CIT vs Sherno Ltd.

Revenue has filed this appeal challenging judgment of the income tax Appellate Tribunal dated 27-7-2012. Following questions have been presented for our consideration:

(1) Whether the income tax Appellate Tribunal was justified in holding that the assessee is entitled to interest u/s 244A on payment of taxed u/s 140A without appreciating the fact that the newly added provisions of the Act in section 244A apparently reveal that there is a liability to pay interest on the delayed payment of refund amount but they do not provide for payment of any interest on interest, even though there is delay in payment of such interest to the assessee which also gets support from the ITAT, Ahmedabad decision in the case of (2009) 125 TTJ 487 ?

(2) Although the tax effect involved is below the monetary limit prescribed by Board vide Instruction No. 3/2011 dated 09-2-2011, case falls in the exception laid down in clause (a) of Para. 8 of the above instruction wherein the Constitutional validity of the provisions of an Act or Rule are under challenge, therefore, the appeal may kindly be admitted.?

In view of admitted fact that tax appeal involves monetary effect which is below the minimum prescribed by CBEC in its circular dated 9-2-2011, permitting the Revenue to file appeal in High Court, we have not considered the question No. (1) on merits at all. Instead we have heard learned counsel Shri Parikh for the Revenue on question No. 2, which touches the aspect of entertaining this appeal even on the face of low tax effect.

The question itself suggests that according to the Revenue the appeal falls in one of the exceptions envisaged under the circular itself. We may reproduce the exception carved out in the said circular subject to which a tax appeal even though involving tax effect lower than that prescribed in the circular, Revenue could carry the matter further in appeal. Such exceptions read as follows:

Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect.

(a) Where the Constitutional validity of the provisions of an Act or Rule are under challenge, or

(b) Where Boards order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or

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

Revenues case as can be discerned from question No. 2 noted above is that since Constitutional validity of the provisions of the Act ore the Rule are under challenge the appeal may be entertained. Learned counsel Shri Parikh for the Revenue was at a loss to explain in what manner the validity of statutory provision is involved in the present appeal. Admittedly vires of statutory provision is nowhere in question. He however, strenuously urged that decision of the Tribunal is palpably erroneous.

This in our view would not enable the Revenue to ignore the conditions of the circular dated 9-2-2011 and file appeal which is other-wise not envisaged in the said circular. This Court in case of Commissioner of Income Tax Vs. Concord Pharmaceuticals, held that the instructions issued in the said circular dated 9.2.2011 are binding on the department. In other words, an appeal which is filed ignoring said directives would not be maintainable. Such is the view taken by various High Courts. Reference to all judgments is therefore, not necessary.

In the result, tax appeal is dismissed only on this ground.