DCIT, Circle-3(2), Hyderabad, Hyderabad V. Sitara Technologies Private Limited, Hyderabad, Hyderabad

ITA 361/HYD/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2367 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHANI RAJU
• Keywords: Question of law; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A SMC : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA.NO. 361/HYD/2017 ASSESSMENT YEAR 2007 - 2008 DCIT, CIRCLE - 3(2), HYDERABAD. VS. M/S. SITARA TECHNOLOGIES PRIVATE LIMITED, 103, SURABHI NEST, 3 - 6 - 361/16, HIMAYAT NAGAR, HYDERABAD - 29. (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI P.S.R.V.V. SURYA RAO FOR REVENUE : SHRI PHANI RAJU , DR DATE OF HEARING : 23 .06.2017 DATE OF PRONOUNCEMENT : .06.2017 ORDER PER D. MANMOHAN, VP. THIS APPEAL IS FILED AT THE INSTANCE OF THE REVENUE AND IT PERTAINS TO THE ASSESSMENT YEAR 2007 - 2008. ADMITTEDLY, THE APPEAL WAS FILED ON 28.03.2017 ON THE GROUND THAT THE DECISION OF THE ITAT, SPECIAL BENCH, VISAKHAPATNAM WAS PLACED UNDER INTERIM SUSPENS ION BY THE HONBLE HIGH COURT OF JUDICATURE AT HYDERABAD AND IT DID NOT LA Y DOWN THE CORRECT LAW. IT IS ALSO NOT IN DISPUTE THAT THE TOTAL INCOME ASSESSED IN THIS CASE IS RS. 15,00,865/ - AND THE TAX THEREON, INCLUDING SURCHARGE AND EDUCATION CESS, IS ONLY RS. 5,05,192/ - AND ON THE DISPUTED AMOUNT, THE TAX EFFECT IS LESS THAN RS. 4 LAKHS. 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER THE CBDT CIRCULAR NO.21/2015, DATED 10.12.2015, AS MODIFIED BY THE CIRCULAR NO.5/2017, DATED 23.01.201 7, THE TAX AUTHORITIES ARE NOT ENTITLED TO FILE AN APPEAL, IF THE TAX EFFECT IS LESS THAN RS. 10 LAKHS, BEFORE THE TRIBUNAL AND EVEN IF AN APPEAL IS FILED, THE SAME HAS TO BE WITHDRAWN. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HONBLE BOMBAY HIGH CO URT IN NUMBER OF DECISIONS OBSERVED THAT THE CIRCULARS ARE BINDING ON REVENUE AND IT HAS TO SCRUPULOUSLY FOLLOW THE GUIDELINES ISSUED BY THE CBDT SINCE, THE INTENTION 2 OF THE GOVERNMENT WAS TO REDUCE THE TAX LITIGATION, HAVING NOTICED THE FACT THAT THE MAJO RITY OF THE CASES PENDING BEFORE THE APPELLATE AUTHORITIES ARE FILED AT THE INSTANCE OF THE REVENUE LEADING TO LITIGATION EXPLOSION / CLOGGING OF C O U R T S W I T H APPEALS. IN FACT, THE CIRCULAR HAS GONE ON TO THE EXTENT OF MENTIONING THAT LATEST CIRCULAR APPLIES EVEN TO T HE PENDING APPEALS. IT ALSO PUTS AN END TO OTHERWISE PREVAILING AN UNCERTAINTY FOR A BON A FIDE ASSESSEE. THE HANGING SW O RD OF TAX DEMAND FOR LARGE NUMBER OF YEARS AND UNCERTAINTY INHERENT IN THE DETERMINATION THEREOF AFFECTS THE TRADE AS ALSO THE INCOME T AX DEPARTMENT. IF IT HAS TO COLLECT PROPERLY, THE ATMOSPHERE OF UNCERTAINTY NEED NOT CONTINUE. THUS, GOING BY THE FUNDAMENTAL OBJECTIVE OF NOT FILING AN APPEAL BASED ON TAX EFFECT, THE APPEAL FILED BY THE REVENUE IN THIS CASE DESERVES TO BE WITHDRAWN. 3. ON THE OTHER HAND, LD DR SUBMITTED THAT IN THE CASE OF CIT VS. SHIVAJI WORKS LTD (IT APPEAL NO. 1241 OF 2000, DATED 06.07.2007), THE HONBLE BOMBAY HIGH COURT HAS CONSIDERED THE CIRCULAR DATED 24.10.2005 AND IN PARTICULAR PARA 3 THEREOF , WHILE HOLDING THA T THE LAW DECIDED BY THE HONBLE SUPREME COURT IS BINDING ON ALL THE AUTHORITIES BELOW IN WHICH EVENT, CIRCULAR SHOULD NOT COME IN THE WAY OF DISPOSING OF THE APPEALS. PARA 3 OF THE SAID CIRCULAR READS AS UNDER: - 3. THE BOARD HAS ALSO DECIDED THAT IN CASE S INVOLVING SUBSTANTIAL QUESTION OF LAW OF IMPORTANCE AS WELL AS IN CASES WHERE THE SAME QUESTION OF LAW WILL REPEATEDLY ARISE, EITHER IN THE CASE CONCERNED OR IN SIMILAR CASE, SHOULD BE SEPARATELY CONSIDERED ON MERITS WITHOUT BEING HINDERED BY THE MONETAR Y LIMITS. 4. JOINING THE ISSUE, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS PARAGRAPH HAS BEEN OMITTED IN THE SUBSEQUENT CIRCULAR , WHICH IMPLIES THAT EVEN IF IT IS A CASE INVOLVING SUBSTANTIAL QUESTION OF LAW OR QUESTION WHICH REP EATEDLY ARISE , SO LO NG AS THE TAX EFFECT IS BELOW RS. 10 LAKHS, THE REVENUE S H O U L D N O T PREFER AN APPEAL AS PER THE NEW CIRCULAR. THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF SHIVAJI WORKS LTD (SUPRA) WAS BASED ON THE PHRASEOLOGY USED IN THE PARA WHICH DOES NOT APPLY IN T HE INSTANT CASE. 5. I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS WELL SETTLED THAT THE CIRCULARS ISSUED BY THE CBDT U/S 119 OF THE INCOME TAX ACT, 1961 ARE BINDING ON THE REVENUE THOUGH NO T ON THE ASSESSEES. WITH REGARD TO THE BINDING NATURE OF THE CIRCULARS VIS - - VIS THE LOW TAX EFFECT, THE 3 HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. SUNNY SOUNDS P. LTD IN INCOME TAX REFERENCE NO. 213 OF 1997, DATED 08.01.2016 AND ALSO IN THE CA SE OF CIT VS. M/S. FERRO ALLOYS CORPORATION LTD, DATED 28.01.2016, WHEREIN THE COURT REFERRED TO EARLIER DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PITHWA ENGINEERING W ORKS [2005] 276 ITR 519 ETC., HE LD THAT THE REVENUE SHOULD NOT PR EFER AN APPEAL IF THE TAX EFFECT IS BELOW THE PRESCRIBED LIMIT AND EVEN IF THE SAME IS FILED, THE DEPARTMENT SHOULD PROCEED TO WITHDRAW IT. AS RIGHTLY POINTED OUT BY THE LD COUNSEL FOR THE ASSESSEE, THE CIRCULAR NO.21 OF 2015 DOES NOT EMPOWER THE REVENUE TO PREFER AN APPEAL M E R E L Y BECAUSE A SUBSTANTIAL QUESTIO N OF LAW ARISES IN A PARTICULAR MATTER. FURTHER, A S RIGHTLY POINTED BY THE LD COUNSEL FOR THE ASSESSEE, THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHIVAJI WORKS LTD (SUPRA) WAS RENDERED BASED ON THE LANGUAGE EMPLOYED IN PARA 3 BY THE CBDT IN ITS CIRCULAR DATED 24.10.2005, WHEREAS THE SAID PARAGRAPH WAS OMITTED IN THE SUBSEQUENT CIRCULAR, WHEREBY MERELY BECAUSE THERE IS SUBSTANTIAL QUESTION OF LAW, THE REVENUE SHOULD NOT PREFER A N APPEAL AND INCOME TAX AUTHORITIES, WHO ARE FUNCTIONING UNDER THE CBDT, CANNOT BYPASS THE CIRCULAR UNDER ANY CIRCUMSTANCE AND RATHER THEY ARE BOUND TO FOLLOW AND COMPLY WITH THE POLICIES LAID DOWN BY THE CBDT. AS STATED EARLIER, THE MAIN OBJECT WAS TO A VOID UNNECESSARY LITIGATIONS IN SMALL CASES AND THE SMALLNESS IS REFERRED TO IN TERMS OF TAX EFFECT INVOLVED AS OTHERWISE EVE N IN SMALL MATTERS APPEALS ARE FILED IN A ROUTINE M A N N E R , LEADING TO UNNECESSARY HARASSMENT TO AN ORDINARY ASSESSEE. SINCE, THE CIRCULAR I S ISSUED B Y R E V E N U E TO TAKE CARE OF THE GENERAL INTEREST OF THE TAX PAYING PUBLIC, THE SAME HAS TO BE FOLLOWED SCRUPULOUSLY, IN WHICH EVENT , THE APPEAL FILED IN THIS CASE DESERVES TO BE DISMISSED AS WITHDRAWN. HAVING REGARD TO THE CIRCUMSTANCES, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 6. ORDER PRONO UNCED IN THE OPEN COURT ON 2 3 R D JUNE, 2017. S D / - (D. MANMOHAN) VICE PRESIDENT HYDERABAD, DATED: 2 3 R D JUNE , 2017 4 OKK, SR.PS COPY TO 1. M/S. SITAR A TECHNOLOGIES PRIVATE LIMITED, 103, SURABHI NEST, 3 - 6 - 361/16, HIMAYAT NAGAR, HYDERABAD - 29. 2. DCIT, CIRCLE - 3(2), HYDERABAD. 3. CIT(A) - 3 , HYDERABAD. 4. PR. CIT - 3 , HYDERABAD. 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE