1. This is an appeal filed by the revenue and cross objection by the assessee against the order of learned Commissioner (Appeals), New Delhi dated 10-5-2007 for the assessment year 2002-03.
2. Rival contentions have been heard and record perused. In this case the assessee is a doctor. In the return of income his claim for HRA at Rs. 54,000was partly disallowed to the extent of Rs. 21,500. Similarly, addition was made on account of amount deposited in the bank account amounting to Rs. 3,50,656. After considering the contentions of the assessee and recording detailed finding, the learned Commissioner (Appeals) deleted both the additions. It was also argued by learned authorised representative that tax effect in the appeal filed by revenue is below Rs. 2 lakhs therefore, as per CBDT Circular No. 2, dated 24-10-2005, the department should not have filed the appeal. In the cross objection the assessee has challenged the validity of reopening under Section 147.
3. With regard to claim on HRA, the learned CIT(A) found that assessee has paid rent of Rs. 5,400 per month for 10 months which amounted to Rs. 54,000.A rent receipt from landlord was also obtained and furnished before the assessing officer. The learned Commissioner (Appeals) also recorded a finding that assessing officer has called the landlord and recorded his statement, according to which landlord was in receipt of rent of Rs. 54,000 during the year under consideration from assessee tenant. As the claim of exemption under Section 10(13A) was made with respect to rent of Rs. 54,000 paid, the same was found to be correct, we therefore, do not find any reason to interfere in the order of learned Commissioner (Appeals) for deleting the disallowance of Rs. 21,500 on account of claim of HRA under Section 10(73A).
4. With regard to the various amounts deposited in the bank account, the learned Commissioner (Appeals) verified the cash flow statement of the various amount deposited in the bank account and found that the amount so deposited were received by the assessee from her mother and/or wife who were also income-tax assessees. The learned Commissioner (Appeals) also found that wife of the assessee was also doctor and after marriage her name was also incorporated in the bank account of the assessee maintained with ICICI Bank, Connaught Place, New Delhi. The credit entries in the pass book represented salary of his wife who was working as Senior Resident Doctor at Kalawati Saran Children Hospital, New Delhi. It. was also found that prior to her marriage she had deposited her salary in the separate bank account with SBI, Paschim Vihar, New Delhi and after marriage she has added her name in her husband's saving bank account in ICICI bank and started depositing her salary in the joint account. She was also an income-tax assessee and filing her return for the relevant assessment year under consideration. Whatever unexplained cheques indicated by the assessing officer, were duly verified as per Annexure-A, by the learned Commissioner (Appeals), according to which all credit entries were duly explained. Detailed finding has been recorded by the learned Commissioner (Appeals) in his appellate order, which is as per material on record, no interference is called in the findings recorded in the learned Commissioner (Appeals) resulting in deletion of addition of unexplained credit of Rs. 3,50,656.
5. With regard to authorised representatives contention regarding dismissal of revenue's appeal on the ground of tax effect, it was contended by the learned Departmental Representative Shri Alok Kumar that appeal is covered by one of the exceptions given in the CBDT circular, therefore, cannot be dismissed on the ground of tax effect.
When the Bench precisely asked about which exception it is covered, he could not state the exception by which it is covered. I did not find any material in the record to support this contention of learned Departmental Representative, we therefore do not accept the verbal contention of learned Departmental Representative which is not supported by any materials on record. I have gone through the grounds of appeal filed by the revenue and found that tax effect in the instant appeal is less than Rs. 2 lakhs. In view of CBDT Instruction No. 2, dated 24-10-2005, the department should, not have filed the appeal before the Tribunal. For this purpose reliance may be placed on the decision of ITAT Delhi Bench in case of Vikram Bhatnagar (IT Appeal No.60 (Delhi) of 2002, order dated 10-3-2006), 2. Hon'ble Bombay High Court in the case of Pilhwa Engg. Works 276 ITR 519, have observed as under: One fails to understand how the revenue can contend that so far as new cases are concerned, the circular issued by the Board is binding on them and in compliance with the said instructions, they do not file references if the tax effect is less than Rs. 2 lakhs. But the same approach is not adopted with respect to the old referred cases even if the tax effect is less than Rs. 2 lakhs. In our view, there is no logic behind this approach.
This Court can very well take judicial notice of the fact that by passage of time money value has gone down, the cost of litigation expenses has gone up, the assessees on the file of the departments have increased; consequently, the burden on the department also increased to a tremendous extent. The corridors of the superior courts are choked with huge pendency of cases. In this view of the matter, the Board has rightly taken a decision not to file references if the tax effect is less than Rs. 2 lakhs. The same policy for old matters needs to be adopted by the department. In our view, the Board's circular dated 27-3-2000, is very much applicable even to the old references which are still undecided. The department is not justified in proceeding with the old references wherein the tax impact is minimal. Thus, there is no justification to proceed with decades old references having negligible tax effect.
6. In case of CIT v. Rajoo Engineers Ltd. (2006) 100 ITD 555 (Rajkot), it was observed that: It is true that the High Court decision in CIT v. Pithwa Engg. Works was not dealing with the new limit of the circular dated 24-10-2005. It was with reference to the earlier circular where reference was not required to be filed to the High Court if the tax effect was less than Rs. 2 lakhs. The contention of the revenue in that case was that Rs. 2 lakhs limit was increased by circular dated 27-3-2000 and prior to that, the limit was only Rs. 50,000 and the contention of the revenue was that the new limit would not be applicable to the old references. The High Court rejected the said contention of the revenue. In those circumstances, though the said High Court decision did not deal with the circular dated 24-10-2005, but it had dealt with the earlier circular and the limits of that circular were applied even to the cases which were prior to the old circular. Therefore, the ratio of that decision was applicable in the instant case as well. The CBDT has taken a policy decision not to file appeals in such type of cases and the circular is binding on the revenue even to appeals filed before 31 -10-2005 and the department would not be justified in proceeding with those appeals within the monetary limit of tax effect prescribed in the circular dated 24-10-2005.
7. As per my considered view the instructions for not filing the appeals with regard to the quantum of revenue effect being less than particular amount have not been issued by the Central Board of Direct Taxes in a light hearted manner. These are issued after a great deal of deliberations and discussion where every aspect of the matter, more particularly the question of loss of revenue is examined in depth.
Every officer is enjoined with the duty to advance the policies laid down by the Central Board of Direct Taxes and see that these are not defeated. The instructions are also aimed at reducing arrears of appeals in Courts and Tribunals. The Central Board of Direct Taxes, in the circular dated 27-3-2000, had asked all officers of- the Income-tax department under their control not to file appeals before the Appellate Tribunal in cases where the tax effect involved in appeal did not exceed Rs. 1 lakh. These instructions in question are binding on all departmental authorities and they could not be by passed and treated as of no consequence on the pretext that these were private only, and the authorities are bound to follow comply with and see that the policies laid down by the Board achieve their objectives. These instructions had been issued to avoid unnecessary litigation in small cases particularly, it was very difficult for a small assessee to come from a remote and distant place to defend an appeal filed against him in the Tribunal. The legal fees payable to the lawyer, travelling and other incidental expenses involved, were likely to be more than the tax effect in the appeal and the financial loss to such an assessee would be more, even if he legally succeeded in the appeal. Therefore, the circular/instruction definitely aimed at redressing problems of small assessees. The assessees are entitled to urge the Tribunal to enforce it. It was observed by the Hon'ble Madras High Court in CIT v. S.Annamatlai that in order to reduce the litigation for filing departmental appeals/references before the Income Tax Appellate Tribunal, High Courts and the Supreme Court, the Central Board of Direct Taxes by Circular F. No. 279/ 126/98-ITJ, dated 27-3-2000, revised the monetary limits. It was held that in case of matters not covered by the exceptions like : (i) where revenue audit objection in the case has been accepted by the department, (ii) where the Board's order, notification, instruction or circular is the subject matter of an adverse order, (iii) where prosecution proceedings are contemplated against the assessee, and (iv) where the constitutional validity of the provisions of the Act are under challenge, the appeals filed by the department should be dismissed. It was observed by ITAT Special Bench in the case of ITO v. Bir Engg. Works (2005) 94 ITD 164 (Asr.) that with a view to reduce the pendency of appeals in the Tribunal, High Court and Supreme Court and also to redress difficulties of small assessees in meeting cost of litigation, CBDT has been issuing various instructions to revenue officials prescribing the monetary limit for filing appeals before the above forums. Impugned Instruction No. 1979, dated 28-3-2000 was issued in suppression of all earlier instructions stipulating such limit of tax effect, 8. With regard to the binding nature of these instructions issued by the CBDT, on the income-tax authorities, the provisions of Section 119 of Income Tax Act are very much clear. On a plain reading of Section 119, it is clear that Sub-section (1) refers to orders, instructions and directions to the income-tax authorities by the Board. The section itself provides that all such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board. Only exceptions provided under the proviso are that such instructions cannot interfere with the discretion of the Commissioner (Appeals) in exercise of appellate functions and also cannot direct any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner. Otherwise, Section 119(1) itself mandates that such instructions shall be binding on the income-tax authorities. Section 119(2) refers to specific orders with reference to any class of income or class of cases either by way of relaxation of any of the provisions of section mentioned therein or with reference to class of income or class of cases. These instructions could be in the form of guidelines, principles or procedure to be followed by the income-tax authorities in the work relating to assessment, collection of revenue or the initiation of proceedings for the imposition of penalties. Here also the Board may, if it is of the opinion that it is necessary in the public interest to do so, publish and circulate such instructions.
Therefore, it is not in all cases that instructions/circulars issued by the Board under Section 119(2) are published by the Board. Thus, the only difference between Sub-section (1) and subsection (2) of Section 119 is that while Sub-section (2) is more specific with reference to particular class of income or class of cases. The contention of the revenue could not be accepted that instructions issued under subsection (1) were more in the nature of administrative instructions and, therefore, were not binding on the authorities because section itself mandates that such instructions shall be followed by the revenue authorities. Nowhere Section 119 provides any exception to income-tax authorities not to follow such instructions except in a case where such instructions interfere with the discretion of Commissioner (Appeals) or with the jurisdiction and power of particular income-tax authority in a particular case. Admittedly, instructions issued by the CBDT prescribing monetary limit for filing the appeals before the Tribunal, High Court or Supreme Court are not in nature which could interfere with the discretion of Commissioner (Appeals) or interfere with the powers and jurisdiction of income-tax authorities to complete the assessment order to dispose of a particular matter in a particular case in a particular manner. Therefore, these instructions are binding on income-tax authorities.
Recent Hon'ble Supreme Court in the case of Tanna & Modi v. CIT , vide its order 17-5-2007, has observed that executive instructions are binding on the authorities under the Income Tax Act, 1961.
9. In view of the above discussion and keeping in view the recent verdict of Hon'ble Supreme Court mentioned hereinabove, the tax effect in the appeals undisputedly less than the prescribed limit of Rs. 2 lakhs, I am inclined to agree with learned authorised representative Shri Manoj Garg, CA that even on the ground of tax effect, as per CBDT Circular No. 2, dated 24-10-2005, the department should not have filed the appeal In the result, appeal of the revenue is dismissed.
10. In the cross objection, the assessee has challenged validity of reopening, as we have already decided on merit in favour of the assessee, we are not going on the technical issue and the CO fields treated as infructuous.
11. In the result, both the appeal of the revenue and the cross objection of the assessee are dismissed.