Appeal not maintainable if revenue involved is less then limit prescribed by CBDT Circular

HIGH COURT OF KARNATAKA

Commissioner of Income-tax

Versus

Golf View Homes Ltd.

IT APPEAL NO. 77 OF 2006†

DECEMBER 4, 2012

JUDGMENT

1. I.T.A. No. 77/2006 is an appeal by the Revenue against the common order dated 26.08.2005 passed in common in four appeals before the Tribunal. Two appeals at the instance of the Revenue in I.T.A. Nos. 3125 and 1742/Bang/2004 relating to assessment years 1999-00 and 2000-01 and two other appeals that are been preferred by the assessee in I.T.A. Nos. 1743/04 and 939/03 relating to the assessment years 1999-00 and 2000-01 respectively, but insofar as it relates to the order concerning I.T.A. No. 3125/04 an appeal by the Revenue before the Tribunal purporting to arise out of the order passed by the Commissioner Income Tax (appeals) [for short CIT (appeals)] in I.T.A. No. 76/AC-11(2)/CIT(A)-1/03-04, appeal had been admitted by this Court on 16.8.07 to examine the following questions as indicated in this appeal:

“(i) Whether the Tribunal was correct in holding that the interest deduction claimed by the assessee is an allowable deduction without taking into account the fact that the assessee had not utilized the loan amount in the course of its business activity and the same had been utilized by its sister concern and consequently, recorded a perverse finding.

(ii) Whether the Tribunal was correct in failing to take into consideration the separate appeal filed by the revenue in respect of part of the interest component allowed by the Appellate Commissioner which was pending consideration before the Tribunal and as the controversy was interrelated.

(iii) Whether the Tribunal was correct in proceeding to hold that the maintenance charges claimed by the assessee should be allowed as a business expenditure without basing such finding on any evidence and consequently recorded a perverse finding.

(iv) The Tribunal committed an error in proceeding to hold that a sum of Rs. 5,00,000/- should be allowed as deduction paid as commission fee for obtaining loan which was actually utilized by its sister concern and not in the course of assessee’s business.

(v) Whether the Tribunal was correct in proceeding to hold that a sum of Rs. 7,12,000/- penal fee paid to Jammu and Kashmir Bank i.e., penalty is an allowable deduction despite the same being not permissible as there was infraction of law.”

2. The question is one relatable to the assessment order dated 28.03.2002 passed by the Assessing Officer in respect of the assessment year 1999-2000. The Assessing Officer had disallowed deduction by way of interest as part of the business expenditure of the assessee to an extent of Rs. 2,91,45,992/-. The claim was allowed only to an extent of Rs. 4,32,000/-. The Assessing Officer had also disallowed various items of expenditure as part of business expenditure as had been claimed by the assessee totaling a sum of Rs. 33,18,099/- as under:

3. On these aspects the assessee had preferred appeal to the CIT (A) in I.T.A.No.92. This appeal came to be partly allowed as per the order dated 14.3.2003 passed by the CIT(A) and the CIT(A) while restricting the dis allowance of the interest expenditure claimed by the assessee from Rs. 2,99,44,992/- as disallowed by the Assessing Officer to Rs. 1,47,59,054/- and in respect, of the expenses claimed as part of the business expenses, allowed an amount of Rs. 15,44,207/- as part of business expenditure in respect of total claim of Rs. 33,18,099/-. It appears this order came to be further rectified by the Commissioner for Income-tax by the order dated 11.07.2003 further reducing the restriction in respect of the claim towards interest, expenditure by adding a sum of Rs. 8,12,033/- to the allowable interest. In respect of expenditure also further relief of Rs.2,12,178/- was allowed in the rectification order.

4. In respect of these orders it appears the Revenue had preferred an appeal in I.T.A. No. 945/2003 initially against the appellate order of the Commissioner and as against the rectified order of CIT (appeals) Revenue preferred an appeal in I.T.A. No. 3125/2004. The assessee had also preferred an appeal in I.T.A. No. 939/2003, insofar as the order related to not allowing the entire interest. Claim of the assessee is that by limiting the amount CIT (appeals) has rectified this appeal of assessee, so also in respect of the remaining disallowed part of the expenses. These two appeals along with appeals of the revenue and the assessee for the subsequent issues were all clubbed together and disposed of by the common order dated 26.8.2012. In this background the present appeal of the revenue.

5. During the pendency of the appeals and the revenue having realized that if the appeal confines to the order relating to the I.T.A. No. 3125/2004 if cannot possibly allow scope for the revenue to agitate substantial loss of revenue in view of the order passed by the CIT (Appeals) initially and also further improved upon by the Tribunal in its order passed in I.T.A. No. 939/2003 has filed an application under Order 6 Rule 17 r/w section 151 of the Code of Civil Procedure, seeking for substitution of the appeal numbers in cause title by making a reference to the order of the Tribunal passed in I.T.A. No. 939/2003 and also for suitable amendment in the Memorandum of Appeal so that the present appeal can be agitated insofar as it relates to the order passed by the Tribunal in ITA No. 939/2003 an appeal of the assessee, in the common order passed by the Tribunal, in respect of appeals of the revenue and the assessee for the two assessment years in question.

6. Along with this application is produced the order passed by the Commissioner for Income Tax (Appeals) in I.T.A. No. 92/R-11/CIT(A)-I/02-03 passed on 14.2.2003 against the assessment order dated 28.3.2002.

7. The submission of Mr. Thirumalesh, learned counsel for the appellant-revenue is that a perusal of the grounds of appeal and also the substantial question urged in the memorandum of appeal, it reveals that the appeal is in substance directed only against the order passed by the CIT(A) only insofar as it is related to its order in I.T.A. No. 939/2003 and therefore permitting the substitution as sought for in the application will not in any way prejudice the respondent- assessee and the revenue should be allowed to agitate this appeal as though it is in the appeal against the order of the Tribunal relating to the order in I.T.A. No. 939/2003 before it. The application is opposed very vehemently by the assessee.

8. Mr. A. Shankar, learned counsel appearing on behalf of the respondent has raised several contentions. Firstly that amendment under order VI rule 17 of the Code of Civil Procedure does not apply, secondly that allowing an application of this nature alters the character of the appeal and it virtually becomes an appeal for some other order and thirdly that at this point of time it is barred by limitation. That Section 260-A of the Act imposes fixed period of limitation and though there is an enabling provision to condone the delay that cannot be achieved in the indirect manner unless commencement of the appeal has been preferred permitting the revenue to agitate question, which did not arise per se in the order of the Tribunal relating to I.T.A. No. 3125/04 as reflected in para 6 of the order of the tribunal. It will cause great prejudice to the assessee, if the application of this nature is allowed.

9. We have bestowed our attention to the submissions made at the bar.

10. It is not necessary to opine on the scope of Order VI Rule 17 of the Code of Civil Procedure being applicable in a proceeding of this nature particularly as it relates to amendment of pleading and the Court is now examining an appeal under section 260-A of the Act, the question would be more relevant within the scope of section 260-A of the Act.

11. We find that though some of the questions possibly could relate to subject matter of the order in the order of the Tribunal passed in ITA No. 939/2003 the revenue having not agitated that as an appeal expressly in that order and on the other hand having chosen to characterize this appeal only as against the order passed by the Tribunal in ITA No. 3125/2004 and unfortunately for the revenue even the reference to the number of the appeal before the CIT (appeals) corresponding to the number of the appeal that had been preferred by the assessee being only with reference to the further appeal in ITA No. 3125/04, we find allowing the application of this nature at this point of time and also to permit the revenue to agitate such question by further alteration of the Memorandum of Appeal etc., is not a feasible course of action at this point of time. Particularly as one of the contentions urged by Mr. A. Shankar, learned counsel for the assessee is that if it is to be taken as an appeal against the order passed in I.T.A. No. 3125/04 questions not relating to this appeal cannot be permitted to agitate and submission is technically sound within the scope of section 260-A of the Act.

12. It is therefore, not proper to allow the application of this nature at this point of time. However, it is open for the revenue to agitate the matter separately and in a manner permitted in law and if they are so desirous to pursue the question, arising out of the order of the Tribunal relating to the order in I.T.A.No.939/2003.

13. Insofar as the merits of the present appeal is concerned, Mr. A. Shankar, learned counsel for the assessee has raised a preliminary objection regarding maintainability of this appeal at this point of time pointing out that the revenue that is involved is not more than Rs. 2,00,000/- and therefore, in terms of board Circular No. 2/05, dated 24.10.2005 the appeal should not be entertained.

14. While this aspect is not disputed by Mr. M. Thirumalesh, learned counsel for the Revenue. What is submitted is that such question about the binding nature of the board Circular is made subject matter of appeal before the Supreme Court in the case of Ranka v. Ranka and that appeal is pending. It is desirable to keep this appeal pending rather than disposing it on the preliminary objection and on a technicality.

15. Second submission is that the hearing of the appeal can be deferred and in the interregnum the revenue may consider the possibility of referring an independent appeal as against the order passed by the Tribunal in ITA No. 939/2003 with suitable applications seeking for condonation of delay etc.

16. Insofar as the pendency of appeal before the Supreme Court is concerned this Court has already disposed of many such appeals notwithstanding such pendency of the appeals and therefore, we do not find it proper to keep this appeal alone pending and on the second aspect of deferring the hearing of this appeal, we find that the question, if needs to be agitated in appeal with the revenue may intend to prefer as against the order passed by the Tribunal in I.T.A. No. 939/2003 by way of independent appeal will not in any way get affected by the disposal of this appeal in one way or the other, as that question is an independent question and that question is not gone into in any manner on merits in this appeal.

17. Therefore, without prejudice to the contentions that possibly may arise elsewhere and in accordance with law, we dismiss this appeal only on the question of maintainability in terms of the board Circular referred to above without going into the merits of the appeal and questions are not answered accordingly. I.A. does not survive for consideration, stands dismissed.