The Hindu Business Line : CBDT’s instructions being ignored?

The CBDT has been instructing field officers not to file appeals if the revenue impact is less than that fixed by CBDT. But this is not being observed.

T. N. Pandey

Section 119(1) provides, in unmistakable terms, that every officer and person employed in the execution of the Act shall observe and follow the orders, instructions and directions of the Board.

Circulars issued by the Board are, thus, binding on officers and persons employed in the execution of the Act. There are umpteen court decisions right from the Apex Court, approving this view.

Recently, the Supreme Court, in the case of Tanna & Modi v. CIT (2007) 292 ITR 209 (SC) vide its order dated May 17, 2005, has again observed that executive instructions are binding on the authorities under the Act.

However, in the matter of filing departmental appeals, such instructions are being constantly flouted, leading to considerable hardship for the taxpayers and, in the process, considerable in-fructuous litigation is being generated.

The CBDT has been issuing Circulars in the last few years, instructing field officers not to file appeals before the appellate forums, if the revenue impact is less than that fixed by the CBDT.

The monetary limits fixed have been reviewed from time-to-time because of erosion in the value of money.

The latest Circular in this context is Instruction No.5/2008, dated May 15, 2008, where it has been stated that the appeals will henceforth be filed only in cases where the tax effect exceeds the monetary limits as given below:

Appeal before Appellate Tribunal — Rs 2,00,000; Appeal under Section 260A before High Court — Rs 4,00,000; and Appeal before Supreme Court — Rs 10,00,000.

These general instructions are subject to certain exceptions. Appeals will be filed in the following circumstances even if the revenue impact is below the monetary limits prescribed, namely:

Where the Constitutional validity of the provisions of an Act or Rule are under challenge.

Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires.

Where the Revenue Audit objection in the case has been accepted by the Department.

However, in spite of the binding nature of the instructions, appeals are being filed despite the revenue impact being less than the prescribed limits.

In the month of July, 2008, itself, some appeals have been dismissed by the Tribunal on the ground that the revenue impact is less than that prescribed by the CBDT.

(i) ACIT, Karnal Circle v. Assandh Coop. Marketing-cum-Processing (2008) 23 SOT 11 (Del)

The Tribunal, finding that the tax effect is less than Rs 2 lakh, dismissed the appeal, saying that 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 CBDT in a light-hearted manner.

These are issued 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.

Every officer is enjoined with the duty to advance the policies laid down by the CBDT and see that these are not defeated. The instructions are also aimed at reducing arrears of appeals in Courts and Tribunals.

(ii) DCIT v. Net 4 India Ltd. (2008) 23 SOT 72 (Del)

This appeal has also been dismissed by the Tribunal on the same ground as above. In this decision, the Tribunal has referred to a decision of the Delhi High Court in the case of CIT v. Manish Bhambri [IT Appeal No.683 (Delhi) of 2007 dated August 1, 2007], where the court upheld dismissal of appeal by the Tribunal, where such appeal was filed in violation of the CBDT instructions regarding tax effect for filing appeal before the Tribunal.

(iii) DCIT, CC-19, New Delhi v. Ashish Gupta (2008) 23 SOT 184 (Del)

The quantum of revenue involved being less than that fixed by the CBDT, the Tribunal dismissed the appeal. Referring to section 119(1) of the Act, it said the CBDT’s instructions were binding on the A.O. and should have been followed.

(iv) ACIT, Bhiwani v. Kapoor Singh (2008) 23 SOT 297 (Del)

The revenue effect being less than Rs 2 lakh, the appeal has been dismissed. The Tribunal has observed that the instructions issued by the CBDT are binding on the departmental authorities and could not be bypassed and treated as of no consequence on the pretext that these were of a private nature.

The authorities are bound to follow, comply with and see that the policies laid down by the CBDT achieve their objectives. The Tribunal has said that “these instructions have been issued to avoid unnecessary litigation in small cases….”

The flouting of CBDT’s orders becomes more serious because appeals to the Tribunal are filed after the approval of a senior functionary, such as the CIT.

The objective behind the Circulars of the CBDT is getting thwarted because of these getting ignored at field level. The CBDT needs to take effective steps to improve the situation.

(The author is a former chairman of CBDT. Responses to blfeedback@thehindu.co.in.)