The DCIT, Circle-3(1), Vadodara V. M/s. Mahaveer Metal Co., Vadodara

MA 109/AHD/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 5467 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 14 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 14-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N DIVETIA
• Keywords: Audit objection; Tax effect

Judgement Text

M.A. NO.1 09 /AHD/ 201 6 ASSESSMENT YEAR : 20 0 9 - 09 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR , AM AND S.S. GODARA , JM] M.A. NO.1 09 /AHD/2016 (IN ITA NO. 3015 / AHD / 2 0 1 4 ASSESSMENT YEAR: 2 00 8 - 09 DY. COMMISSIONER OF INCOME TAX , .... ...... .......... APPELLANT CIRCLE - 8, AHMEDABAD. VS. MAHAVEER METAL CO., .......... . RESPONDENT I - 37, SAPTGIRI DUPLEX, OPP. TAJ RESIDENCY, AKOTA MAIN ROAD, VADODARA . [PAN: AA OFM 8942 R ] APPEARANCES BY: S.N. DIVETIA FOR THE APPELLANT MUDIT NAGPAL FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 18.08 . 2017 DATE OF PRONOUNCING THE ORDER : 28 . 08.2017 O R D E R PER PRAMOD KUMAR, AM: 1. THIS IS A RECTIFICATION PETITION FIL ED BY THE ASSESSING O FFICER AND IT SEEKS RE CALL OF ORDER DATED 15.12.2015 PASSED BY THIS TRIBUNAL ON THE GROUND THAT WHILE THE DEPARTMENTAL APPEAL WAS DISMISSED ON THE GROUND OF TAX EFFECT BEING LESS THAN RS.10 LAKHS, IT DID NOT TAKE INTO ACCOUNT THE FACT THAT IN THIS CASE REVENUE AUDIT OBJECTION W AS ACCEPTED BY THE DEPARTMENT. 2. THE A PPLICANT POINTS OUT THAT THE DEPARTMENTAL A PPEAL WAS DISMISSED VIDE ORDER DATED 15. 12.2015 ON THE GROUND THAT TAX EFFECT INVOLVED IN THE PRESENT APPEAL IS LESS M.A. NO.1 09 /AHD/ 201 6 ASSESSMENT YEAR : 20 0 9 - 09 PAGE 2 OF 6 THAN RS.10 LAKHS I N THE LIGHT OF C IRCULAR N O.21/2015 DAT ED 10.12.2015. I T IS, HOWEVER, ALSO POINT ED OUT THAT IN PARA 8 OF THE SAID CIRCULAR IT IS INTER ALIA STATED THAT A DVERSE JUDGEMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN T HE MONETARY LIMITS SPECIFIED AND THE E XCEPTIONS ARE AS FOLLOWS : - (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR (B) WHERE BOARD S ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEG AL OR ULTRA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT, OR (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN ASSETS/ BANK ACCOUNTS. 3. OUR ATTENTION WAS EVEN INVITED TO THE FACT THAT IN THIS CASE TH E R EVENUE AUDIT PARTY VIDE OBJECTION NO.ITRA/P.NO.VI/AQ - 5 DATED 12.10.2011 FOR A.Y. 2008 - 09 HAD RAISED OBJECTION THAT THE ASSESSEE HAD GRANTED REMUNERATION TO PARTNERS AMOUNTING TO RS.54,42,532/ - BY INCLUDING INTEREST INCOME OF RS.25,45,660/ - IN COMPUTING THE BOOK PROFIT AND REMUNERATION TO T HE PARTNERS INSTEAD OF THE ADMISSIBLE REMUNERATION OF RS.44,24,268/ - . THUS , AN EXCES S REMUNERATION OF RS.10,18,264/ - WAS PAID TO PARTNERS. THIS OBJECTION WAS ACCEPTED BY THE DEPARTMENT. THE A PPLICANT CONTENDS THAT IN VIEW OF THE FACT THAT THE DEPARTMENTAL OBJECTION OF THE REVENUE AUDIT PARTY WAS ACCEPTED IT IS A FIT CASE IN WHICH APPEAL COULD NOT BE DISMISSED ON THE GROUND THAT TAX EFFECT INVOLVED IS LESS THAN RS.10 LAKHS . HE HAS THUS URGED TO RECALL THE ORDER DATED 15.12.2015 AND HEAR THE MATTER ON MERITS. M.A. NO.1 09 /AHD/ 201 6 ASSESSMENT YEAR : 20 0 9 - 09 PAGE 3 OF 6 4. LEARNED COUNSEL FOR THE ASSESSEE DOES NOT DISPUTE THE FACT T HAT THE REVENUE AUDIT OBJECTION WAS RAISED IN THE PRESENT CASE AND THE SAME W A S ACCEPTED BY THE DEPARTMENT. HE, HOWEVER, CONTENDED THAT MER E FACT T HAT REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE DEPARTMENT CANNOT BE REASON ENOUGH FOR PURSUING THE MA T TER ON MERITS BEFORE THE T RIBUNAL. HE SUBMITS THAT VIDE SUBSEQUENT C IRCULAR DATED 23.01.2017 CBDT HAS CLARIFIED THE ABOVE POSITION BY STATING AS FO LLOWS : - INSTRUCTIONS WERE ISSUED VIDE CBDT CIRCULAR NO.21/2015 DATED 10.12.2015, TO THE EFFECT THAT APPEALS/SLPS SHOULD NOT BE FILED IN CASES WHERE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS SPECIFIED UNDER PARA 3 OF THE SAID CIRCULAR, IT WAS ALSO CL ARIFIED THEREIN THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PRESCRIBED IN THE SAID CIRCULAR. 2. IN PARA 8 OF THE AFORESAID CIRCULAR NO.21/2015, IT HAS BEEN UNAMBIGUOUSLY AND EXPRESSLY PROVIDED TH AT ADVERSE JUDGEMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN CIRCULAR OR EVEN IF THERE IS NO TAX EFFECT: A. WHERE THE CONSTITUTIONAL VAL IDITY OF THE PROVISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR B. WHERE BOARD'S ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR C. WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPAR TMENT D. WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN ASSETS/BANK ACCOUNTS. THE DIRECTION TO 'CONTEST ON MERITS' NEGATES THE MECHANICAL FILING OF APPEALS IN THESE CASES. 3. HOWEVER, IT HAS BEEN NOTICED THAT PARA 8 (C) OF CIRCULAR NO.21/2015, REGARDING CASES WHERE ADDITION MADE ON ACCOUNT OF REVENUE AUDIT OBJECTION IS DELETED, IS BEING ERRONEOUSLY INTERPRETED AND APPEALS ARE BEING MECHANICALLY FILED BY THE DEPARTMENT WITHOUT PROPER EXAMINATION OF THE CASE ON MERITS. THIS IS CONTRARY TO THE INS TRUCTIONS CONTAINED IN CIRCULAR NO.21/2015 AND CIRCULAR NO.8/2016. IT IS, THEREFORE, CLARIFIED THAT THE IMPORT AND IN TE NT OF PARA 8 OF THE CIRCULAR NO.21/20L5 IS THAT EVEN ON ISSUES MENTIONED IN THE SAID P ARA, APPEALS AGAINST THE ADVERSE JU DGEMENT SHOULD O NLY BE FILED ON MERITS. M.A. NO.1 09 /AHD/ 201 6 ASSESSMENT YEAR : 20 0 9 - 09 PAGE 4 OF 6 4. ACCORDINGLY, HENCEFORTH, APPEALS SHOULD NOT BE FILED BY THE DEPARTMENT IN VIOLATION OF INSTRUCTIONS MENTIONED ABOVE. FURTHER, APPEALS THAT MAY HAVE BEEN FILED IN VIOLATION OF THESE INSTRUCTIONS MAY BE WITHDRAWN. 5. THE A BOVE MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. 5. LEARNED COUNSEL , ON THE BASIS OF ABOVE CIRCULAR, CONTENDS THAT EVEN IN THE SITUATION IN WHICH REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE INCOME TAX AUTHORITIES , THE DECISION TO PURSUE OR NOT TO PURSUE WILL HAVE TO BE TAKEN ON MERIT IN E A CH CASE. IN OTHER WO R DS, ACCORDING TO THE LEANED COUNSEL , EVEN WHEN THE REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE DEPARTMENT IT IS ONLY AFTER THE SATISFACTION OF THE C OMMI SSIONER THAT THE I NCOME T AX DEPAR TMENT HAS THE STRONG C A SE THAT APPEAL CAN BE PURSUED FOR ADJUDICATION ON MERITS. HE SUBMITS THAT NO SUCH SITUATION IS INDICATED IN THE PRESENT CASE. LEARNED COUNSEL FURTHER INVITES OUR ATTENT ION TO CERTAIN JUDICIAL PRECEDENTS , WHICH FOR THE REASONS WE WI LL SET OUT IN A SHORT WHILE, WE NEED NOT REFER AT THIS STAGE, WHICH ARE IN FAVOUR OF THE ASSESSEE ON MERITS. IT IS SUBMITTED T HAT WHEN THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE ON MERITS BY BINDING JUDICIAL PRECEDENTS THERE CANNOT BE ANY GOOD REASON TO PURSUE THE MATTER IN APPEAL FOR ADJUDICATION ON MERITS. IN TH ESE CIRCUMSTANCES , ACC OR DING TO LEARNED COUNSEL, RECALL OF THIS O R DER WILL LEAD TO MULTIPLICITY OF PROCEEDINGS. HE THUS URGED US NOT TO RECALL THE ORDER AS THERE IS NOTHING TO SHOW OR EVEN T O SUGGEST THAT APPLICANT IS OF THE VIEW THAT HE HAS A CASE ON MERIT S . 6. IN THE BRIEF REJOINDER, LEARNED D EPARTMENTAL R EPRESENTATIVE SUBMITS THAT IT IS NOT FOR T H E ASSESSEE TO DECIDE AS TO WHETHER THE I NCOME T AX DEPARTMENT SHOULD PURSUE THIS APPEAL ON MER IT S OR NOT , AND THAT CALL HAS TO BE TAKEN BY THE AUTHORITIES CONCERNED ONLY . HE NEVERTHELESS FAIRLY ACCEPTS THAT THERE IS NOTHING MORE THAN THE F A CT THAT T HE REV ENUE AUDIT OBJECTION HAS BEEN ACCEPTED IN THE PRESENT CASE AND AS SUCH THERE IS NO M.A. NO.1 09 /AHD/ 201 6 ASSESSMENT YEAR : 20 0 9 - 09 PAGE 5 OF 6 SATISFACTIO N OF THE I NCOME T AX AUTHORITIES TO THE EFFECT THAT IT IS A CASE WHICH DESERVE S TO BE PROCESSED EVEN WHEN THE TAX EFFECT IS LESS THAN RS . 10 LAKHS. HE , HOWEVER , CONTENDS THAT NO SUCH CALL IS NECESSARY AT PRESENT BECAUSE RIGHT NOW HE IS ONLY SEEKING RECALL O F THE T RIBUNAL S ORDER DISMISSING THE APPEAL SUMMARILY. THE DECISION AS TO WHETHER THE APPEAL IS TO BE PURSUED CAN ONLY BE TAKEN AFTER THE SAID DISMISSAL ORDE R IS RECALLED . HE THUS URGES US TO RECALL T RIBUNAL S ORDER DATED 15.12 .2015 7. WE HAVE HEARD TH E RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 8. WE SEE MERITS IN THE PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE. IN ORDER THAT A N APPEAL CAN BE PURSUED ON MER IT S BY THE I NCOME T AX AUTHORITIES IN A CASE WHERE TAX EFFECT IS LESS THAN RS . 10 LAKHS IT IS NOT SUFFICIENT THAT THE REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE DEPARTMENT. IN SUCH A CASE, EVEN AFTER ACCEPTANCE OF THE REVENUE AUDIT OBJECTION , THE MATT ER HAS TO BE EXAMINED ON MERITS BY THE AUTHORITIES CONCERNED TO TAKE A CONSCIOUS CALL AS T O WHETHER OR NOT SUCH AN APPEAL IS ACTUALLY WORTH PURSUING. IN OTHER WORDS , SIMPLY BECAUSE REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE REVENUE AUTHORITIES DO E S MAKE DEPARTMENTAL APPEAL INVOLVING TAX EFFECT LESS THAN RS.10 LAKHS WHICH ARE REQUIRED TO BE PURSUED ON MERIT S . IN SUCH A SITUATION, A CONSCIOUS CALL FOR PURSUING THE APPE A L ON MERITS IS REQUIR E D TO BE TAKEN ON MERITS OF EACH CASE. THAT DECISION IS NOT O N RECORD AND , THEREFORE , GIVEN PRESENT FACTS AS BEFORE US IT IS NO T REALLY NECESSARY TO RECALL THE ORDER DATED 15.12.2015. W HILE IT IS NOT FOR US TO JUDGE , AS TO WHETHER THE I NCOME T A X AUTHORITIES ARE JUSTIFIED IN DECIDING WHETHER A PARTICULAR APPEAL IS T O BE PURSUED OR NOT , THERE HAS TO BE A CONSCIOUS DECISION BY THE I NCOME T A X AUTHORITIES TO PURSUE AN APPEAL IN CASE T A X EFFECT IS LESS THAN RS. 10 LAKHS M.A. NO.1 09 /AHD/ 201 6 ASSESSMENT YEAR : 20 0 9 - 09 PAGE 6 OF 6 EVEN WHEN T HE REVENUE AUDIT OBJECTION IS ACCEPTED BY TH E I NCOME T AX DEPARTMENT. IN THIS VIEW OF THE MAT TER , WE SEE NO MERITS IN THE RECTIFICATION PETITION FILED BY THE DEPARTMENT BEFORE US. WE MUST , HOWEVER , MAKE IT CLEAR THAT IN A C A SE IN WHICH I NCOME T AX AUTHORITIES CONCERNED ARE OF THE CONSCIOUS VIEW THAT APPEAL IS TO BE PURSED ON MERIT , IT WILL BE OPEN TO THE APPLICANT TO MOVE A FRESH RECTIFICATION APPLICATION CONVEYING THE SAID DECISION OF THE I NCOME TAX AUTHORITIES AND THE T RIBUNAL WILL THEN TAKE A CALL , AS MAY BE CONSIDERED APPROPRIATE , O N RECALL OF THE IMPUGNED ORDER. WITH THESE OBSERVATIONS , THE P RESENT RECTIFICATION APPLICATION IS REJECT E D. 8. IN THE RESULT, MISCELLANEOUS APPLICATION FILED BY THE DEPARTMENT IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 28 TH DAY OF AUGUST, 2017. SD/ - SD/ - S.S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 28 TH DAY OF AUGUST, 2017 PBN/ * COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTA L REPRESENTATIVE (6) GUARD FILE BY ORDER UE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD