ITO 25(3)(2), MUMBAI V. HI TECH ENGINEERS, MUMBAI

ITA 7347/MUM/2012

• Counselvise Citation: 734719914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2005-2006
• Appeal Filed On: 11-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Audit objection; Tax effect
• Section: 260A; 12A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, M UMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND B.R.BHASKARAN (AM ) . . , . . , ./I.T.A. NO.7347 & 7348/MUM/2012 ( / ASSESSMENT YEARS :2005-06 & 2008-09) INCOME TAX OFFICER 25 (3) (2) , C-11, ROOM NO.306, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA,(E) MUMBAI-400051 / VS. M/S HI TECH ENGINEERS, 26, JANSUKH NIWAS, KASTURBA ROAD KANDIVALI (W), MUMBAI-400067 ( % / APPELLANT) .. ( &% / RESPONDENT) ./ ./PAN/GIR NO. : AAAFH3990C % / APPELLANT BY : SHRI PITAMBAR DAS &% * /RESPONDENT : WRITTEN SUBMISSIONS DATED 15.2.2014 * - / DATE OF HEARING : 19.2.2014 * - /DATE OF PRONOUNCEMENT : 21.2.2014 / O R D E R PER BENCH THE DEPARTMENT HAS FILED THESE APPEALS FOR ASSESSM ENT YEARS 2005-06 & 2008- 09 AGAINST ORDER OF LD. CIT(A) BOTH DATED 14.9.20 12 ON COMMON GROUND OF DELETING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS.4,69,152/ - IN ASSESSMENT YEAR 2005-06 AND OF RS.570,725/- IN ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS STATI NG THAT THE TAX EFFECT IN EACH OF THE APPEAL FILED BY THE DEPARTMENT IS BELOW RS. 3 LAKHS I.E. RS.1,71,663/- IN ASSESSMENT YEAR 2005-06 AND OF RS.1,76,354/- IN ASSESSMENT YEA R 2008-09. IT IS STATED THAT IN VIEW OF CBDT INSTRUCTION NO.3 OF 2011 DATED 9.2.2011, THE APPEALS FILED BY THE DEPARTMENT ARE NOT MAINTAINABLE AND RELIANCE IS PLACED ON THE DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD (2009) 313 ITR 340(BOM). HOWEVER, LD. DR SUBMITTED THAT THE APPEALS HAVE CA SCADING EFFECT AND IN VIEW OF DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V/S SURYA HERBAL LTD.[2011] 14 I.T.A. NO.7347 & 7348/MUM/2012 2 TAXMANN.COM 142 (SC), THE CBDT INSTRUCTION NO.3 O F 2011 DATED 9.2.2011 DOES NOT APPLY IPSO FACTO. HE SUBMITTED THAT THE APPEALS B E ADJUDICATED ON MERITS. 3. WE HAVE CONSIDERED THE WRITTEN SUBMISSIONS OF A SSESSEE AS WELL AS THE SUBMISSIONS OF LD. DR ALONG WITH CBDT INSTRUCTION NO.3 OF 2011 DATED 9.2.2011 ALONG WITH THE ORDER OF HONBLE APEX COURT IN THE CASE O F SURYA HERBAL LTD (SUPRA). 4. AT THE OUTSET, WE MAY STATE THAT THE SAID DECISI ON OF THE HONBLE APEX COURT DOES NOT APPLY TO THE FACTS OF THESE APPEALS BEFOR E US. IN BOTH THE APPEALS, THE ISSUE INVOLVED DEPENDS ON FACTS AND NOT ON QUESTION OF L AW WHICH HAS CASCADING EFFECT IN SUBSEQUENT ASSESSMENT YEARS. THE ONLY ISSUE INVOLV ED IN BOTH THE APPEALS IS AS TO WHETHER THE ASSESSEE IS HAVING INTEREST FREE LOAN MORE THAN THE INTEREST FREE ADVANCES GIVEN BY IT. THEREFORE, WE CONSIDER THE APPEALS FI LED BY DEPARTMENT IN THE LIGHT OF CBDT INSTRUCTION 3 OF 2011, DATED 9.2.2011 AS TO WHETHER THEY ARE MAINTAINABLE OR NOT. THE RELEVANT CIRCULAR ISSUED BY CBDT READS A S UNDER: INSTRUCTION NO.3/2011(F:NO.279/MISC.142/2007-ITJ) DT.9.2.2011 REFERENCE IS INVITED TO BOARDS INSTRUCTION NO. 5/2008 DATED 15-5-2008 WHEREIN MONETARY LIMITS AND OTHER CONDITIONS FOR FILING DEP ARTMENTAL APPEALS (IN INCOME- TAX MATTERS) BEFORE APPELLATE TRIBUNAL, HIGH COURTS AND SUPREME COURT WERE SPECIFIED. 2. IN SUPERSESSION OF THE ABOVE INSTRUCTION, IT HAS BEEN DECIDED BY THE BOARD THAT DEPARTMENTAL APPEALS MAY BE FILED ON MERITS BE FORE APPELLATE TRIBUNAL, HIGH COURTS AND SUPREME COURT KEEPING IN VIEW THE MONETA RY LIMITS AND CONDITIONS SPECIFIED BELOW. 3. HENCEFORTH APPEALS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER: S. NO. 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 B EFORE SUPREME COURT 25,00,000 IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PRESCRIBED ABOVE . FILING OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE 4. FOR THIS PURPOSE, TAX EFFECT MEANS THE DIFFERE NCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE B EEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME I N RESPECT OF THE ISSUES I.T.A. NO.7347 & 7348/MUM/2012 3 AGAINST WHICH APPEAL IS INTENDED TO BE FILED (HEREI NAFTER REFERRED TO AS DISPUTED ISSUES). HOWEVER THE TAX WILL NOT INCLUDE ANY INTE REST THEREON, EXCEPT WHERE CHARGEABILITY OF INTEREST ITSELF IS IN DISPUTE. IN CASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UNDER DISPUTE, THE AMOUNT OF INTEREST SHA LL BE THE TAX EFFECT. IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOM E, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED ADDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDU CED IN THE ORDER TO BE APPEALED AGAINST. 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX E FFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES I N 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 DIS PUTED 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. IN OTHER WORDS, HENCEFORTH, AP PEALS CAN BE FILED ONLY WITH REFERENCE TO THE TAX EFFECT IN THE RELEVANT ASSESSM ENT YEAR. HOWEVER, IN CASE OF A COMPOSITE ORDER OF ANY HIGH COURT OR APPELLATE AU THORITY, WHICH INVOLVES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR, APPEAL SHALL BE FILED IN RESPECT OF ALL SUCH ASSESSMENT YEARS EVEN IF THE TAX EFFECT IS LESS THAN THE PRESCRIBED MONETARY LIMITS IN ANY OF THE YEAR(S), IF IT IS DECIDED TO FILE APPEAL IN RESPECT OF THE YEAR(S) IN WHICH TAX EFFECT EXCEEDS THE MONETARY LIMIT PRESCRIBED. IN CASE WHERE A COMPOSIT E ORDER/JUDGMENT INVOLVES MORE THAN ONE ASSESSEE, EACH ASSESSEE SHALL BE DEAL T WITH SEPARATELY. 6. IN A CASE WHERE APPEAL BEFORE A TRIBUNAL OR A CO URT IS NOT FILED ONLY ON ACCOUNT OF THE TAX EFFECT BEING LESS THAN THE MONET ARY LIMIT SPECIFIED ABOVE, THE COMMISSIONER OF INCOME-TAX SHALL SPECIFICALLY RECOR D THAT EVEN THOUGH THE DECISION IS NOT ACCEPTABLE, APPEAL IS NOT BEING FIL ED ONLY ON THE CONSIDERATION THAT THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPEC IFIED IN THIS INSTRUCTION. FURTHER, IN SUCH CASES, THERE WILL BE NO PRESUMPTIO N THAT THE INCOME-TAX DEPARTMENT HAS ACQUIESCED IN THE DECISION ON THE DI SPUTED ISSUES. THE INCOME- TAX DEPARTMENT SHALL NOT BE PRECLUDED FROM FILING A N APPEAL AGAINST THE DISPUTED ISSUES IN THE CASE OF THE SAME ASSESSEE FOR ANY OTH ER ASSESSMENT YEAR, OR IN THE CASE OF ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHE R ASSESSMENT YEAR, IF THE TAX EFFECT EXCEEDS THE SPECIFIED MONETARY LIMITS. 7. IN THE PAST, A NUMBER OF INSTANCES HAVE COME TO THE NOTICE OF THE BOARD, WHEREBY AN ASSESSEE HAS CLAIMED RELIEF FROM THE TRI BUNAL OR THE COURT ONLY ON THE GROUND THAT THE DEPARTMENT HAS IMPLICITLY ACCEP TED THE DECISION OF THE TRIBUNAL OR COURT IN THE CASE OF THE ASSESSEE FOR A NY OTHER ASSESSMENT YEAR OR IN THE CASE OF ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, BY NOT FILING AN APPEAL ON THE SAME DISPUTED ISSUES. T HE DEPARTMENTAL REPRESENTATIVES/COUNSELS MUST MAKE EVERY EFFORT TO BRING TO THE NOTICE OF THE TRIBUNAL OR THE COURT THAT THE APPEAL IN SUCH CASES WAS NOT FILED OR NOT ADMITTED ONLY FOR THE REASON OF THE TAX EFFECT BEING LESS TH AN THE SPECIFIED MONETARY LIMIT AND, THEREFORE, NO INFERENCE SHOULD BE DRAWN THAT T HE DECISIONS RENDERED THEREIN WERE ACCEPTABLE TO THE DEPARTMENT. ACCORDINGLY, THE Y SHOULD IMPRESS UPON THE TRIBUNAL OR THE COURT THAT SUCH CASES DO NOT HAVE A NY PRECEDENT VALUE. AS THE EVIDENCE OF NOT FILING APPEAL DUE TO THIS INSTRUCTI ON MAY HAVE TO BE PRODUCED IN COURTS, THE JUDICIAL FOLDERS IN THE OFFICE OF CSIT MUST BE MAINTAINED IN A SYSTEMIC MANNER FOR EASY RETRIEVAL. I.T.A. NO.7347 & 7348/MUM/2012 4 8. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISSU ES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT. (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVIS IONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR (B) WHERE BOARDS ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS B EEN ACCEPTED BY THE DEPARTMENT. 9. THE PROPOSAL FOR FILING SPECIAL LEAVE PETITION UNDER ARTICLE 136 OF THE CONSTITUTION BEFORE THE SUPREME COURT SHOULD, IN AL L CASES, BE SENT TO THE DIRECTORATE OF INCOME-TAX (LEGAL & RESEARCH), NEW D ELHI AND THE DECISION TO FILE SPECIAL LEAVE PETITION SHALL BE IN CONSULTATION WIT H THE MINISTRY OF LAW AND JUSTICE. 10. THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE SHALL NOT APPLY TO WRIT MATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME-TAX, FILIN G OF APPEALS IN OTHER DIRECT TAX MATTERS SHALL CONTINUE TO BE GOVERNED BY RELEVANT P ROVISIONS OF STATUTE AND RULES. FURTHER, FILING OF APPEAL IN CASES OF INCOME-TAX, W HERE THE TAX EFFECT IS NOT QUANTIFIABLE OR NOT INVOLVED, SUCH AS THE CASE OF R EGISTRATION OF TRUSTS OR INSTITUTIONS UNDER SECTION 12A OF THE IT ACT, 1961, SHALL NOT BE GOVERNED BY THE LIMITS SPECIFIED IN PARA 3 ABOVE AND DECISION TO FI LE APPEAL IN SUCH CASES MAY BE TAKEN ON MERITS OF A PARTICULAR CASE. 11. THIS INSTRUCTION WILL APPLY TO APPEALS FILED ON OR AFTER 9TH FEBRUARY 2011 . HOWEVER, THE CASES WHERE APPEALS HAVE BEEN FILED BE FORE 9TH FEBRUARY 2011 WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJEC T, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 12. THIS ISSUES UNDER SECTION 268A(1) OF THE INCOM E-TAX ACT, 1961. 5. SINCE THESE APPEALS HAVE BEEN FILED BY DEPARTMENT ON 11.2.2012 AND THE TAX EFFECT IN BOTH THE APPEALS IS OF RS.1,71.663/- AND RS.1,76,354/-, RESPECTIVELY, THE ABOVE INSTRUCTIONS OF CBDT ARE APPLICABLE AND THE APPEALS FILED BY DEPARTMENT ARE LIABLE TO BE DISMISSED AS THE TAX EFFECT IN THESE APPEALS ARE BELOW RS.3 LAKHS. 6. IN THE RESULT, THE APPEALS OF THE DEPARTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST FEBRUAR Y,2014 * 1 2 21ST FEBRUARY,2014 * SD SD ( . . / B.R.BHASKARAN ) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2 DATED 21/02/2014 I.T.A. NO.7347 & 7348/MUM/2012 5 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. % / THE APPELLANT 2. & % / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- CONCERNED 4. 7 / CIT CONCERNED 5. 8 &9 , - 9 , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) - 9 , /ITAT, MUMBAI