Case Law Details
CIT Vs Satish Kumar Agarwal (Rajasthan High Court)
The Rajasthan High Court in CIT vs Satish Kumar Agarwal dealt with an appeal from the Income Tax Department, challenging a ruling by the Income Tax Appellate Tribunal (ITAT), Jaipur. The case arose from the assessment of the respondent for the year 2015-16, where a deduction under Section 54B of the Income Tax Act was disallowed. The assessment was revised under Section 263, contending that Section 50-C should have been invoked. The ITAT ruled in favor of the respondent, and the department appealed, citing an audit objection and exceptions under Circular 3 of 2018. However, with the issuance of Circular 9 of 2024 by the Central Board of Direct Taxes (CBDT), the monetary limits for filing appeals were enhanced, and this circular applied retrospectively to pending appeals.
The court held that Circular 9 of 2024, which increased the monetary thresholds for appeals, made the appeal non-maintainable as the tax effect was below the specified limit. The court dismissed the appeal, emphasizing that the exceptions in earlier circulars, including audit objections, were no longer applicable, as Circular 5 of 2024 had superseded them. This ruling highlights the application of recent CBDT circulars aimed at reducing tax litigation, with monetary limits and exceptions being central to the case’s dismissal.
Assessee was represented by Sh. Sidharth Ranka, Adv. and Other Advocates
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. The issue involved in these appeals is similar and is being decided by this order. The facts are being noted from D.B. Income Tax Appeal No.8/2021.
2. This appeal is filed against the order dated 09.09.2020 passed by the Income Tax Appellate Tribunal, Jaipur (for short ‘the Tribunal’).
3. The brief facts are that the respondent filed income tax return pertaining to assessment year 2015-2016, declaring total income of Rs.20,04,170/-. The assessment under Section 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) was finalized on 29.12.2017, disallowing the deduction of Rs.91,83,373/- claimed under Section 54B. Assessment order was revised under Section 263 of the Act on the ground that Section 50-C of the Act ought to have been invoked. The assessment order was set aside and matter remanded for assessment to be framed in view of the observation made by the Revisional Authority. The appeal of the assessee was accepted by the Tribunal on 09.09.2020, hence the present appeal.
4. The tax effect in the appeal is Rs.13,93,590/-. The case of the department is that the revision was done on the basis of the audit objection accepted by the department and the appeal falls within exceptions carved out in Circular No.3 of 2018 dated 11.07.2018.
5. The issue involved is as to whether after issuance of Circular No. 9 of 2024 dated 17.09.2024, the exceptions of Circular 3 of 2018 are applicable to pending appeals.
6. The contention of learned counsel for the appellant is that Para 5 of Circular 9 of 2024 is giving retrospective effect only to the enhanced monetary limit and not to the exceptions in Para 3.1 & 3.2 of Circular 5 of 2024.
7. Learned counsel for the respondent submits that Circular 9 of 2024 is applicable to all the pending appeals and appeals to be filed, there is no distinction made between appeals to be filed and pending appeals.
8. In a measure for reducing litigation circulars under Section 268A of the Act are issued by the Central Board of Direct Taxes (CBDT) from time to time. The monetary limits for filing appeal by department before the Tribunal, High Court and Supreme Court are fixed and also the exceptions for filing appeals inspite of low tax effect.
9. For dealing the issue, it would be pertinent to look into the language of the previous circulars. In Instruction No. 5 of 2008 dated 15.05.2008, Instructions No. 3 of 2011 dated 09.02.2011 and No. 5 of 2014 dated 10.07.2014, Para 11 in all three instructions was that these shall apply to the appeals to be filed on or after the date of issuance and the appeals filed earlier shall be governed by the instructions operating at the relevant time. Circular No. 21 of 2015 dated 10.12.2015 was issued in supersession of Instruction No. 5 of 2014. The monetary limit for filing the appeals was enhanced and para 8 stipulated exceptions for filing the appeal inspite of the low tax effect. Para 10 stated that the Circular will apply retrospectively and the pending appeals below specified monetary limit may be withdrawn/not pressed. Further that the appeals before the Supreme Court shall be governed by the instructions operative at the time of filing of these appeals.
10. Circular No.3 of 2018 dated 11.07.2018 superseded Circular 21 of 2015. The monetary limits were enhanced. In Para 10 four exceptions for filing appeals in case having tax effect less than specified monetary limits were set out. The exception in clause (c) of Para 10 is being relied upon by the department in this case.
11. Para 10(c) and 13 of circular 3 of 2018 are reproduced:-
Para 10(c)
“Where Revenue Audit objection in the case has been accepted by the Department”.
Para 13 :-
“This Circular will apply to SLPs/appeals/cross objections/ references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/appeals/cross objections/ references. Pending appeals below the specified tax limits in para 3 above may be withdrawn/ not pressed.”
12. From para 13, it is evident that the Circular had retrospective application and the appeals below specified monetary limits were to be withdrawn or not pressed.
13. Circular 3 of 2018 was modified by Circular 17 of 2019 dated 08.08.2019. The monetary limits were further enhanced and para 5 of the Circular was substituted. Para 4 of this Circular clarified that the modification shall apply with effect from the date of issue of the Circular.
14. Circular 3 of 2018 and Circular 17 of 2019 were superseded by Circular 5 of 2024 dated 15.03.2024. The monetary limits were enhanced and the exceptions for filing appeals inspite of low tax effect were in Para 3.1 & 3.2. The exception of audit objection having been accepted by department was no longer there. The Circular was made applicable to the appeals to be filed from the date of issue of the Circular.
Para 10 of the Circular is quoted below:-
“This issues under section 268A of the Act and shall come into effect from the date of issue of this Circular. This Circular will apply to SLPs/appeals to be filed henceforth before the SC/HCs/Tribunals.”
15. By Circular 9 of 2024 dated 17.09.2024, monetary limits specified in Circular 5 of 2024 were enhanced. The exceptions in Para 3.1 & 3.2 of Circular No.5 of 2024 were retained.
16. Para 5 of Circular 9 of 2024 is reproduced:-
“The modifications shall come into effect from the date of issue of this Circular. This Circular will apply to SLPs/appeals to be filed henceforth in SC/HCs/Tribunal. It shall also apply to the SLPs/appeals pending before Supreme Court/High Courts/Tribunal, which may accordingly be withdrawn.”
Para 5 made this circular applicable to the appeals to be filed thereafter and also to the appeals pending before the Supreme Court, High Court and the Tribunal.
17. Circular 9 of 2024 albeit, enhanced the monetary limits but retained the exceptions in Para 3.1 & 3.2 of Circular 5 of 2024. From perusal of Para 5 of Circular 9 of 2024, it is evident that the circular shall apply to the appeals to be filed henceforth and also to the appeals pending before the Supreme Court, High Court and the Tribunal. Thereby making monetary limit specified in it and exceptions in Para 3.1 & 3.2 of Circular 5 of 2024 applicable to all the pending appeals. In other words, Circular 5 of 2024 was applicable prospectively but Circular 9 of 2024 while enhancing the monetary limit, retaining the exceptions of Circular 5 of 2024 made it applicable to the pending appeals also.
18. The contention of learned counsel for the appellant that the Circular give retro respective effect only to the monetary limit lacks merit. In case the argument is accepted, the result would be of adding words to the clear and plain language of Para 5 of Circular 9 of 2024.
19. The reliance of the counsel for the appellant on the exceptions carved out in Circular 3 of 2018 cannot be sustained. Circular 3 of 2018 was superseded by Circular 5 and the exceptions of Circular 5 with the enhanced monetary limits in Circular 9 of 2024 were made applicable to pending appeals.
20. The appeals are dismissed as non-maintainable in view of the Circular 9 of 2024.
21. The proposed substantial questions of law are kept open.
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