Commissioner of Income Tax vs Nanak Ram Jaisinghania

The assessee filed a return of income declaring a loss of Rs. 1,13,20,160 for the assessment year 2001-02. In the return the assessee had also claimed rent charges of Rs. 55,20,545.68 and extra bed charges, laundry, etc., at Rs. 12,24,480. The Assessing Officer disallowed the interest on advances. He also disallowed the amount of Rs. 11,82,399.80 on sundry creditors on the assessee''s failure to reconcile the balance and the disallowances. After disallowing the aforesaid charges, the income was assessed at a loss of Rs. 87,96,942 thus instead of the loss of Rs. 1,13,20,160 declared by the assessee. The loss was assessed at Rs. 87,96,942. The net effect in any case was that no tax was payable. The Commissioner of Income Tax (Appeals) on the assessee''s appeal particularly sustained the additions on advances while deleting/restricting certain amounts. The Revenue went in appeal against the order of the Commissioner of Income Tax (Appeals). Cross-objections were filed by the assessee in the said appeal and one of the objections to the maintainability of the appeal was taken by the assessee on the ground that this appeal was liable to be dismissed as non-maintainable on account of no tax effect on account of the Central Board of Direct Taxes circulars and instructions which, according to the assessee, were binding by the Department. As per the Central Board of Direct Taxes Instruction No. 1979, dated March 27, 2000, and Instruction No. 2 of 2005, dated October 24, 2005, the appeals before the Income Tax Appellate Tribunal are not maintainable if the tax effect is below Rs. 2 lakhs. As per the aforesaid instructions as tax effect was nil in the present case, the appeals were non-maintainable. The Income Tax Appellate Tribunal accepted this plea of the assessee and dismissed the appeal of the Department as non-maintainable. While doing so it relied upon the following judgments:

(1) Commissioner of Income Tax Vs. Pradeep Kumar Gupta,

(2) (2006) 10 SOT 383

(3) (2006) 10 SOT 525

(4) Joint CIT v. Dev Raj Agarwal [2005] 92 TTJ (Lucknow) 436; and

(5) ITO v. M.J. Ware Housing (P) Ltd. I.T.A. No. 3839/D/04 & CO. 28/Del/07, dated August 31, 2007.

Learned Counsel for the appellant submits that the Central Board of Direct Taxes has issued OM dated May 15, 2008, which is Instruction No. 5 of 2008 and as per these instructions, in loss cases, notional tax effect is to be taken into account. The learned Counsel, however, conceded that these instructions are applicable in respect of those appeals preferred after the issuance of these instructions. In fact, it is specifically provided in paragraph 11 of the said instruction as under "this instruction will apply to appeals filed on or after May 15, 2008". However, the cases where appeals have been before May 15, 2008, will be governed by the earlier instructions on this subject, operative at the time when such appeal was filed. In the present case, appeal was filed in the year 2005 before the Income Tax Appellate Tribunal and it was dismissed on November 30, 2007, as not maintainable. These instructions came much thereafter, and in view of paragraph 11 thereof, has no applicability to the case. The Income Tax Appellate Tribunal, therefore, rightly dismissed the appeal as non-maintainable. The present appeal preferred thus clearly is a misuse of the process of law and in spite of the aforesaid clear instructions of the Central Board of Direct Taxes itself, we fail to understand as to why this appeal is preferred when the appeal before the Income Tax Appellate Tribunal itself was not maintainable. In these circumstances, we dismiss the appeal with costs quantified at Rs. 10,000 to be paid to the Delhi High Court Mediation and Conciliation Centre.