Judgment:
1. This appeal is preferred by the Revenue against the order of the learned CIT(A)-Raipur, dt. 28th July, 2000, and a solitary ground raised therein by the Revenue reads as under: "On the facts and in the circumstances of the case the learned CIT was not justified in deleting the addition of Rs. 1,55,000 made by the AO on account of unexplained investment in construction of building." 2. It appeared from the record that the tax effect of this appeal filed by the Revenue on 13th Sept., 2000, being less than Rs. 1,00,000, it has been filed in contravention of the Board instruction. The same, therefore, was treated as covered by the decision of this bench in the case of ITO v. Jagatpal Singh (ITA No.597/Nag/97 dt. 25th Sept., 2001 [reported at (2002) 75 TTJ (Nag) 401--Ed.] and accordingly was fixed for hearing out of turn. At the time of hearing, the learned Departmental Representative, raised a preliminary objection stating that the Revenue effect of this appeal, taking into consideration the tax as well as the interest, exceeds Rs. 1,00,000 and, therefore, the case is not covered by the CBDT Instruction No. 1979 dt. 27th March, 2000. The contention of the learned counsel for the assessee, on the other hand, was that the tax effect alone has to be considered for deciding the applicability of the Board instruction and the quantum of interest which may or may not be payable by the assessee in case the Revenue succeeds in its appeal is not to be taken into consideration.
Keeping in view this contradictory stand taken by the learned representatives of both the sides, it was thought fit by the Bench to hear the arguments of both the sides on this preliminary issue in order to render the verdict on the same.
3. The learned Departmental Representative at the outset referred to the decision of Chandigarh Bench of Tribunal in the case of ITO v.Dharmvir (2002) 253 ITR 1 (Chd)(AT) to explain the object behind the instructions issued by the CBDT from time to time in the present context (hereinafter referred to as the "said instruction"). He submitted that the said instructions have been issued by the CBDT to avoid unnecessary litigation in small cases so as to help the small assessees who might find it difficult to defend themselves in the appeals filed against them by the Revenue having regard to the cost and efforts involved therein. He submitted that when the very purpose of the said instructions is to avoid the cost of litigation involved in pursuing the appeal, what is relevant to consider is the quantum of revenue which the Department is going to get if it succeeds in it's appeal. He submitted that such total quantum which the Revenue is expected to generate on succeeding in it's appeal includes tax as well as interest since both these items constitute a source of revenue for the Department. He, therefore, contended that the total monetary gain arising out of the Revenue's appeal is relevant and vital and the same in totality has to be considered for the purpose of ascertaining the revenue effect of the Departmental appeal. Referring to the Instruction No. 1979 issued by the CBDT on 27th March, 2000, which is applicable to the present case, he pointed out that an expression "cumulative revenue effect" is used by the Board specifically in the last portion of para 2 of the said circular which clearly indicates that the total revenue effect has to be considered for working out the monetary limit. He also invited our attention to the earlier Instruction No. 1777 issued by the CBDT on 4th Nov., 1987, and pointed out that the expression "revenue effect" was used by the Board in para No. 3 of the said circular while explaining the method of working out the monetary limit, He submitted that the monetary limits specified by the CBDT have been revised on number of occasions by issuing instructions to that effect from time to time but the concept of revenue effect remains applicable throughout this period. He, therefore, contended that taking into consideration the intention behind issuing these instructions by the CBDT and the specific expression "revenue effect" used in the said instructions, the total revenue effect inclusive of tax as well as interest should be considered for ascertaining the monetary limit of this Departmental appeal.
4. The learned counsel for the assessee submitted that the expression "tax effect" has been consistently used by the Board in the various instructions issued from time to time in connection with the norms specified for filing appeals before the Tribunal. In this regard, he invited our attention to the copies of the said instructions issued by the CBDT on 20th May, 1970, 5th April, 1980, 7th Dec., 1984, 6th April, 1985, 4th Nov., 1987, 28th Oct., 1992 and 27th March, 2000, placed in his paper book and pointed out that the expression "tax effect" has been specifically used in the said circulars issued by the Board.
Relying on the decision of Chandigarh Bench of Tribunal in the case of ITO v. Dhamvir (supra), he submitted that the instructions are issued by the CBDT after a great deal of deliberation and discussion where every aspect of the matter more particularly the question of loss of revenue is examined in depth and these instructions under consideration in the present case cannot be an exception. He also contended that such instructions are not issued by the CBDT in a light-hearted manner and it was well aware of the definition of the word "tax" when it was used in the impugned instructions. In this regard, he invited our attention to the Board Circular F. No. 16/87/67-IT(B) dt. 10th July, 1967, in which a reference was made to the definition of the word "tax" expressly given in Section 2(43) of the IT Act, 1961, with an observation recorded by the Board that the said definition is exhaustive and does not include within its connotation, concepts of penalty and interest leviable under the other provisions of the Act.
His contention, therefore, was that the Board was very much conscious about the meaning of the word "tax" while issuing the said instructions laying down, Inter alia, the norms for filing appeals before the Tribunal.
5. Referring to the definition given in Section 2(43), the learned counsel for the assessee then proceeded to explain the exact and express meaning of the word "tax" and it's distinct character from "interest". In this regard, the referred to Section 140A wherein these two terms are mentioned separately and independently of each other. He further relied on the decision of Hon'ble Calcutta High Court in the case of Shreeniwas & Sons vs. ITO & Ors. (1974) 96 ITR 562 (Cal) wherein it was held by the Hon'ble Calcutta High Court that tax and interest are different in character and as tax has been defined in Section 2(43) of the Act, there is no scope for any argument that interest is additional tax, He also relied on the decision of Hon'ble Bombay High Court in the case of CIT v. P.B. Hathiramani (1994) 207 ITR 483 (Bom) wherein applying the ratio laid down by Hon'ble Calcutta High Court in the case of Shreeniwas & Sons v. ITO (supra), the Hon'ble Bombay High Court held that the character of tax and interest are different. He, therefore, contended that the term "tax" has been defined expressly in Section 2(43) and the expression used by the CBDT in the relevant instructions being the "tax effect", the contention of the learned Departmental Representative that interest amount has also to be considered for working out the monetary limit of the Departmental appeal cannot be accepted. He also pointed out that the Department has not raised any ground relating to the issue of levy of interest in the present appeal and in a solitary ground raised therein, it has disputed merely the additions made by the AO and deleted by the learned CIT(A).
His contention in this regard was that the tax effect is to be ascertained on the basis of grounds raised in the relevant appeal and there being no ground regarding the levy of interest raised by the Revenue, nobody is allowed to travel beyond the scope of the grounds specifically raised in the appeal filed before the Tribunal.
6. In the rejoinder, the learned Departmental Representative submitted that the levy of interest being automatic and mandatory, no specific ground is required to be raised in the appeal and this issue being a consequential one, the interest is generally levied automatically consequent to the decision on main issue. He also submitted that even the assessees never raise a ground claiming interest payable to them on the amount of refund granted as a result of appellate order but still such interest is paid to the assessees as a consequence of the appellate decision on the main issue.
7. We have considered the rival submissions and also perused the relevant material on record. It is observed that a policy decision adopting a selective approach in filing or recommending appeals and references to the Tribunal, High Courts and Supreme Court was taken by the Board way back in 1968 and guidelines were laid down for this purpose vide it's Circular No. 91/47/68-ITJ(38) issued on 14th Oct., 1968. Subsequently Instruction No. 173 was issued by the Board on 20th May, 1970, in which a monetary limit for filing a reference application against a Tribunal's order was specified for the first time. The relevant para No. 3 of the said Instruction is reproduced below: "While considering the desirability of filing a reference application against the Tribunal's order, the CITs should keep in view the guidelines laid down in the Board's Circular dt. 14th Oct., 1968, referred to above. The Board would generally be reluctant to advise a reference unless the tax effect is more than Rs. 5,000 or a general question of law affecting a large number of cases is involved. Where the Board have already authorised reference to a High Court on a particular issue in a case from a CIT's charge and it is pending, the CIT/CITs should file reference applications on the same issue in all cases from that charge; the Board's approval need not be taken afresh for every case. In case, however, the CIT does not propose to file a reference in such a case, for reasons other than of modest tax effect, he should report the matter for the Board's approval." . (emphasis supplied in bold italics) 8. A perusal of the aforesaid circular reveals that the expression "tax effect" was specifically used by the Board while prescribing a monetary limit in the said instruction. Thereafter the monetary limit as well as the other norms for the purpose of accepting the decisions of the Tribunal were revised by the CBDT vide its Instruction No. 1328, issued on 5th April, 1980. It was also decided by the Board that no Departmental appeal on questions of fact be filed against the order of the first appellate authorities if the tax effect or reduction in penalty is Rs. 5,000 or less in respect of income-tax appeal and Rs. 2,000 or less in respect of an appeal under other direct taxes. Para Nos. 1, 3.1 and 4 of the said circular being relevant in the present context, are reproduced below: "At present the board exercises centralised control in regard to filing of references under the IT Act and other acts. As per Instruction No. 173 (F. No. 277/1/70-ITJ, dt. 20th May, 1970) the CITs are expected to send reports to the board only where they recommend a reference or where they have some doubts. Where the CITs propose to accept the decisions of the Tribunal they are not expected to refer the matter to the board. The board is generally reluctant to advise reference unless the tax effect is more than Rs. 10,000 or a general question of law affecting a large number of cases is involved. Further, where the Board has already authorised reference to a High Court on a particular issue in a case from a CITs' charge and it is pending, the CIT filed reference applications on the same issue in all cases from the charge; the board's approval is not required to be taken afresh for every case. If the CIT does not propose to file a reference in such a case for reasons other than of low tax effect, he is effected to send a report in the matter for obtaining the board's approval." 3.1. The present monetary limits of Rs. 10,000 for reference to the High Court and of Rs. 30,000 for appeal to the Supreme Court laid down in Instruction No. 284, dt. 10th Jan., 1975, will continue. The limit of Rs. 10,000 for reference to the High Court, however, shall be relaxed where the question of law is repetitive and the cumulative tax effect in a number of cases is bound to be substantial. In such cases whereas the first reference to the High Court may be filed howsoever low the tax effect may be subsequent references should be filed only if the tax effect in each reference is more than Rs. 5,000.
4. The Board has further decided that no Departmental appeal on questions of fact need be filed against the order of the AACs/CITs if the tax ettect/reduction in penalty is Rs. 5,000 or less in respect of an IT appeal and Rs. 2,000 or less in respect of an appeal under other direct taxes. Repetitive appeals need not filed on the same legal issue if the tax effect in each such order is Rs. 1,000 or less." 9. From the perusal of the aforesaid instruction issued by the Board on 5th April, 1980, it is evident that the expression "tax effect" was specifically and invariably used by the CBDT in the context of monetary limits specified and revised vide this circular. These monetary limits specified in the circular dt. 5th April, 1980, were again revised by the Board vide its Instruction No. 1573, dt. 7th Dec., 1984 and No.1612, dt. 6th April, 1985. It is pertinent to note here that in all these instructions issued by the CBDT resting with the Instruction dt.
6th April, 1985, the specific expression "tax effect" was used by the CBDT and there was no mention of or reference to the words "revenue effect".
10. Thereafter a fresh Instruction No. 1777 was issued by the CBDT on 4th Nov., 1987, whereby the monetary limits laid down in the earlier guidelines for filing the appeals before the Tribunal as well as before the Supreme Court and for making a reference before the High Court were revised as given in para No, 3 of the said instruction, which is reproduced below: "The Board desire that while deciding the question of filing an appeal/reference in respect of an adverse judgement of High Court/ITAT etc., the Chief CIT should follow the following guidelines: Filing of Departmental appeal/reference should be selective.
Guidelines were issued laying down monetary limits of revenue effect of Rs. 10,000 for filing appeals before ITAT, Rs. 30,000 for Reference before High Court and Rs. 60,000 for appeal to Supreme Court (Instruction No. 1573, dt. 12th July, 1984 and 1612, dt. 6th April, 1985). These guidelines should be adhered to subject to the exceptions given below. For the purpose of working out monetary limit, the cumulative revenue effect of the issue in the assessee's case for all the years upto the year for which returns have been filed should be taken into consideration. Where the same issue is involved in different cases of a group (e.g. industrial house, family, connected cases, etc.) the revenue effect of the group and not the individual case should be taken into account for the purpose of the monetary limit. While applying the monetary limits, the effect of carry forward, effect of consequential addition/deletions in other years should be kept in view. In cases of firms/AOP the revenue effect in cases of partners/members be also taken into account." 11. In the aforesaid instruction, the expression "revenue effect" was used by the CBDT for the first time while revising the monetary limits.
As already discussed, the specific expression "tax effect" was invariably used by the CBDT in the earlier instructions, but the reference made in the Instruction No. 1777, dt. 4th Nov., 1987, to the expression "revenue effect" gave rise to the controversy as raised by the learned Departmental Representative in the present case. It is worthwhile to note here that in the said instruction issued on 4th Nov., 1987, a reference was made by the Board to the earlier instructions No, 1573, dt. 7th Dec., 1984 and No. 1612, dt. 6th April, 1985, and it was categorically stated therein that the guidelines issued in the said instructions should be strictly adhered to subject only to the exceptions given in the instruction issued on 4th Nov., 1987. It, therefore, appears that the expression "revenue effect" in the said Instruction was used by the Board synonymously with the expression "tax effect".
12. Before us, the learned Departmental Representative has relied on the decision of Chandigarh Bench of Tribunal in the case of ITO v.Dharmvir (supra) to explain the objects behind issuing the said instructions by the CBDT. In the said decision, after discussing such objects as well as the manner and method adopted by the CBDT in issuing such instructions, the Tribunal observed on p. 6 of the report that the said instructions definitely aim at to redress problems of small assessees and in that way are benevolent. It is a settled position that the benevolent circulars are to be interpreted in a broad and liberal manner. In the case of CIT v. K.T.M.S. Mohammed (1981)128 ITR 580 (Mad), the Hon'ble Madras High Court has observed that when the tenor of the circular suggests that it has to be applied in a sympathetic manner, such circular has to be interpreted in a broad manner and not in a narrow sense to deprive any benefit that may be intended to be conferred under that circular. A similar view was expressed by the Hon'ble Supreme Court in the case of Shashi Gupta v. Life Insurance Corporation of India AIR 1995 (SC) 1367 while holding that when two interpretation of a circular are possible, one which is favourable to the policyholder and advances the object behind issuing the said circular, is to be adopted. Moreover, when the specific expression "tax effect" was consistently used in the earlier instructions, it is not proper on the part of the Department to raise the present controversy merely on the basis of the expression "revenue effect" used in the Instruction No. 1777, dt. 4ht Nov., 1987, which was issued in continuation of the earlier instructions because consistency and discipline are of far greater importance than winning or losing any appellate proceedings.
13. The learned counsel for the assessee has invited our attention to the Board Circular F. No. 16/87/67-IT(B) issued by the CBDT on 10th July, 1967, wherein the definition of the word "tax" given in Section 2(43) was considered by the Board before coming to the conclusion that the said definition is an exhaustive one and does not include within its connotation, concepts of penalty and interest leviable under the other provisions of the Act. It is thus evident that the Board was conscious about the scope and ambit of the expression "tax" and it's distinct character from interest when the earlier instructions in the present context were issued wherein the expression "tax effect" was specifically used. In these circumstances, the contention of the learned Departmental Representative merely relying on the expression used in the Circular dt. 4th Nov., 1987, that the revenue effect of the appeal inclusive of tax and interest has to be considered, appears to be far fetched and we find it difficult to accept the same.
14. In any case, the Instruction which is applicable to the present appeal is the one bearing No. 1979 issued on 27th March, 2000, para No.2 of which being relevant in the present contexts, is reproduced below : " In supercession of the above instruction, it has now been decided by the Board that appeals will be filed only in, cases where the tax effect exceeds the revised monetary limits given hereunder" (ii) Appeal under s. 260A/Reference under s. 256(2) Before the High Court The new monetary limits would apply with reference to each case taken singly. In other words, in group cases, each case should individually satisfy the new monetary limits. The working out of monetary limits will therefore not take into consideration the cumulative revenue effect as envisaged in Board's earlier instruction referred to the above." 15. From a perusal of the above, it is quite clear that the specific expression "tax effect" has been used by the CBDT in the said instruction. By this circular, the requirement of working out the cumulative revenue effect prescribed in the earlier instruction issued on 4th Nov., 1987, has been dispensed with by the Board and in this limited context, the Board has used the words "revenue effect" in the latest Instruction dt. 27th March, 2000. In the said Instruction, the Board has also categorically stated that the same is being issued in supersession of the earlier Instructions No. 1777, dt, 4th Nov., 1987 and No. 1903 dt. 28th Oct., 1992, which makes it amply clear that as a result of this instruction issued subsequently, the earlier instructions ceased to exist. In the case of CIT v. God Granites (1999) 240 ITR 343 (Kar), the Hon'ble Karnataka High Court has held that the Board can modify its view taken in a circular by issuing another circular and in view of the subsequent circular, the earlier circular ceases to exist.
16. As already observed, the specific expression "tax effect" has been used by the Board in its latest Instruction No. 1979, issued on 27th March, 2000, superseding, inter alia, its earlier instruction No. 1777 dt. 4th Nov., 1987, wherein the expression "revenue effect" was used.
It, therefore, follows that what is relevant for working out the monetary limit of the Departmental appeal filed after 1st April, 2000, is the "tax effect" and not the "revenue effect" for working out the monetary limit. Before us, the learned counsel for the assessee has explained the express meaning of the word "tax" referring to the exhaustive definition given in Section 2(43). He has also relied upon the decision of Hon'ble Calcutta High Court in the case of Shreenivas & Sons v. ITO (supra) as well as that of Hon'ble Bombay High Court in the case of C1T v. P.B. Hathiramani (supra) for the proposition that "tax" and "interest" are different in character. He has further laid his hands on the CBDT Circular F. No. 16/87/67-IT(B) dt. 10th July, 1967, wherein after taking into consideration the exhaustive definition of the word "tax" given in Section 2(43), the Board has made it clear that the same does not include within its connotation concepts of penalty and interest leviable under the other provisions of the Act. Keeping in view this undisputed position and considering the specific expression "tax effect" used in the latest Board Instruction No. 1979, issued on 27th March, 2000, we are of the considered opinion that what is to be taken into consideration for working out the monetary limit of the appeals filed by the Revenue after 1st April, 2000, is the tax effect alone and the interest which may or may not be payable by the assessee in case the Revenue succeeds in its appeal is not to be taken into consideration for the purpose of working out the monetary limit.
17. In the present case, the tax effect of the Departmental appeal is admittedly less than Rs. 1,00,000 and thus it is clearly filed by the Revenue in contravention of the aforesaid Instruction No. 1979, dt.
27th March, 2000, issued by the CBDT which is binding on the Department. In the case of CIT v. Cameo Colour Co. (2002) 254 ITR 565 (Bom), the . Hon'ble Bombay High Court has held that an appeal or reference contrary to the instructions issued by the CBDT in the circular will not be considered by the Courts. Their Lordships of Hon'ble High Court, therefore, proceeded to dismiss the appeal presented by the Revenue in limine as the same was found to be contrary to the binding instructions issued in the CBDT circular. As such, respectfully following the said decision of the Hon'ble Bombay High Court, we dismiss this appeal filed by the Revenue in contravention of the aforesaid CBDT's circular which is binding on the Revenue.
18. The cross-objection filed by the assessee has not been pressed by the learned counsel for the assessee. Accordingly, the same is dismissed as not pressed.
19. In the result, the appeal of the Revenue as well as the cross-objection of the assessee are dismissed.