IT HAS BEEN DECIDED BY THE BOARD THAT MONETARY LIMITS FOR FILING OF APPEALS IN INCOME-TAX CASES BE ENHANCED FURTHER THROUGH AMENDMENT IN PARA 3 OF THE CIRCULAR MENTIONED ABOVE AND ACCORDINGLY. THE TABLE FOR MONETARY LIMITS SPECIFIE D IN PARA 3 OF THE CIRCULAR SHALL READ AS FOLLOWS: S.NO. APPEALS/SLPS IN INCOME-TAX MATTERS MONETA RY LIMIT (RS.) 1 BEFORE APPELLATE TRIBUNAL 50,00,000 2 BEFORE HIGH COURT 1,00,00,000 3 BEFORE SUPREME COURT 2,00,00,000 ITA NO. 1021/BANG/2019 PAGE 5 OF 7 3. FURTHER, WITH A VIEW TO PROVIDE PARITY IN FILING OF APPEALS IN SCENARIOS WHERE SEPARATE ORDER IS PASSED BY HIGHER APPELLATE AUTHORITIES FOR EACH ASSESSMENT YEAR VIS-A-VIS WHERE COMPOSITE ORDER FOR MORE THAN ONE ASSESSMENT YEARS IS PASSED. PAR A 5 OF THE CIRCULAR IS SUBSTITUTED BY THE FOLLOWING PARA: 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX EFFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN THE CASE OF EVERY ASSESSEE. IF IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN MORE THAN ONE ASSESSMENT YEAR, APPEAL CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MONETARY LIMIT SPECIFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RESPECT OF AN ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. FURTHER, EVEN IN THE CASE OF COMPOSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTHORITY WHICH INVOLVES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR NO APPEAL SHALL BE FILED IN RESPECT OF AN ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. IN CASE WHERE A COMPOSITE ORDER/ JUDGEMENT INVOLVES MORE THAN ONE ASSESSEE, EACH ASSESSEE SHALL BE DEALT WITH SEPARATELY 4. THE SAID MODIFICATIONS SHALL COME INTO EFFECT FROM THE DATE OF ISSUE OF THIS CIRCULAR. 6. CLEARLY, ALL OTHER PORTIONS OF THE CIRCULAR NO. 3 OF 2018 (SUPRA) HAVE REMAINED INTACT. THE PORTION WHICH HAS REMAINE D INTACT INCLUDES PARAGRAPH 13 OF THE AFORESAID CIRCULAR WHI CH IS AS FOLLOWS: 13. THIS CIRCULAR WILL APPLY TO SLPS/ APPEALS/ CROSS OBJECTIONS/ REFERENCES TO BE FILED HENCEFORTH IN SC/HCS/TRIBUNAL AND IT SHALL ALSO APPLY RETROSPECTIVELY TO PENDING SLPS/ APPEALS/ CROSS OBJECTIONS/REFERENCES. PENDING APPEALS ITA NO. 1021/BANG/2019 PAGE 6 OF 7 BELOW THE SPECIFIED TAX LIMITS IN PARE 3 ABOVE MAY BE WITHDRAWN/ NOT PRESSED. 7. IN VIEW OF THE ABOVE DISCUSSIONS, WE HEREBY HOL D THAT THE RELAXATION IN MONETARY LIMITS FOR DEPARTMENTAL APPE ALS, VIDE CBDT CIRCULAR DATED 8TH AUGUST 2019 (SUPRA) SHALL BE APP LICABLE TO THE PENDING APPEALS IN ADDITION TO THE APPEALS TO BE FI LED HENCEFORTH. 8. LEARNED COMMISSIONER (DR) THEN SUBMITS LIBERTY MAY KINDLY BE GIVEN TO POINT OUT, UPON NECESSARY FURTHER VERIF ICATIONS, AND TO SEEK RECALL THE DISMISSAL OF APPEALS AND RESTORATIO N OF THE APPEALS IN THE CASES (I) IN WHICH IT CAN BE DEMONSTRATED THAT THE APPEALS ARE COVERED BY THE EXCEPTIONS, AND (II) WHICH ARE INADV ERTENTLY INCLUDED IN THIS BUNCH OF APPEALS, WHEREIN THE TAX EFFECT, I N TERMS OF THE CBDT CIRCULAR (SUPRA), EXCEEDS RS 50,00,000. NONE O PPOSES THIS PRAYER; WE ACCEPT THE SAME. WE MAKE IT CLEAR THAT T HE APPELLANTS SHALL BE AT LIBERTY TO POINT OUT THE CASES WHICH AR E WRONGLY INCLUDED IN THE APPEALS SO SUMMARILY DISMISSED, EITHER OWING TO WRONG COMPUTATION OF TAX EFFECT OR OWNING TO SUCH CASES B EING COVERED BY THE PERMISSIBLE EXCEPTIONS- OR FOR ANY OTHER REASON , AND WE WILL TAKE APPROPRIATE REMEDIAL STEPS IN THIS REGARD. 9. IN THE LIGHT OF THE ABOVE DISCUSSIONS, ALL THE APPEALS STAND DISMISSED AS WITHDRAWN. AS THE APPEALS FILED BY THE REVENUE ARE FOUND TO BE NON-MAINTAINABLE AND AS ALL THE RELATED CROSS-OBJECTIONS OF THE ASSESSEE ARISE ONLY AS A RESULT OF THOSE APP EALS AND MERELY SUPPORT THE ORDER OF THE CIT(A), THE CROSS OBJECTIO NS FILED BY THE ASSESSEE ARE ALSO DISMISSED AS INFRUCTUOUS. ORDERED , ACCORDINGLY. 3. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF TH E TRIBUNAL, WE DISMISS THE APPEAL OF THE REVENUE. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF SEPTEMBER, 2019. SD/- ( N.V. VASUDEVAN ) VICE PRE SIDENT BANGALORE, DATED, THE 4 TH SEPTEMBER, 2019. / D ESAI S MURTHY / ITA NO. 1021/BANG/2019 PAGE 7 OF 7 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.