CIT vs. Shambhubhai Mahadev Ahir (Gujarat High Court – Full Bench)

CBDT’s low tax effect circulars have prospective effect

The department filed an appeal in the High Court in 2008, the tax effect of which was more than Rs. 4 lakhs but less than Rs. 10 lakhs. The assessee claimed, relying on Sureshchandra Durgaprasad Khatod (HUF) & Madhukar K. Inamdar 318 ITR 149 (Bom), that as Instruction No. 3 of 2011 dated 9.2.2011 issued by the CBDT applied to pending appeals and as the tax effect was lower than the sum of Rs. 10 lakhs prescribed therein, the appeal was not maintainable. The department argued that the maintainability of the appeal had to be decided on the basis of the CBDT Instruction dated 15.5.2008 which was in force at the time of filing the appeal. The matter was referred to the Full Bench of the High Court. HELD by the Full Bench:

Clause 11 of Instruction No. 3/2011 dated 9.2.2011 specifically states that “this instruction will apply to appeals filed on or after 9.02.2011. However, the cases where appeals have been filed before 9.02.2011 will be governed by the instructions on this subject, operative at the time when such appeal was filed.” Similarly, clause 11 of instruction No. 5/2008 dated 15.5.2008 specifically provides that “this instruction will apply to appeals filed on or after 15.05.2008. However, the cases where appeals have been filed before 15.05.2008 will be governed by the instructions on this subject, operative at the time when such appeal was filed”. There is, thus, no ambiguity in the instructions of either 2011 or 2008 as regards the applicability of those instructions in respect of the appeals, and, at the same time, it has also been made clear that if those appeals are not filed after the given dates mentioned in those instructions, the fate of the appeals will be governed in accordance with the instructions prevailing on the date of presentation of such appeals. In view of such clear legislative intention, we are unable to hold that even if an appeal is filed prior to 9.02.2011, the same would be barred notwithstanding the fact that at the time of filing such appeal, the same was not barred by the then instructions of the CBDT (Sureshchandra Durgaprasad Khatod reversed, Vijaya V. Kavekar (Bom), Madhukar K. Inamdar (Bom) & other judgements dissented from)