Deputy Commissioner of Income Tax Circle 1(1), Jabalpur V. M/s.TDP & Associates, Jabalpur

MA 19/JAB/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5109 (ITAT-JABALPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-02-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 26-12-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Audit objection; Tax effect; Right to appeal; Tax effect
• Section: 274; 268A; 254(2); 119

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (through web-based video conferencing platform) BEFORE SHRI SANJAY ARORA, HON’BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER M.A.No. 19/JAB/2019 (arising out of ITA No. 66/JAB/2019) (Asst. Year: 2012-13) Applicant by : Shri S.K. Halder, Sr. DR Respondent by : None (written submissions) Date of hearing : 25/02/2022 Date of pronouncement : 27/04/2022 O R D E R Per Sanjay Arora, AM: This is a Miscellaneous Application (MA) by the Revenue directed against the Order under section 254(1) of the Income Tax Act, 1961 (‘the Act’ hereinafter) by the Tribunal, dated 23/8/2019, dismissing its’ captioned appeal for Assessment Year (AY) 2012-13 in limine, i.e., as not maintainable u/s. 268A of the Act. 2. The Revenue’s case is that its’ appeal under reference has been wrongly dismissed, as the same, even as clarified per the Authorization Memo accompanying the Memorandum of Appeal (in Form 36), is covered by the exception specified at para 10(c) of the Board Instruction 03/2018, dated 11/07/2018. Section 268A, inserted on the statute book by Finance Act, 2008 Dy. CIT, Circle-1(1), Jabalpur. vs. TDP & Associates, 502, Near Jain Mandir, Garha Ward, Jabalpur. [PAN : AAEFT 1016 D] (Applicant) (Respondent) MA No. 19/JAB/2019 (AY 2012-13) Dy. CIT v. TDP & Associates 2 w.r.e.f. 01/4/1999, empowers the Central Board of Direct Taxes (CBDT/Board) to issue circulars, instructions, orders, directions, etc. from time to time fixing monetary limits for the purpose of regulating the filing of appeals and applications for references by the Revenue before the higher forums, being the Appellate Tribunal, the Hon'ble High Court, and the Hon'ble Supreme Court (sec. 268A(1)), and which are to, while considering those appeals, references, etc., have regard to those Circulars/Instructions, etc. (s.268A(4)). Instruction 03/2018 is one such Instruction issued u/s. 268A(1), and applicable to appeals pending disposal (as on 11/07/2018) as well. Paras 10 & 11 thereof provide exceptions to the said general prescription, so that an appeal/reference, otherwise covered, would be excluded in case it falls under any of the situations specified therein. Para 10(c) thereof reads as under: ‘10. Adverse judgment relating to the following issues 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) – (b) ................................, or (c) where a Revenue Audit objection in the case has been accepted by the Department, or (d).................................’ This was followed by Instruction 17/2019, dated 08/08/2019, enhancing the monetary limits specified in the former, being from Rs. 20 lacs to Rs.50 lacs for appeals before the Tribunal. Both the Instructions, to be read together, were accordingly applicable at the relevant time. 3.1 The decision in Asst. CIT v. Anurag Srivastava & Ors. (MA Nos. 03- 07/Jab/2020, dated 07/9/2020), relied upon by the Revenue, is qua the impugned order (IO) and, thus, directly applicable in the facts and circumstances of the case. It stands explained therein that the said order is an order en masse, passed without affording any, much less proper, opportunity to the Revenue, whose appeals stand dismissed thereby. To be heard, a basic ingredient of a judicial order, as indeed, as specifically stated therein, of an order u/s. 254(1), stood thus grossly violated. And MA No. 19/JAB/2019 (AY 2012-13) Dy. CIT v. TDP & Associates 3 it was for this reason that the impugned order specifically provided liberty to the Revenue to move the Tribunal in case its’ appeal was not covered by the Board Instruction 03/2018 read with 17/2019. A similar liberty was in fact also provided vide the Order by its’ Ahmedabad Bench in ITO v. Dinesh Madhavlal Patel & Ors. dated 14/8/2019 dismissing 628 appeals by the Revenue and connected COs by the assessees, which was followed and noted by it in the IO. Why, there is, and for that reason, even no finding by the Tribunal in the impugned order that the Revenue’s appeal/s is covered u/s. 268A read with the extant Board Circular. As further explained in Anurag Shrivastava (supra), it was in view of this liberty that it was equally open for the assessee-respondent to show that the addition/disallowance under dispute does not carry conviction with the assessing authority, so that it cannot be, despite having been effected in assessment and the subject matter of appeal, said to have been accepted by the Department and, thus, as qualifying u/c. 10(c) of the Board Instruction 3/2018, as indeed found by the Tribunal in one of the MAs in Anurag Srivastava & Ors. (supra) itself (MA No. 03/Jab/2020). Further, that in view of this liberty to the parties to exhibit the non-applicability or otherwise of sec. 268A in a given case, the instant proceedings, though initiated u/s. 254(2), cannot be strictly regarded as so, confining them to the parameters thereof, viz. the material on record, and it was open for the parties to, for the purpose, bring additional material on record; the whole premise of the proceedings being to bring the order in conformity with the law, more so as the prejudice caused (to either side) was on account of the violation of the principle of audi alterm partem by the Tribunal while deciding the appeal/s under reference. Reference in this context was made, inter alia, to the decisions in Honda Siel Power Products Ltd. v. CIT [2007] 295 ITR 466 (SC); Northern Air Products (P.) Ltd. v. CIT [2005] 274 ITR 225 (MP), to which we may add the decision in CIT v. MPFC [2005] 272 ITR 33 (MP). How, then, one wonders, would the several decisions by the Hon’ble Courts, enclosed in the compilation placed on the file and MA No. 19/JAB/2019 (AY 2012-13) Dy. CIT v. TDP & Associates 4 also referred in the written submissions, which have been perused, apply in the given facts and circumstances? 3.2 Continuing further; the matter having been considered by the Tribunal at length in Anurag Srivastava & Ors. (supra), examining the issue from various angles. It stands, inter alia, explained that the mention of an appeal as having been filed as covered by the exception (stating the clause under which it is), though the monetary limit is not exceeded, is a circumstance, of which the Tribunal is therefore obliged to have regard of in terms of s. 268A(4). Why, the relevant Board Instruction u/s. 268A(1) being applicable to pending appeals, while the threshold monetary limit for filing an appeal, etc. by the Revenue is progressively increased with time, there may have been in a given case no occasion (at the time of filing the appeal) for the Revenue to have clarified this fact earlier, i.e., along with the appeal memo, so that it would be so for the first time only at the time of the hearing of its’ appeal by the Tribunal. In fact, the mention of this fact was itself not an ingredient of the memorandum of appeal, and could be urged at the time of the hearing the appeal. Further, the very fact that an addition/disallowance stands made in assessment is itself, at least prima facie, indicative of the acceptance of the revenue audit objection by the Revenue. Further, the filing of the appeal qua the relevant issue only emphasizes that it continues to endorse the same. Why, the presumption in law, inasmuch as all judicial and official acts are presumed to be regularly performed (s.114(e)) of the Evidence Act), would also endorse this inference. It was in any case open for the Tribunal to call for the record in case it wished to satisfy itself about the applicability or otherwise of s. 268A(1) read with the extant Board Instruction, etc. thereunder, in a given case, which course rather would only enable it to issue a definite finding in the matter. 3.3 On this being observed by the Bench during hearing in ITO v. Sudhir Kumar Rawat (MA No. 16/Jab/2019), an identical case, heard on 18/2/2022, Sh. Usrethe, the ld. counsel for the assesse-respondent in that case, and who has also put MA No. 19/JAB/2019 (AY 2012-13) Dy. CIT v. TDP & Associates 5 appearances on behalf of the assessee in the instant case, would draw our attention to the Board Instruction 05/2017, dated 23/01/2017 (PB pgs. 19-20), as well as the Order by the Tribunal in Asst. CIT v. Rajesh Kumar Shantilal Sanghvi & Ors. (in MA No. 396/2019, dated 09/9/2020) – copy of which is also placed in the compilation filed, at pgs. 21 – 27), reading relevant parts thereof. The said Instruction, in terms, clarifies that the Income Tax Authorities engaged in administrative of the Act are not to file appeals merely because their tax effect exceeds the monetary limits as specified in the Board Instructions issued u/s. 268A. That is, regard in all cases is to be had of the merits of the case before filing an appeal by the Revenue, which is not to be reduced to a mechanically filing. We were urged to, therefore, dismiss the Revenue’s appeal under reference, even as was by the Tribunal in Rajesh Kumar Shantilal Sanghvi & Ors (supra). 3.4 The said MA has since been disposed of by the Tribunal (on 22/4/2022); the relevant part of its’ order reads as under: ‘4.3 We find the assessee’s contention as wholly without merit. The same has no basis, either on facts or in law and, accordingly, only needs to be stated to be rejected. To begin with, does it imply that the assessee concedes to the Revenue’s appeal being not covered u/s. 268A per se inasmuch as it is only in that case that a reference may have to be made to Instruction 05/2017 (supra), exhorting the Revenue’s authorities not to file appeals mechanically, i.e., merely because the monetary limit u/s. 268A is breached. This itself should be the end of the matter as the Revenue’s appeal was dismissed as not maintainable u/s. 268A (without even issuing a finding to that effect). That, then, i.e., the applicability or otherwise of s. 268A in the facts and circumstances of the case, and the law in the matter, could only be the subject matter of the rectification proceedings, making it impermissible to travel to other areas. Rather, a finding as to the appeal being without merit, and thus filed mechanically, is a finding on the merits of the case, which necessarily implies it being admissible and not liable to be dismissed as not maintainable for low tax effect u/s. 268A. The argument is thus self-defeating. We shall dwell on this aspect later. Suffice here to say that the argument raises a question as to whether the Board Instruction 05/2017 gives any extra jurisdiction (to an appellate forum) which extends beyond it’s appellate jurisdiction, i.e., in deciding the Revenue’s appeal as without merit, implicit in which is it’s consideration and adjudication on merits? That is, even assuming it to be filed mechanically, does it MA No. 19/JAB/2019 (AY 2012-13) Dy. CIT v. TDP & Associates 6 give rise to an appealable right to the assessee, i.e., separate and distinct from that it has to defend the impugned order on merits? Continuing further, the question as to if an appeal has been filed mechanically or not, which is itself a question of fact or, at best, a mixed question of fact and law, requires a consideration of its’ merits, entailing, in turn, an examination of the relevant facts and circumstances of the case, the law in the matter, as well as indeed the adjudication by the prior adjudicating authority/s, whose order/s is under challenge, and all of this with due application of mind. The argument of an appeal as being ousted for consideration on merits, as it has been filed mechanically, and is without merit, is thus a contradiction in terms. No answer, much less satisfactory, was given by Shri Usrethe during hearing, on being questioned thus. Why, the said finding would also necessarily require hearing the parties thereon, i.e., on merits, a pre-requisite of an order u/s. 254(1). Further still, Instruction 05/2017 is not a Instruction issued by the Board u/s. 268A(1), but only u/s. 119. How, one wonders, an appeal be dismissed u/s. 268A(1), or its dismissal justified thereunder, on the basis of a Circular issued u/s. 119? The right to appeal is a statutory right, which cannot be abrogated or diluted except where the law itself provides therefor. In Pahwa Chemicals (P.) Ltd. v. CCE [2005] 274 ITR 87 (SC), the Hon'ble Apex Court clarified that the Instructions by the Board u/s. 37B (of the Central Excise Act, 1944), which is akin to s. 119 of the Act, are circumscribed by the consideration stated in section 37B itself, i.e., in furtherance of the provisions of the Act. Sure, it is open for a litigant not to file an appeal or, upon filing, not press it, but once filed, it becomes obligatory for the appellate authority to consider it on merits (Rani Paliwal v. CIT [2004] 268 ITR 220 (P&H)). Proceedings under the Act, it needs to be appreciated, are not adversarial in nature, and the sole objective of any appellate authority, as indeed of the assessing authority, is an assessment in conformity with law, a public law. Continuing further, the withdrawal of an appeal, i.e., the non-exercise of the statutory right, can only be regulated by law and, where so, as u/s. 268A, is therefore to be strictly construed, i.e., strictly in accordance with the terms of the withdrawal, so that the same would have to be scrupulously observed. It therefore does not even otherwise lie in the mouth of the assessee-respondent to contend so, i.e., that the appeal is without merits, except where it is being heard on merits, implying its admission. Put succinctly, a decision to the effect that an appeal is without merits is only a decision on its’ merits, to be decided after hearing the parties, or in the least affording them an opportunity of being heard, i.e., qua the merits, if it is to qualify as a valid judicial order. The hearing contemplated in the captioned appeal was on the applicability or otherwise of section 268A, and not on the merits of the case. An appeal dismissed as being not eligible to be heard in view of the threshold monetary limit for filing appeals by the Revenue, without affording an opportunity thereto and without issuing any definite finding as to it being indeed covered by the relevant Board Instruction, albeit reserving a right to show otherwise, is, on the Revenue exercising the said right, i.e., to show it’s MA No. 19/JAB/2019 (AY 2012-13) Dy. CIT v. TDP & Associates 7 appeal as being excepted under the very same Instruction/s relied upon in dismissing the appeal, is being contested by the assessee – not on the ground of it having been rightly dismissed u/s. 268A, but as being without merit, even without showing so, much less hearing the Revenue thereon, and on that basis, contending it as rightly dismissed in limine! This, even as the Tribunal, as explained in considerable detail in Anurag Srivastava (supra), considers it a serious wrong on its’ part in not extending the Revenue an opportunity of being heard (on the applicability of or otherwise of section 268A), though saved by the provision of liberty to, in fact, both the parties, inasmuch as the COs by the assessees were also dismissed along with, we are being pressed to consider the question if the appeal has been filed mechanically, i.e. without merit, and that too without hearing the parties thereon. A speaking order, it is well settled, is a pre-requisite of a judicial order (refer: Pr. CIT v. Bajaj Herbals (P.) Ltd., in CA No. 2659/2021, dated 07/4/2022). In short, to compound the error already committed, instead of its rectification. If this is not a travesty of justice, what is, and the argument advanced, plainly, no more than a confused statement, without understanding its import and ambit.’ 4.4 Coming to the merits of the instant application by the Revenue, the record, referred to by it now, i.e., upon being afforded an opportunity to do so by the Tribunal, clearly shows that the appeal under reference was preferred by it conscious of the monetary limitation, due to it being excepted under the relevant Instruction itself, mentioning the relevant clause (Cl. 10 (c)) thereof. This aspect is not contested by the assessee, even as the Revenue, as a matter of abundant caution, has also placed on record the relevant audit objection, i.e., the subject matter of cl. 10 (c) (also refer paras 4.1 to 4.3). 4.5 The decisions by the Hon’ble Courts, of which only that mentioned were brought to our notice during hearing, would, in view of foregoing, be of little assistance to the assessee. We may here also briefly discuss the reliance on the order in Rajesh Kumar Santhilal Sanghvi (supra). The same follows another order by the Tribunal in ITO vs Ashokkumar Harkishnabhal Bhavsar (in ITA No. 32/AHD/2019), wherein it was found by the Tribunal, as a fact, that the addition made on account of the revenue audit objection was in fact deleted, and the same was being erroneously interpreted and appeals being filed by the Revenue mechanically. It was under these circumstances that the Tribunal referred to the Board Circular Nos. 21/2015 and 8/2016 exhorting the Revenue Authorities not to file appeals mechanically, but only upon due consideration of their merits. The same, as would be apparent from the foregoing, has no application in the facts and circumstances of the instant case. Rather, inasmuch as the same is an order u/s. 254(1), deciding an appeal by the Revenue per a speaking order, it is supportive of what stands stated hereinabove. Needless to add, no such finding stands issued in Rajesh Kumar Santhilal Sanghvi (supra) relied upon, which could only be on hearing on merits.’ MA No. 19/JAB/2019 (AY 2012-13) Dy. CIT v. TDP & Associates 8 The reliance on the said Circular, also forming part of the compilation filed in the instant case (pgs. 19-20), is, thus, to no avail. 4. We may at this stage also explain the manner in which the hearing in this case was proceeded with, and which would also throw light on as to why this order is ex-parte qua the assessee-respondent, which is incumbent on us to explain. The matter came up for hearing several times, with Shri Sapan Usrethe, Advocate, seeking adjournment each time (even as no vakalatnama in his favour stood filed, and which he would assure to file before the next date of hearing), save on 26/10/2020, when the adjournment was at the instance of the Revenue. On each such occasion it was emphasized by the Bench that the proceedings u/s. 254(2) are contemplated by law to be completed with a reasonable time, and which is also the dictate of justice. Further, he filing a compilation of case laws on 23/10/2020, the Bench, after hearing the parties on 27/11/2020, required him to also argue the matter with reference to the decision by Tribunal in Anurag Srivastava & Ors. (supra), granting him time for the same. As afore-noted (para 3.3 above), an identical matter (MA No. 16/JAB/2019 in ITO vs. Sudhir Kumar Rawat) was argued by Shri Usrethe on 18/02/2022. The case law furnished as well as the accompanying written submissions filed in this case by Sh. Usrethe are the same as in that case, also represented by him. It was under these circumstances that Shri Usrethe’s application for adjournment dated 24/2/2022 – which, in the absence of any authorization in his favour on record, can not even otherwise be regarded as so, stating of the case file being non-traceable as the reason for the same, was not accepted by the Bench. And the hearing in the matter proceeded with by hearing the party before us. 5. The Revenue has, at the instance of the Bench, filed the audit objection dated 02/12/2015 on 26/11/2020, on the basis of which it claims its’ appeal to be excepted u/c.10 (c) of the Board Instruction 3/2018. The same stands confirmed by us to be in respect of the issue under dispute before the Tribunal. Further, the MA No. 19/JAB/2019 (AY 2012-13) Dy. CIT v. TDP & Associates 9 observations & findings by the Tribunal in Anurag Srivastava & Ors. (supra) and Sudhir Kumar Rawat (supra), as apparent, apply with equal force in the instant case as well. 6. We have, in view of the foregoing, no hesitation in, accepting its’ instant petition, recalling the relevant appeal by the Revenue for being heard on and a decision on merits by the Tribunal after hearing the parties. We decide accordingly. The Registry to post the matter for hearing in the regular course. 7. In the result, the Revenues’ captioned MA is allowed. Order pronounced in open court on April 27, 2022 Sd/- sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: 27/04/2022 vr/- Copy to: 1. The Applicant: Dy. CIT, Circle-1(1), Jabalpur 2. The Respondent: M/s. TDP & Associates, 502, Near Jain Mandir, Garha Ward, Jabalpur 3. The Principal CI T-1, Jabalpur (MP) 4. The CI T( Appeals)-1, Jabalpur. 5. The Sr . D.R., I TAT, Jablapur 6. Guard File By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.