Asstt. CIT vs Arunodhaya Chemicals (P)Ltd.

K. Raviraja Pandian, J.—These appeals at the instance of the revenue filed against the order of the Tribunal, Madras A Bench, dated 19-3-2001 made in ITA Nos. 1309, 1310 and 1311/Mad/1989. The relevant assessment years are 1983-84, 1984-85 and 1985-86.

The facts of this case are as follows :

The assessee is a private limited company and was assessee for the relevant assessment years. The assessing officer determined the income after taking into account the alleged sale of rectified spirit in the black market for its use in the manufacture of arrack. The contention of the department was that such addition should have been considered while determining the commercial profits of the respondent for distribution of dividend u/s 104 of the Act. The assessment of such huge income was the result of estimation of alleged receipts on the sale of rectified spirit but for which no book profits were available for the declaration of dividend. The assessing officer determined the distributable income and the additional tax u/s 104 as follows :

Sr. No.

Heads

Amount

1.

Sale of Vehicles

Rs. 22,76,962

2.

Sale of Spare Parts

Rs. 7,57,642

3.

Evasion of sales-tax on bogus RD sales

Rs. 22,47,560

4.

Servicing of vehicles

Rs. 43,08,570

Aggrieved by the said order, appeals were filed before the Commissioner (Appeals), who held that non-declaration of dividend within the stipulated period cannot be a ground for levy of additional tax and deleted the additional tax charged. The department filed further appeals before the Tribunal which dismissed the appeals of the revenue, upholding the decision of the Commissioner (Appeals) relying on the decision of the Supreme Court in Commissioner of Income Tax, West Bengal Vs. Gangadhar Banerjee and Co. (Private) Ltd., and distinguishing the judgment of the Supreme Court in Gobald Motor Service (P.) Ltd. Vs. Commissioner of Income Tax, Madras, as to quantum addition, the assessing officer estimated the sale price of rectified spirit at Rs. 5 per litre, the Commissioner (Appeals) reduced it to Re. 1 per litre and the Tribunal upheld the order of the Commissioner (Appeals). The reference applications filed against the quantum addition are pending. Aggrieved by the orders of the Tribunal, the appellant filed these appeals by formulating the following questions of law :

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the levy of additional tax u/s 104 of the Income Tax Act, 1961 is recoverable for the assessment years 1983-84, 1984-85 and 1985-86?

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the estimated sale price of the rectified spirit was Re. 1 per litre and not Rs. 5 per litre as held by the assessing officer ?

Heard the learned counsel for the revenue and perused the material available on record. Counsel for the revenue {sic} submitted that the tax effect in all these cases are below the limit fixed by the department for filing appeal.

An issue similar to the issue in this case came up for consideration before a Division Bench of this court in the case of Commissioner of Wealth-tax Vs. S. Annamalai, , wherein it was held that in order to reduce the litigation for filing departmental appeals /references before the Tribunal, High Courts and the Supreme Court, the CBDT, by Circular F. No. 279/126/1998-IT, dated 27-32000, refixed the monetary limits, however, casting out certain exceptions. The exceptions stated are (i) where revenue audit objection in the case has been accepted by the department, (ii) where the Boards 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 revenue had not made out a case that the issue involved in the appeals before the Tribunal falls within the exceptions provided in the circular.

It may be noted that this court considered a similar issue in the case of Commissioner of Income Tax Vs. Associated Electrical Agencies, , wherein this court held as follows :

We are of the considered view that none of the exceptions stated in the circular are applicable to the facts of the present case. The circular was stated to be issued by invoking the statutory power u/s 119 of the Income Tax Act. The appeal is filed u/s 260A of the Income Tax Act. It is well-settled principle of law that each and every provision of a statute has to be given the same importance. One provision cannot be elevated to a higher pedestal than the other provision, of course, unless or otherwise specifically stated either in the scheme, the Act or in the provision itself that a particular provision is subjected to or qualified by any other provision or the provision can be given effect to notwithstanding anything contained in any other provisions by assigning overriding effect. Hence, the contention that notwithstanding the circular, which was issued u/s 119 of the Income Tax Act, the appeal could be filed by the revenue u/s 260A has to be rejected for the reason that if the contention is accepted, one of the section would become virtually otiose and that cannot be the intention of the law makers.

Thus, following the long line of case laws reported in Commissioner of Income Tax Vs. Rajasthan Patrika Ltd., and Commissioner of Income Tax Vs. P.S.T.S. Thiruvirathnam and Sons, to which one of us is a party (K. Raviraja Pandian, J.), Commissioner of Income Tax Vs. Digvijay Singh, , Commissioner of Income Tax Vs. Camco Colour Co., this court held that the uniform line of judicial opinion is that if tax effect is less than what is stated in circular, the revenue need not agitate the issue on appeal and that the circular is binding on the revenue.

The said judgment of this court in the case of Associated Electrical Agencies (supra) has been relied by the Gujarat High Court in the case of CIT v. Concord Pharmaceuticals (2008) 220 CTR (Guj) 117 to reject the appeal of the revenue where the tax effect is less than Rs. 2 lakhs. The apex court in the case of State of Kerala and Others Vs. Kurian Abraham Pvt. Ltd. and Another, has laid down that the circular issued by the CBDT is much binding on the revenue and that requires no support of judicial precedent. The appeals are filed on 30-7-2004. Hence, the circularis binding on the revenue. The appeals are dismissed. No costs.