1. These appeals are filed at the instance of the revenue. At the time of hearing, learned counsel appearing on behalf of the assessees raised a preliminary ground with regard to the admissibility of appeals on the ground that the tax effect in each case being less than Rs. 1 lakh, the appeals were filed in violation of the policy decision taken by the CBDT vide Instruction No. 1979 dated 27-3-2000 and thus liable to be dismissed as unadmitted.
2. Learned DR submitted that in respect of appeals filed under the Wealth-tax Act different monetary limits are prescribed by the CBDT and thus the appeals were filed in consonance with the policy decision taken by the CBDT. In support of his submissions, learned DR filed written submission and placed before us the following instructions issued by the CBDT from time to time.
3. Taking us through the instructions issued by the CBDT from time to time, learned DR submitted that the first instruction was issued by the CBDT prescribing monetary limit of Rs. 5,000/- in respect of Income-tax appeals and Rs. 2,000/- in respect of the appeals under other direct taxes and further an appeal before the Appellate Tribunal should not be filed unless the tax effect is in excess of the monetary limit prescribed since the main objective was to reduce the litigation and also the costs involved therein. Instruction No. 1612 deals with enhancement of the monetary limits prescribed in Instruction No. 1328.
The monetary limits before the Appellate Tribunal were changed to Rs. 10,000/- for income-tax and Rs. 5,000/- for other direct taxes. Learned DR submits that CBDT always provided for separate monetary limits in respect of the departmental appeals before Appellate Tribunal with regard to other taxes. He has taken us through Instruction No. 1777 and in particular paras 3 and 6 therein to submit that the guidelines issued vide Instruction No. 1612 dated 6-4-1985 should be adhered to subject to certain exceptions i.e., for the purpose of working out monetary limit, the cumulative revenue effect of the issue in the assessees' cases for all the years, up to the year for which returns have been filed, was directed to be taken into consideration. In para-6, it was mentioned that instructions would apply to litigation under wealth-tax also. Drawing support from the above instruction, learned DR submits that separate monetary limit prescribed in respect of the appeals pertaining to other taxes were directed to be adhered to which implies that even as per instruction No. 1777 the monetary limit prescribed for wealth-tax appeals continued at Rs. 5,000/- only.
Learned DR has taken us through Instruction No. 1903 wherein it was specified as under: "appeal before the ITAT (IT matters) is just Rs. 25,000" ".........other guidelines as laid down in the Board's Circular No. 1777 dated 4-11-87 (F.No. 279/110/87-ITJ) for computing the tax effect etc., will continue to be applicable..............." The case of the learned counsel is that the guidelines as laid down in Board's Instruction No. 1777 for computing the tax effect were not totally altered which is made clear from the observation that the monetary limit of Rs. 25,000/- with regard to the appeals before ITAT is applicable to income-tax matters only and other guidelines laid down in Instruction No. 1777 continue to be applicable. Thus, in so far as the wealth-tax appeals are concerned, the monetary limit of Rs. 5,000 remained unchanged. He has then taken us through Instruction No. 1979 to submit that the monetary limit for filing appeals before Appellate Tribunal was enhanced to Rs. 1 lakh only with regard to the income-tax matters which implied that in so far as the wealth-tax appeals are concerned, the monetary limit of Rs. 5,000/- set vide Instruction No.1612 was not enhanced. Learned DR has also referred to first two paras of Instruction No. 1979 to submit that the present instruction is in supercession of the earlier instruction only with regard to the appeals filed under the Income-tax Act. Paras 1 and 2 are extracted here for immediate reference.
"Reference is invited to Board's Instruction No. 1903 dated 28^thOctober, 1999 and Instruction No. 1777 dated 4^thNovember, 1987 wherein monetary limits of Rs. 25,000/- for departmental appeals (in Income-tax matters) before the Appellate Tribunal, Rs. 50,000/- for filing reference to the High Court and Rs. 1,50,000/- for filing appeal to the Supreme Court were laid down.
2. In supercession of the above instruction, it has now been decided by the Board that appeals will b filed only in cases where the tax effect exceeds the revised monetary limits given here under:- (Tax effect) (i) Appeal before the Appellate Tribunal (in income-tax matters) Rs. 1,00,000/- (ii) Appeal Under Section 260A/reference Under Section 256(2) before the High Court. Rs. 2,00,000/- 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 above." We contended that the Board's Instruction Nos. 1903 and 1777 were not superceded in full. He also referred to Instruction No. 1985 to submit that the suppression 'each case taken singly' would not mean each assessment year but two appeals of the same assessee if they were filed together. Learned DR submitted that in the following appeals, the cumulative tax effect for asst. years 1993-94 and 1994-95 in respect of each assessee exceeded Rs. 1 lakh.Name of the beneficiary WTA Nos.Nb. Ghousuddin Ali Khan 141-142/H/03Syed Jaffar Ali Khan 75-76-Hyd/03Sb. Sakina Begum 85-86/H/03Syed Shah Rafiq Mohiuddin 90-91/H/03 4. Even otherwise, the administrative Instructions issued by the department are not binding upon the appellate authorities and once an appeal is filed by the department, it is the duty of the appellate authority to decide the appeals on merits. In this regard, the learned DR relied upon the following decisions.
5. Learned counsel, on the other hand, submitted that Instruction No.1979 issued on 27-3-2000 is in supercession of the earlier of the earlier Instructions on the subject of filing the appeals and hence the new monetary limits set in Instruction No. 1979 would prevail. He further submitted that the CBDT has mentioned the provisions of IT in para-2 (ii) though they intended to apply the instructions to litigation under other direct taxes also which indicate that even the monetary limits prescribed for appeals filed before the Appellate Tribunal in Income-tax matters would apply to the appeals filed under wealth-tax and other direct taxes. Learned counsel strongly relied upon the Hon'ble Supreme Court's decision in the case of 263 ITR 706 in the case of Azadi Bacha Andolan to submit that it is the duty of the ITO to follow the Instructions issued by the CBDT under Section 119 of the Act and the departmental authorities should not choose to ignore the guidelines and spend their time, talent and energy on inconsequential matters. In short, the case of the learned counsel is that though the circular of CBDT is not binding on the appellate authorities, it can direct the Officers to follow the instructions, being issued in exercise of powers under Section 119 of the Act, and thus the Tribunal is competent to dismiss the appeals as un-admitted. With regard to the observations 'each case taken singly' in Instruction No. 1979, the learned counsel stated in the written submissions as under:- "It is humbly submitted that Instruction No. 1979 clearly stipulated that the new monetary limits would apply with reference to "each case taken singly". It is further clarified that in group cases, each case should individually satisfy the new monetary limits. It is further clarified that the working out of monetary limits will therefore not take into consideration the cumulative revenue effect as envisaged in Board's earlier instruction referred above. Each case taken 'singly' clearly mean each assessment year of each case and two assessment years cannot be clubbed together for working out the monetary limit. The Instruction No. 1985 is issued on 29-6-2000 with a view to clarify the Instruction No. 1979 dated 27-3-2000. The basic instructions contained in Instruction No. 1979 hold the field and it is specifically clarified that the monetary limits in the context of "each case taken singly" would mean each assessment year for each assessee considered at one point of time. The clarification is unambiguous and it can only mean that the monetary limit has to be seen with reference to each assessment year for each assessee separately. It is impermissible to club two assessment years for working out the monetary limit as per the specific clarification contained in Instruction No. 1985. However, the example given in Instruction No. 1985 issued on 29-6-2000 is totally misconceived and erroneous. It was clearly a drafting error. The fundamental clarification is 'each case for each assessment year'. This, by no stretch of imagination, can mean/be interpreted as clubbing two assessment years if they are disposed of by a common order. The interpretation as given in the example would lead to unintended and unjustified consequences. If two separate orders are passed for two assessment years on two different dates by the CIT(A), then no appeals need to be filed and if the same appeals are disposed of by a common order, then appeal has to be filed. Such an interpretation would lead to illogical and unintended results. The basic framework of instructions is a measure for reducing litigation, which is further clarified in Instruction No. 1985 issued on 29-6-2000 in para-2 which reads as under: "2) even if the issues involved in appeal under consideration are already pending in appeal before the appellate authorities, all subsequent appeals will now be filed for particular assessment year only as indicated in (1) above, if the tax effect exceeds the prescribed monetary limits" Thus the monetary limit has to be worked out with reference to each assessment year." 6. Joining the issue the learned DR submitted that the CBDT never intended to enhance the monetary limits with regard to the appeals to be filed under wealth-tax Act since the tax rates under Wealth-tax Act were drastically reduced from 3 to 1% during the above period and many assets were taken out of tax net. At present only unproductive assets are sought to be brought under tax net under the Wealth-tax Act and also due to enhancement of basic exemption limit, there would be very few cases where the tax effect in Wealth-tax appeals would exceed Rs. 1 lakh. it was therefore submitted that the Board might have, under peculiar circumstances, thought fit not be enhance the monetary limit in respect of the departmental appeals filed under the Wealth-tax Act.
As directed by the Bench, the D/R filed a copy of instruction No. 1569 dated 3-7-84 wherein the Board has taken a policy decision of not filing appeals in respect of matters concerning Rule 1BB if the tax effect is less than Rs. 20,000/-.
7. We have carefully considered the rival submissions and perused the record. In our considered opinion, the Instruction No. 1979 dated 27-3-2000 has not made out a distinction between the income-tax matters and the appeals arising under other direct taxes in so far as taking into consideration the tax effect for filing the appeals before the Appellate Tribunal. Though the aforementioned Instruction is clear in this regard, since the learned DR has raised an issue that the monetary limits fixed under Instruction Nos. 1328 and 1612 were not changed vis-is the appeals under other direct taxes, it is necessary to explain the chronology of the events and instructions issued from time to time due to changed circumstances. In the year 1980, the CBDT issued a circular wherein it was stated that in so far as the wealth-tax appeals are concerned only when the tax effect is less than Rs. 2000/- appeal should not be filed before the Appellate Tribunal. The object was not only to reduce the litigation but also to avoid the cost involved in such litigation. On 6-4-85 Instruction No. 1612 was issued wherein the monetary limit (tax effect) is fixed at Rs. 5,000/- in respect of the appeals to filed under other direct taxes. it is also necessary to bear in mind that on 3^rd July, 1984 the CBDT in F.No.319/25/84- WT has issued a specific circular with regard to the appeals concerning the applicability of Rule 1BB of Wealth-tax Rules wherein the departmental authorities were advised not to file the appeals before the Appellate Tribunal unless the tax effect in each appeal is Rs. 20,000/- or more. Vide Instruction No. 1777 dated 4-11-87, the earlier instructions, with regard to the filing of appeals by the revenue authorities on certain issues, were modified but, with regard to the monetary limits, it was made very clear that the guidelines earlier issued by the CBDT should be adhered to. While mentioning about the earlier guidelines i.e., Instructions Nos. 1573 and 1612, the Board observed as under: "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 appeals to Supreme Court (Instruction No. 1573 dated 12-7-84 and 1612 dated 6-4-1985).
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 up to the year for which returns have been filed should be taken into consideration." For the first time, the Board specified in para-6, that these instructions would apply to the litigation under other direct taxes also e.g., Wealth-tax, Gift-tax, Estate Duty etc.
8. Vide Instruction No. 1903 dated 28-10-92, the CBDT again stated in clear terms that the other guidelines as laid down in Board's instruction No. 1777 for computing the tax effect etc., will continue to be applicable. In other words, even in the year 1992, the CBDT has made a clear demarcation, vis-is tax effect, between the appeals to be filed under Income-tax Act and the appeals under other direct taxes.
9. However, a clear departure is made while issuing instruction No.1979 dated 27-3-2000 wherein the earlier instruction with regard to the monetary limits were specifically withdrawn which is clear from paras 1 and 2 of Instruction which are extracted below.
"Reference is invited to Board's Instructions No. 1903 dated 28^thOctober, 1992 and Instruction No. 1777 dated 4^thNovember, 1987 wherein monetary limits of Rs. 25,000 for departmental appeals (In income tax matters) before the Appellate Tribunal, Rs. 50,000 for filing reference to the High Court and Rs. 1,50,000/- for filing appeal to the Supreme Court were laid down.
2. 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 here under:- (Tax effect) (i) Appeal before the Appellate Tribunal (in income-taxc matters) Rs. 1,00,000/- (ii) Appeal Under Section 260A/reference Under Section 256(2) before the High Court Rs. 2,00,000 The new monetary limits would apply with reference to each case taken singly. In other words, in group case, 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 above." Though the aforementioned instruction gives an indication that the monetary limit for filing an appeal before the Appellate Tribunal is limited to income tax matters only (when the earlier instructions are superceded, there is no monetary limit for filing the appeals under other direct taxes), Para-5 of the Instruction makes it very clear that the said instruction would also apply to litigation under other direct taxes also. If one goes by the plain language of para-2 of instruction, it looks as though the circular is limited to appeals filed under direct taxes, in view of the expression 'income-tax matters'- 'reference Under Section 256(2)'. However, the fact remains that a reference under Wealth-tax Act is permissible Under Section 27 of Wealth-tax Act and similar provisions are contained for filing reference applications under other direct taxes, but still if we have to give a meaning to para-5 of the Instruction, it has to be understood that the monetary limits etc., mentioned against items (i), (ii) and (iii) of para-2 apply to litigation under other direct taxes also. In view of the conscious decision taken by the CBDT in revising the monetary limits in supercession of earlier instructions, it is difficult to visualize that the monetary limits fixed in 1980 to 1985 vis-is Wealth-tax appeals are still permitted to be considered. It also do not appeal to logic inasmuchas, a perusal of the cost inflation index notified in the Income-tax Act indicate that by the year 2000, 100 points index has touched 406 points i.e., there is fourfold increase and the salaries of the Government officials etc., have also witnesses multiple increase; the main object being avoidance of cost involved in fighting out such litigation, the CBDT would have enhanced the monetary limits to Rs. 1 lakh commensurate with the costs involved in the year 2000 for entering into litigation. In other words, the cost of filing the appeal i.e., preparation and supervision in the process of filing the appeals by various offices, appearance by the Standing counsels or the departmental officials, would involve higher cost in the present days and the CBDT would have certainly taken all these factors into consideration in enhancing the monetary limits to Rs. 1 lakh and made it uniform in respect of the appeals under direct taxes.
10. The learned DR stressed upon the 'clarification' issued vide Instruction No. 1985 dated 29-6-2000 to submit that in respect of appeals which involve identical issue in various years, the monetary limit prescribed in Instruction No. 1979 would apply taking together the assessment years for which the appeals were filed. It is necessary to bear in mind that an expression which lacks clarity requires clarification but, in present case, the policy decision taken by the CBDT vide Instruction No. 1979 being very specific and explicit, it may not be proper to give a different view on the matter in the garb of clarification. If the CBDT is of the view that the earlier instructions contained an unintended error, it could have been withdrawn and fresh circular/instruction would have been issued, which is within the powers of CBDT Under Section 119 of the Act. However, in our considered opinion, the CBDT is not justified in interpreting an earlier Circular, issued Under Section 119 of the Act. As stated earlier, Instruction No.1979 leaves no room for doubt as to what should be the monetary limit to be taken into consideration while filing an appeal by the revenue.
From para-2 of the aforementioned instruction, it could be seen that following three points were stated explicitly i.e., (a) The new monetary limit would apply with reference to each case taken singly.
(b) In group cases, each case should individually satisfy that new monetary limits.
(c) The working out of the monetary limits will therefore not take into consideration the cumulative revenue effect.
Such being the policy decision taken by the revenue, with a view to reduce the litigation and also the cost involved therein, it is duty of the revenue authorities to scrupulously follow the policy decision taken by the CBDT and in cases where the tax effect in each case is less than Rs. 1 lakh, the departmental authorities should not prefer appeals before the Appellate Tribunal. The ITAT, Hyderabad Benches had consistently taken this view, which is in consonance with the view taken by the Hon'ble Bombay High Court in the case of CIT v. Camco Colour Company (254 ITR 565) and the judgment of Hon'ble Madras High Court in the case of CIT v. S. Annamalai (258 ITR 675). No doubt the Circulars issued by the CBDT are not binding on the Courts and Tribunals but it is the duty of the Court to see to it that the instructions, which are binding upon the revenue authorities, being issued in exercise of their powers under Section 119 of the Act, are followed by them. In this connection, it would be relevant to extract the observations of Hon'ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan "If, in the teeth of this clarification, the AO chose to ignore the guidelines and spent their time, talent and energy on inconsequential matters, we think that the CBDT was justified in issuing "appropriate" directions vide Circular No. 789 (see (2000) 243 ITR (ST.) 57), under its powers under Section 119, to set things on course by eliminating avoidable wastage of time, talent and energy of the Assessing Officers discharging the onerous public duty of collection of revenue".
It is no doubt true that a contrary view was taken by the Hon'ble Punjab & Haryana High Court in the case of Rani Paliwal v. CIT (supra) and Rajasthan High Court's decision (258 ITR 300) but the ITAT, Hyderabad Benches had consistently followed the view taken by the Hon'ble Bombay High Court (supra) and thus we are of the considered opinion that the department should not have preferred appeals in these cases since the tax effect in each case is less than Rs. 1 lakh, in fact in some cases the tax effect is barely in four digits. It is necessary to state here that in the case of Lokhiya Trading Co., (supra), the Hon'ble A.P. High Court has not expressed any view on this issue & thus it cannot be considered as a binding precedent on the issue on hand. On a conspectus of the matter, we are of the view that the appeals filed by the revenue are contrary to the Instruction No.1979 dated 27-3-2000 and accordingly we dismiss all the appeals filed by the revenue.