w w w . L a w y e r S e r v i c e s . i n


Assistant Commissioner of Income Tax, Circle Satna and Others v/s Anurag Shrivastava and Others

    M.A. No. 03/JAB/2020 (Arising out of I.T.A. No. 222/JAB/2018), MA No. 04/JAB/2020, (Arising out of I.T.A. No. 225/JAB/2018), MA No. 05/JAB/2020 (Arising out of I.T.A. No. 226/JAB/2018), MA No. 06/JAB/2020 (Arising out of I.T.A. No. 227/JAB/2018) and MA No. 07/JAB/2020 (Arising out of I.T.A. No. 228/JAB/2018)
    Decided On, 07 September 2020
    At, Income Tax Appellate Tribunal ITAT Jabalpur Bench
    By, THE HONORABLE JUSTICE: N.R.S. GANESAN
    By, MEMBER (J) & THE HONORABLE JUSTICE: SANJAY ARORA
    By, MEMBER (A)
    For Petitioner: I.B. Khandel, D.R. And For Respondents: A.P. Shrivastava and Sapan Usrethe, Advocates


Judgment Text
1. This is a set of four Miscellaneous Petitions by the Revenue under section 254(2) of the Income Tax Act, 1961 ('the Act' hereinafter) directed against the Order dated 23/08/2019 by the Tribunal, dismissing, among 92 others, the captioned appeals (and the corresponding Cross Objections (COs) by the Assessee-respondents) as withdrawn/not pressed. The appeals relate to assessment years (AYs.) 2008-09 & 2009-10, even as in the context of the case; the law remaining unchanged, the same is of no particular significance. The cases of both the sides being largely the same, the petitions were heard together, and are being disposed of per a common, consolidated order for the sake of convenience. For the purpose of writing this order though the lead case is taken as MA No. 3/Jab/2020, with reference to which the petitions were argued. The specific facts of each case, to the extent relevant, are noted and discussed separately.

2.1. The claim of the Revenue per its' instant Miscellaneous Applications ('MAs' for short) is that its' captioned appeals have been wrongly dismissed as withdrawn/not pressed per the impugned order inasmuch as, though the tax effect thereof is admittedly below the threshold monetary limit for filing of appeals by the Revenue before the Tribunal, per the extant Circular, being No. 17/2019, dated 08/08/2019, i.e., Rs. 50 lacs, it is covered by the exception listed at para 10(c) of its earlier Circular 3/2018, dated 11/07/2018, in conjunction with which the said Circular is to be read. Clause (c) of para 10 speaks of cases covered by the revenue audit objection. The assessments in the instant case being consequent to an audit objection, the Revenue's appeals are excepted and, thus, do not fall u/s. 268A of the Act. Information qua the same is on record in the form of an authorization memo u/s. 253 of the Act. Why, the impugned order, vide para 7, which also finds reproduction in the MAs, itself grants liberty to move the Tribunal in such a case. The appeals under reference be accordingly recalled for being heard on merits.

2.2. The learned counsel for the assessee, Shri Usrethe, would object. No objection having been taken by the Departmental Representative (DR) at the time of hearing of it's appeals, the Revenue had missed the bus, and it was not open for it to now so contend, even as held in CIT vs. Concord Pharmaceuticals Ltd. [2009] 317 ITR 395 (Guj), referring to the relevant para thereof, forming part of his written submissions. The said decision has since been followed by the Tribunal in ITO vs. Dr. Asha Gupta (in M.A. No. 12/Jab/2017, dated 24/04/2019/PB pgs. 1-4). That apart, the Revenue's objection is not maintainable on merits as well as there is no audit objection in the case of MA Nos. 6 & 7/Jab/2020, for cl. 10(c) to apply, while the audit objection was, in fact, not accepted by the Assessing Officer (AO) in Anurag Shrivastava (MA 3/Jab/2020), for which he would take us through the final report (LAR) by the Deputy Accountant General (Central Revenue Audit)(PB pgs. 8-9), which clarifies that the audit objection was responded to by the AO, stating his non-satisfaction therewith. It could not therefore be said that the audit objection had been accepted by the Department. Clause 10(c) clearly states of the revenue audit objection having been accepted by the Department. The Apex Court in Larsen & Toubro Ltd. vs. State of Jharkhand, C.A. No. 5390 of 2007, dated 21/03/2017 (PB pgs. 10-35) held a reassessment under Central Sales Tax Act, 1956 as not valid as the same was not on the basis of the personal satisfaction of the assessing authority, but on the direction of the audit party (para 29). The same would equally apply to the present case as the LAR clearly states that, in reply to the audit objection, the AO clarified the correct figure of commission, confirming his working.

2.3. The ld. Departmental Representative (DR) would, in rejoinder, state that the very fact that the notice u/s. 148(1) in the case of Anurag Shrivastava was finally issued by the AO, recording the reasons for his belief as to the escapement of income, only implies that the audit objection was finally accepted by him. He, on being specifically asked, while confirming the absence of any audit objection in the cases covered by MA Nos. 6 & 7/Jab/2020, would though submit that the reassessment proceedings initiated in these cases was only on the basis of the information provided by the assessees in other, related cases, i.e., MA Nos. 5 & 4/Jab/2020 respectively, wherein the impugned assessments were pursuant to an audit objection. That is to say, he would argue, but for the said audit objection/s, there would be no reassessment in these two cases, so that the same must necessarily be regarded as made pursuant to a surviving audit objection.

2.4. The hearing was closed at this stage, and the order reserved.

3. We have heard the parties; perused the material on record, and given our careful consideration to the matter.

3.1. At the outset, we note that the instant proceedings being u/s. 254(2), bar debatable issues. It should therefore normally suffice, for the Revenue to succeed, if the impugned assessment is, on the basis of the material on record, shown to be on the basis of an audit objection, in which case the exclusion per cl. 10(c) of the Board's Circular No. 3/2018 would apply. The authorization memo dated 30/10/2018 by the Pr. CIT, accompanying Form-36 (Memorandum of Appeal), clearly records this fact; para 2 thereof reading as under:

"2. Under section 253(2) of the Act, I, therefore, direct the Assistant Commissioner of Income Tax, Circle-Satna, to file an appeal before the appellate Tribunal against the order of the above authority because the issue of deletion under appeal falls under point 10(c) of the exceptional clause of Circular No. 3/2018, dated 11/07/2018 even though the tax effect being below the monetary limit, further appeal is being filed for assessment year 2008-09 on the ground of appeal enclosed."

3.2. At this stage we may consider the decision in Concord Pharmaceuticals Ltd. (supra), also followed by the Tribunal. The same, rather than that of the assessee, supports the cause of the Revenue in the facts and circumstances of the present case. Per the same, the Hon'ble Court clearly states that if an objection is raised before the Tribunal at the time of hearing, which was not dealt with by it, and the Revenue's appeal dismissed on low tax-effect, the Revenue was at liberty to move the Tribunal to restore its appeal for being decided on merits. This is precisely what the Revenue is in the present case doing per its instant applications u/s. 254(2). This is in view of the manner in which the hearing in the matter took place. The impugned order dismisses 84 appeals by the Revenue and 12 COs by the assessees at one go. Another 104 appeals/COs, heard simultaneously, were also dismissed along with, albeit per a separate order; the hearing in all cases concluding within a few minutes. The appeals were 'heard' en masse, without affording any specific opportunity to the Revenue to raise any objection, seriously violating the principles of natural justice. In fact, given the short time frame in which the appeals were fixed, even the notices were not sent to the parties; the list/s itself being finalized only a couple of days prior to the date of their listing. The ITAT Bar and the office of the Departmental Representatives were intimated of the posting, conveying the lists on being finalized on 20/8/2020, & on 22/8/2020, i.e., the revised lists. A fair hearing itself demands adequate notice, and by convention four weeks time is given by the Tribunal. Why, the order dated 14/8/2019 in ITO v. Dinesh Madhavlal Patel & Ors. by the Ahmedabad Bench of the Tribunal, a common order dismissing, like-wise, 628 appeals, reproduced at para 5 (pages 9 to 15) of the impugned order, itself, vide para 1 thereof, notes that individual notices to the parties were dispensed with in light of the discussions with the Principal Chief Commissioner of Income Tax (Gujarat) and the representatives of the ITAT Bar Association. The arguments raised before the Tribunal in the said appeals, as a reading of the same would clarify, were on the legal aspects of the matter, viz. the applicability of the circular to pending appeals, etc., not touching the specific facts of any particular case. It is primarily for the said arguments, equally applicable in the instant case, that an extensive reference, reproducing it in toto, was made by the Tribunal thereto in the impugned order. In the present case, speaking for all the 96 appeals/COs, no counsels, other than those listed, were present during 'hearing'. All this is in fact a matter of the Tribunal's record. The claim of proper opportunity having been provided by the Tribunal to the Revenue for raising objection/s, implicit in the charge of it having not raised any objection at the time of hearing, is thus a figment of imagination; the co-author of the impugned order being a constituent of the Bench that heard the matters. There is, accordingly, no reference to any argument, by either side, in the impugned order, much less any mention of provision of opportunity to raise any specific objection; the Bench making it clear that the listed matters had been so on being identified on the basis of the revised monetary limit qua tax-effect per the recently issued Board circular of August 8, 2019, enhancing the same for the maintainability of the Revenues' appeals before the Tribunal.

The impugned order is thus not maintainable on this short ground alone, i.e., non-provision of any opportunity, or in any case proper opportunity, of being heard. The Tribunal, while doing so, was acutely conscious of the legal infirmity of this course; the pitfalls it entailed; and it's duty towards the litigants, i.e., the tax payers and the Revenue. Accordingly, keen to avoid any prejudice being caused by proceeding in the manner it does, it, even as made clear earlier in the open court, preempting the raising of any objection by the Revenue, provided liberty to the parties to move the Tribunal where any appeal or CO, not covered u/s. 268A, has nevertheless been dismissed by it in limine. Para 7 of the Tribunal's order, also read out during hearing, reads as under:

'7. It may be clarified that though every care has been taken by the Registry of the Tribunal in identifying the listed appeals, it may yet be that some error in working the tax effect may have occurred. It may also be that an appeal/s is otherwise saved by the exceptions listed at para 10 (scope of which stands widened vide amendment dated 20/8/2018) or para 11 of the Circular. Similarly, it may be that a CO/s bears an independent ground/s, raised for adjudication. Accordingly, liberty is hereby granted to the parties to, where so, move the Tribunal in this regard, in which case it shall, where satisfied on merits, recall an appeal/s or, as the case may be, a CO/s, for being heard on merits. Further, the recall of an appeal would be accompanied by the recall of the assessee's corresponding CO, if any, dismissed along with. Needless to add, the Tribunal shall, while doing so, which shall be per a speaking order, grant an opportunity of hearing to the other side.'

(emphasis, ours)

Similar liberty, it may be noted, was also provided by the Tribunal in Dinesh Madhavlal Patel (supra) vide para 8 thereof while summarily dismissing 628 appeals, making it clear that either owing to wrong computation of tax effect or owing to such cases being covered by the permissible exceptions, or for any other reason, the Tribunal shall take remedial steps in this regard. Where, then, one may ask, is the scope for raising any objection by the Revenue, which forms the basis of the assessee's case, or at least the preliminary objection to the instant MAs Where, again, then, is the scope for taking a plea by the assessee that the Revenue having not raised an objection at the time of hearing of its appeal, is now precluded to seek its restoration Why, even the Hon'ble Courts do this, making a saving for any error/omission, i.e., while summarily dismissing an appeal/reference u/s. 268A thus. It may be noted that the Tribunal does not issue any finding, not even with regard to the appeals under reference being covered by the relevant Board circular/s, or otherwise u/s. 268A. All the impugned order says is that the listed appeals are dismissed as withdrawn/not pressed (refer para 6), which makes its order legally infirm in the absence of any material on record to support the same. Needless to add, there is no stated basis or reference to any such material in the impugned order; the sole basis for the in limine dismissal of the appeals being their low tax-effect.

The Revenue's applications are thus admissible by the very terms of the impugned order itself, i.e., the liberty provided per the impugned order. Though, therefore, the applications are u/s. 254(2), its strict parameters, as normally obtain, would not apply thereto. It is in fact this liberty which makes the said order legally sustainable in view of the short shrift given to the due process of hearing, fundamental to the judicial decision making process and, thus, to a judicial order. The instant applications, thus, become the first occasion for the Revenue (assessee) to object to its' appeal (CO) being wrongly dismissed u/s. 268A, even as contemplated by the impugned order, as well as the order relied upon by it. The Tribunal is thus obliged to consider and decide the Revenue's objection/s on merits, as the leave granted per the impugned order itself provides. How, one may ask, does the decision in Concord Pharmaceuticals Ltd. (supra) assists the assessee/s under such circumstances; the same, rather, in view of the position of law as clarified thereby, does that of the Revenue. Each of the Revenue's applications are liable to be allowed, restoring the appeals (along with the COs, if any) for being heard on merits, subject to the satisfaction, after hearing the parties, that the appeals are not covered by the extant circular/s.

3.3. That apart, the authorization memo dated 30/10/2018, filed along with the appeal memo, forms part of the Tribunal's record. The same, reproduced hereinbefore in its relevant part, clearly states that the instant appeal is being filed by the Revenue despite it being a low tax-effect matter in view of cl. 10(c) of circular 3/2018. Section 268A, introduced by Finance Act, 2008, w.r.e.f. 01/4/1999, reads as under:

'268A. (1) The Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing of appeal or application for reference by any income-tax authority under the provisions of this Chapter.

(2) Where, in pursuance of the orders, instructions or directions issued under subsection (1), an income-tax authority has not filed any appeal or application for reference on any issue in the case of an assessee for any assessment year, it shall not preclude such authority from filing an appeal or application for reference on the same issue in the case of--

(a) the same assessee for any other assessment year; or

(b) any other assessee for the same or any other assessment year.

(3) Notwithstanding that no appeal or application for reference has been filed by an income-tax authority pursuant to the orders or instructions or directions issued under sub-section (1), it shall not be lawful for an assessee, being a party in any appeal or reference, to contend that the income-tax authority has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case.

(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under sub-section (1) and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case.

(5) Every order, instruction or direction which has been issued by the Board fixing monetary limits for filing an appeal or application for reference shall be deemed to have been issued under sub-section (1) and the provisions of sub-sections (2), (3) and (4) shall apply accordingly.'

Section 268A(1) empowers the Board to, for the purpose of regulating the filing of appeals or applications for reference by an income tax authority, issue orders, instructions or directions to the income tax authorities, fixing monetary limits as deemed fit. Section 268A(4) provides for the Tribunal or Court to have regard to the orders, etc. issued u/s. 268A(1) and the circumstance under which an appeal or application for reference was filed, or not filed, in respect of any case. Circular 3/2018, dated 11/07/2018, is one such circular, fixing the monetary limit at Rs. 20 lacs for an appeal before the Tribunal. Vide para 10 thereof, exceptions are laid down, so that the Circular shall not apply where an appeal/application is covered thereby. Clause 10(c) states of a case where a revenue audit objection is accepted by the Department. It is this clause which the authorization memo refers to. Circular 3/2018 was later modified by circular 17/2019, dated 08/8/2019, enhancing the monetary limit for appeals before the Tribunal to Rs. 50 lacs. The other terms and conditions of the earlier circular continued to be in force. The filing of the instant appeals, in view of the applicability of cl. 10(c) of circular 3/2018, as clarified by the authorization memo, was thus a circumstance attending the filing of the appeals in the instant case. The Tribunal was therefore obliged to have regard thereto. It was open for the Tribunal to, where in doubt, or in order to satisfy itself, or as a matter of abundant caution, require the Revenue to place on record the copy of the revenue audit objection, or make such other inquiry or verification in the matter as deemed fit and proper, i.e., to ascertain if the appeals were indeed excepted or not. We have already stated of the absence of the due process of hearing while disposing these appeals by the Tribunal, so that there was no question of either any objection being raised by the Revenue, or calling for any substantiation therefrom by the Tribunal. In fact, an examination of the authorization memos u/s. 253(2), which accompany Form 36 and, thus, form part of the Tribunal's record, by it's Registry while fixing the appeals where the tax-effect was lower than the monetary limit specified, would itself have precluded the listing of such appeals in the first instance as these were, at least prima facie, excepted by the Board circular. No regard to the terms of the Board circular, apart from the tax-effect involved, was made by the Tribunal while listing the appeals, as the same would require perusing the record, or otherwise hearing the parties on the applicability or otherwise of the circular. It was for this reason as well that its' order bore a caveat, saving appeals (COs) which may not be actually covered u/s. 268A for any reason, though may stand dismissed in limine. Not only the appeals, the corresponding COs by the assessees, being generally supportive in nature, were also protected inasmuch as they may contain an independent ground, i.e., independent of the grounds on merits assumed per the Revenue's corresponding appeal.

It was in this view of the matter not necessary for the Revenue to have raised a specific ground of appeal in its respect, i.e., of it being excepted, which was also contended before us to be another un-exonerable lapse committed by the Revenue, missing the bus as it were. The plea is even otherwise, i.e., quite apart from the hearing process in the present case, delineated hereinbefore, misdirected. A ground of appeal, by definition, is a statement of the cause of grievance, precisely stated, with a view to obtain the desired relief through adjudication thereon. That is, concerns the appeal on merits. Accordingly, the inclusion of the basis for filing an appeal in the grounds of appeal (GoA) is misconceived. What adjudication, one may ask, is being sought thus The Authorization Memo (AM), on the other hand, is the source of authority for the AO to file an appeal before the Appellate Tribunal. The fact of an appeal falling under any of the exceptions listed (in para 10), or otherwise being not a qualifying appeal (para 11), refers to the applicability or otherwise of the terms of the circular, regard of which has to be, by law, made by an appellate authority while dealing with that appeal. The Authorization Memo u/s. 253(2) thus rightly bears reference to para 10(c), conveying thus the basis on which an appeal has been filed, i.e., despite being a low tax-effect appeal and, thus, apparently covered by the extant Board circular, rendering it as not liable to be excluded u/s. 268A from consideration on merits. The two, i.e., 'Ground of Appeal' and 'Objection', operate in different fields, with no interface. Further, it may be that an appeal, validly filed, may in time get covered by a subsequent circular u/s. 268A. It could be that such an appeal is though excepted by a subsequent circular/s, and therefore the authorization memo, already submitted, does not bear reference to the excepting clause, which, even otherwise, though desirable, is not an essential element/ingredient of an authorization memo u/s. 253(2). As such, even the absence of a reference to the excepting clause therein would not per se preclude the Revenue to raise an objection before an appellate authority in its respect, claiming exclusion under a particular clause of the relevant circular/s. We are in this supported, apart from the principles of natural justice, by the decision in Concord Pharmaceuticals Ltd. (supra). Of course, the onus in such a case, given the prima facie applicability of the circular, to satisfy the court/tribunal as to the non-applicability of the circular, and thus of s. 268A, would be on the Revenue. In fact, in the context of the argument advanced, i.e., of the objection having not been raised in the GoA, so that it becomes only a mode of bringing the basis for filing an appeal to the notice of the Tribunal, it becomes irrelevant whether the same is through GoA or AM, and thus, of no consequence. Rather, it would be incorrect to term it as an 'objection', the same being excluded under the circular itself, terms of which have to be complied with, so that the Revenue, on its' appeal being listed, is obliged to state the reasons for having filed the appeal in the facts and circumstances of the cases, without obtaining clarity on which, it would not be possible for the appellate forum to decide on the maintainability or otherwise of the Revenue's appeal.

It is, in fact, even otherwise, not open for any appellate authority to consider the Board circular/s in part. When it is said that an appeal is covered by a Board circular/s, it implies the circular read as a whole, in its entirety, and not merely that part thereof which specifies the threshold monitory limit. It is equally incumbent on it to examine the applicability of the other parts of the circular as well, without which it cannot be said, one way or the other, if an appeal (or an application) is covered by the extant circular issued u/s. 268A(1) and, thus, liable to be withdrawn or dismissed in limine as not maintainable in view of section 268A(4). That only would satisfy the mandate of law, requiring an appellate authority to have regard to the orders, instructions or directions issued by the Board u/s. 268A(1) from time to time. In fact, the authority conferred by law on the Board for fixing monetary limits is for the purpose of regulating the filing of appeals by it before an appellate authority, which it does as a policy instrument of the Union of India. This authority is quite apart from and independent of that granted u/s. 119, which is for the purpose of the administration of the Act. Such appeals as covered by the Board circular u/s. 268A(1) r/w s. 268A(5), must, therefore, not have been filed in the first place. As afore-noted, the circulars enhancing the monetary limits from time to time, as also making them applicable to those since filed, i.e., pending appeals, appeals/references validly filed may get ousted in time on account of the enhanced limit. Either way, having been already filed, such appeals need to be identified. The primary duty of this identification is on the Revenue; the Board having been thereby empowered by law to limit the discretion of an income tax authority in respect of filing of an appeal/application for reference. The Revenue, accordingly, per internal instructions/directions, instructs its field officers to do so, i.e., as and when a new circular, in supersession or modification of an earlier one, is issued u/s. 268A(1), to bring the same to the notice of the appellate forums, intimating their withdrawal or non-pressing thereof. It is this identification that took precedence with the Tribunal. Perhaps anxious to arrive at the actual amount locked in tax litigation before it, it embarked on the said exercise, as part of a responsive judiciary, which also explains the departure from the established norms of judicial hearing. We have already observed that it, in doing so, acted with circumspection, providing liberty to the parties in case of any error or omission in dismissing an appeal/CO thus, balancing thus the need for retaining only maintainable tax litigation on its records, with the paramount concern for not causing any prejudice. In fact, the arguments emanating from both the sides in the instant cases, with the assessee bringing on record material, also relying on case law in the support of its case, itself emphasizes, if any was required, the need for hearing the parties before issuing any opinion, even as the same does not exclude mistake or omission, removal of which, therefore, the law provides. No Court or Tribunal can, by its action or non-action, cause prejudice to any party before it, is a settled legal proposition, i.e., actus curiae neminem gravabit, reiterated time and again by the Apex Court, as in Honda Siel Power Products Ltd. vs. CIT [2007] 295 ITR 466 (SC).

In our clear view, dismissal of the Revenue's appeals by the Tribunal, in view of the authorization memo dated 30.10.2018 on record, clearly stating of the appeal being filed, despite its low tax effect, is, in view of cl. 10(c) of the Board circular 3/2018 dated 11.07.2018, a clear case of a mistake manifest on record. We have already clarified that the authorization memo, an official document, can still be subject to verification by the Tribunal so as to satisfy itself, which itself implies having regard thereto, which the law obliges it to.

3.4. In sum, the Revenue's instant applications are, therefore, admissible, and cannot be ousted at the threshold on the ground that no objection raised by the ld. DR at the time of hearing. (also see para 4.1)

3.5. We may next examine the said applications for their validity on merits, i.e., in view of the specific objection/s raised by the assessee, and which we shall do so separately for each (set of) application/s.

M.A. No. 3/Jab/2020

4.1. The assessee's case is that the notice u/s. 148(1) in his case was, clearly, issued by the AO not on the basis of his personal satisfaction, as evident from the LAR dated 09.9.2011 (PB pgs. 8-9), but at the instance of the audit party. The first issue, therefore, is if the said document (LAR) is admissible This is as the purview of the proceedings u/s. 254(2) is limited to a mistake apparent from record, precluding admission of new materials. The 'mistake' by the Tribunal, as discerned, being the non-regard of the authorization memo, conveying a valid basis for preferring it's appeal by the Revenue, consideration of fresh material may be precluded by the strict parameters of section 254(2); the mistake rectifiable thereunder being only that apparent from record, so that the rectification envisaged would necessarily be restricted with reference to the material on record, which represents the settled law in the matter (Honda Siel Power Products Ltd. (supra)). This embargo would, however, not apply in the present set of cases as, as indicated earlier, the Revenue application/s, is, apart from u/s. 254(2), maintainable with reference to the very terms of the impugned order itself. The proceedings would thus relate back to the stage of hearing of the Revenue's appeal/s by the Tribunal, i.e., restore status ante. This only would meet the ends of justice. The parties are, therefore, entitled to place on record material in support of their claims/case. The import of our finding is that the instant proceedings would not be, in any manner, fettered by s. 254(2), barring all debatable issues as well as admission of new material, and that the parties are at liberty to raise objections or advance arguments as they may do in a regular appeal. It is for this reason that reference to LAR (duly attested by Sri A.P. Srivastava, Advocate, the ld. counsel for the assessee), as well as to the decision in Larsen & Toubro Ltd. (supra), was not objected to by the Bench during hearing; rather, it indicating that due regard to the said decision shall have to be given. True, the reliance on case law, inasmuch and to the extent it declares the law as it always was, is in any case not barred by s. 254(2), but the same shall be relevant, or assume relevance, only when the relevant facts are proved, which may require bringing material on record, precluded by s. 254(2).

Coming back to the facts of the case, clause 10(c) (supra) 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) .., or

(b) .., or

(c) where a Revenue Audit objection in the case has been accepted by the Department, or

(d)'

The relevant part of the LAR reads as under: (PB pgs. 8-9)

A.Y.

U/s

DOA

R.I.

A.I.

Whether case seen by IAP

2008-09

143(3)

24/12/10

780730

1000730

No.



Short accountal of receipts:

The assessee engaged in the business in the name of Ad's Marketing at Mumbai, which used to help securing bank loan facility to the needy costumers and earn commission from banks. Return declaring total income of Rs. 780730/- was e-filed by the assessee on 30/09/2008.

As per section 199 of the I.T. Act, the total receipt corresponding to the TDS credit claimed was required to be offered for taxation.

Audit examination revealed that the 'a' claimed TDS credit of Rs. 1364777/- as per TDS certificates enclosed with return and offered for commission receipt Rs. 12619851/- in P/L account. But it was seen from enclosed TDS certificates that actual total commission receipts was Rs. 12874131/-, which was required to be offered instead of Rs. 12619851/-. But this was not done. The omission resulted in short accountal of commission receipt to the extent of Rs. 254280/- involving short levy of tax Rs. 78,573/-.

On being pointed out in audit it was replied that, the amount of Rs. 547057/- is mentioned twice in TDS certificate. The assessee has claimed commission received at Rs. 12619051/- which includes other commission of Rs. 292777/- but no TDS has been deducted.

The reply does not correctly reflect the factual position of total receipts. The objected receipt was arrived at after excluding the amount of Rs. 547057/- which included twice."

(emphasis, by italics, ours)

4.2. It is clear that the audit objection was toward short accounting of receipt, inferred on the basis of the TDS certificates, comparing the same with the books of account of the assessee. The assessee's reply to the AO is on PB pg. 5, resolving the apparent difference (Rs. 2,54,280), which was accepted by the AO, as indicated by his reply as referred to in LAR (emphasized through italics). There is no dispute as to the nature of receipt, but only to the arithmetical accuracy of its accounts, doubted with reference to the TDS certificate/s, which stands duly clarified. It is, therefore, abundantly clear that the AO was satisfied with the assessee's reply (to the audit objection) as to there being no escapement of income, yet proceeded to issue notice u/s. 148(1), so that the same was only due to the non-acceptance of his reply by the audit party, i.e., at its insistence. It would be a different matter, we may add, if and where the audit party had, per its report, pointed out the mistake/error in the AO's reply/working, in which the case it could not be said as a fact that the audit objection did not obtain, and that the assessment proceedings were initiated despite the non-acceptance of the audit objection by the Department. In such a case, it is the audit objection, as finally obtains, i.e., after having regard and giving effect to the AO's reply, that shall form part of the AO's reason to believe escapement of income-to that extent, which is not so in the present case, and for which we have also perused the reasons recorded for the issue of notice u/s. 148(1), reproduced at para 2 (page 1) of the assessment order, forming part of the Tribunal's record. Why, a discrepancy in the assessee's accounts would result in a corresponding difference in its' account with the party issuing the TDS certificate/s We, accordingly, have, in the facts and circumstances of the case, little doubt that the assessment proceedings, though initiated by reason of a revenue audit objection, the same was not accepted by the AO inasmuch as he was not personally satisfied therewith. The terms of clause 10(c) of the Board circular clearly state of the revenue audit objection having been accepted by the Department. We are conscious that the words 'accepted by the Department', the import of which is surely wider, cannot be equated with the personal satisfaction of the AO issuing notice u/s. 148(1), in the absence of which, as found, as indeed in the instant case, the proceedings in Larsen & Toubro Ltd. (supra) were struck down. Therefore, even though, strictly speaking, the issue of notice itself signifies its acceptance by the Department, as canvassed by the ld. DR, it may be of no consequence as the reassessment proceedings itself do not, in view of our finding as to the lack of personal satisfaction of the AO, survive. The Revenue fails.

M.A. 4-5/Jab/2020

5. No specific objection was raised by the learned counsel for the assessee in these two cases, i.e., other than the general objections covering all the cases, which we have, for the reasons afore-stated (para 3), not found acceptable. The appeals, therefore, require being restored for being heard on merits by the Tribunal, and we direct so. The Revenue succeeds.

M.A. Nos. 6 & 7/Jab/2020

6.1. The assessee's case is that there is no audit objection in these cases, an admitted fact and, therefore, cl. 10(c) of circular 3/2018, dated 11/07/2018, on the basis of which the Revenue seeks exclusion from the said circular (and, thus, from section 268A), shall not apply. The Revenue's case is that, though there is no audit objection, yet these appeals ought to be regarded as covered under cl. 10(c) (supra) as the reassessment in the cases of the HUFs were only pursuant to the information provided by the assessees (in M.A. Nos. 4 & 5), in proceedings initiated consequent to an audit objection in their cases, that the sums for the purchase of property by them were sourced from their respective HUFs, and whose returns for the relevant year did not reflect the same. This only would take the matter to its logical end.

6.2. The primary facts are not in dispute, i.e., that there is no audit objection per se in these cases. The issue therefore is if the same can, or rather are, yet to be regarded as covered u/c. 10(c). This gives rise to a very interesting and pertinent issue, i.e., the interpretation of the relevant clause of the Board's circular issued u/s. 268A(1) r/w s. 268A(5) of the Act. Reference here is drawn to cl. 10(c) (at para 4.1).

6.3. At the outset, we note that the arguments advanced emphasize, once again, the primary need for proper hearing. Two, the issue involving an interpretative exercise, would under normal circumstances be precluded u/s. 254(2), resulting in a possible injustice inasmuch as the parties were in the first instance not provided proper opportunity of hearing. It is only on account of this, duly taken cognizance of by the Tribunal while passing the impugned order, per para 7 thereof, that the interest of the parties is saved. The question before us is as to how cl. 10(c) is to be construed. Tax statutes are to be strictly construed. The circular under reference is a delegated legislation under a tax statute and, therefore, is to be construed in a like manner, i.e., strictly. Admittedly, the revenue audit objection is in the case of a member of the HUF, who has explained the source of the sum for the admitted investment as the HUF. This has resulted in reassessment in the case of the HUFs, which are in appeal before us, since dismissed as withdrawn. Apparently, a strict interpretation would result in the said dismissal being upheld inasmuch as, without doubt, it cannot be said that the audit objection was in the case of HUFs. A broad, purposive interpretation, on the other hand, may lead to the inclusion of these assessments under clause 10(c), so that the Revenue's appeals are saved and, thus, liable to be restored for a decision on merits.

6.4. Having delineated the contours of the issue we are confronted with, and called upon to decide, we note that the interpretation of an instruction, circular, etc. has to be on the same basis as of the statute. The right to appeal is a statutory right. The Board, duly empowered to issue instructions, orders or directions fixing monetary limits for the purpose of regulating the filing of appeals/references before higher appellate forums, with the avowed object of minimizing tax litigation, accordingly issues instructions/circulars u/s. 268A from time to time, which are binding on the income tax authorities. Accordingly, either no appeal/reference covered by the relevant circular is to be filed, or where already filed, shall be withdrawn/not pressed, and toward which the appellate authority before which the appeal is pending is to have due regard of the relevant circular. The same implies that the terms of the extant circular/s shall have to be strictly followed, so that only cases clearly covered thereby shall fall to be regarded as so covered and, accordingly, excluded u/s. 268A. Clause 10(c), reproduced hereinbefore, draws an exception in respect of cases where a revenue audit objection has been accepted by the Department. The exclusion thereby cannot be stretched to other cases where the audit objection is either applied or becomes applicable or has relevance. That would be straining the clear terms of the circular.

The underlining of facts by the ld. DR during hearing only emphasize equity. Considerations of equity, however, have little bearing while interpreting a tax statute, which is to be strictly construed. It may be argued that para 10 specifies exceptions to the broad exemption class identified by the circular, i.e., where the tax-effect falls below the specified monetary limit, being the threshold limit for filing appeals/references by the Revenue before a higher appellate forum. Being an exception to an exception, the same is to be broadly construed, i.e., purposively, if the general exception category is to be strictly identified. Now, the purpose of the exception being, clearly, to exclude (from the general exception category) cases co

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vered by the audit objection, the instant appeals would also stand to be so excepted. This is as the reassessment proceedings in these cases arise only on account of the audit objection, but for which there would not have been any such assessment. After all, where was the need to issue a separate audit objection in the case of the HUFs The argument, though apparently impressive, is flawed. This is as the circular cannot be regarded as an exemption notification-to be strictly construed (CC(I) v. Dilip Kumar & Co., in CA No. 3327 of 2007, dated 30/7/2018), so as to then say that cl. 10 thereof is an exception to an exception, and is to be broadly construed so as to in effect construe the excepted category strictly. Section 268A is a declaration of intent of the Union of India not to pursue its right of appeal under the Act under certain conditions, i.e., where the tax-effect of an appeal before an appellate authority does not exceed a specified monetary limit. That is, is, in effect, a withdrawal of the statutory right of appeal. A circular u/s. 268A defines the terms of the withdrawal, which is to be therefore strictly construed. Clearly, the purpose is to finalize a tax assessment at an early stage on the basis of its tax-effect. If an appeal/reference falls under the exception category listed in para 10, or otherwise does not fall within the purview of a qualifying appeal (para 11), it is excluded, else, it shall stand to fall u/s. 268A where the tax-effect thereof is within the monetary limit as specified per the extant Board circular. If an appeal/reference does not fall within the exceptions listed, no interpretative rule, which is only toward realizing the intent, could be applied to then include therein one that is clearly not included, the words being liable to be read strictly. It would be a different matter, we may clarify, if in the instant case the audit objection mentioned the names of the assessee/s under reference as well. It would again be a different matter if clause 10(c) were to refer to cases relatable to an audit objection. We are conscious that in the cases as the present one, of the two assessments, i.e., in the hands of the purchaser of the property (covered by MA Nos. 4 & 5/Jab/2020) or the person stated to be the source of the funds for the same (MA Nos. 6 & 7/Jab/2020), one can be on substantive basis, and the other has to be regarded as protective, and hearing of both the appeals should be together. No such exclusion or exception, i.e., for substantive and protective assessments, however, has been drawn by the circular, with, rather, as we observe, both the assessments made on substantive basis, apparently inconsistent with the facts of the case. We have considered the matter in considerable detail as the rule of strict interpretation does not rule out applicability of reasonable construction to give effect to the purpose or intent of the provision (Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585(SC)). We are again conscious that we have in MA No. 3/Jab/2020 held clause 10(c) as not applicable even on the terms thereof even as notice u/s. 148(1) was issued, implying acceptance of the audit objection by the Revenue. However, the same was only on the basis of a finding of fact by us, based on uncontroverted evidence, that the audit objection was indeed not accepted, nor the reason/s for non-acceptance, as advanced by the Assessing Officer, controverted, so as to then say that the issue of notice u/s. 148(1) resulted due to his acceptance of the audit objection, and which was therefore held by us as on account of insistence of the audit party. We also noted that it was only due to proceedings arising by the very terms of the impugned order, restoring status ante, that new materials (viz. LAR) were admitted, allowing arguments involving contentious issues. We also noted that though the words 'has been accepted by the Department' in cl. 10(c) carries a broader connotation, i.e., than that of the words 'accepted by the assessing authority', an assessment made in the absence of the personal satisfaction of the assessing authority would not survive. We, accordingly, find no merit in the Revenue's case, which therefore fails. 7. In the result, MA Nos. 4 & 5/Jab/2020 are allowed and MA Nos. 3, 6 and 7/Jab/2020 are dismissed. The corresponding Cross Objection in the case of MA Nos. 4 & 5/Jab/2020, if any, shall also stand revived. Order pronounced on September 07, 2020 under Rule 34(4) of The Income Tax (Appellate Tribunal) Rules, 1963.
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