CIT vs. M/s Ranka & Ranka (Karnataka High Court)

CBDT’s decision to confine the effect of low tax effect Instruction to fresh appeals is contrary to the object of s. 268A & the National Litigation Policy

The department filed an appeal in the year 2005, the tax effect of which was less than Rs. 10 lakhs. The High Court had to consider whether inspite of para 11 of CBDT’s Instruction No. 3 of 2011 dated 9.2.2011 which declared that that the bar on filing departmental appeals with tax effect of less than Rs. 10 lkahs would apply only to appeals filed after 9.2.2011, the Instruction could still be considered to be applicable to pending appeals. HELD by the High Court dismissing the appeal as non-maintainable:

Though paragraph 11 of Instruction No. 3/2011 provides that the revised tax limits will apply only to fresh appeals, the same has to be held to be applicable to pending appeals as well because (i) the Department has not kept in mind the object with which such Instructions have been issued from time to time; (ii) the object of s. 268A which empowers the CBDT to issue such instructions & under the National Litigation Policy, the Government has to be an “efficient & responsible” litigant and not a “compulsive” litigant and appeals should not be pursued in low-tax matters, (iii) a beneficial circular has to be applied retrospectively (iv) extending the benefit of the Instruction to pending matters will be only in the nature of a one-time settlement akin to the KVSS & VDIS, (v) by experience it is seen that tax is levied by defeating Parliament’s intention to grant incentives to trade and industry & where the Tribunal has come to the rescue of the assessees, appeals are filed mechanically & compulsively with the approach of “let the Court decide” & to “save their skin”; (vi) there would be an anomaly in confining the Instruction to fresh appeals because if the Tribunal has decided a case expeditiously, such matters will be denied the benefit of the bar on filing appeals while if there is no disposal by the Tribunal owing to pendency etc, the benefit accrues to the assessee. The benefit to which the assessee is entitled cannot depend on the date of the decision over which neither the assessee nor revenue has any control; (vii) the Instruction would be discriminatory, if held to be prospective only. It can be saved from the vice of discrimination by holding it as retrospective.