Commissioner of Income Tax-TDS-1 v. Emsons Exim Pvt. Ltd.

1. All these petitions were heard together and are being disposed of by a common judgment as common question of maintainability of all petitions is involved.

2. The Revenue is challenging the Order dated 28/09/2019 passed by the Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’) under Section 234E of Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). It is not in dispute that an appeal against an order passed by ITAT under Section 234E of the said Act is maintainable under Section 260 A of the act. In spite of the availability of the statutory remedy of appeal, the Revenue has filed the present petitions invoking Article 226 of the Constitution of India contending that the tax effect involved is below monetary limits as prescribed in Central Board of Direct Taxes (hereinafter referred to as ‘CBDT’) Circular No.17 of 2019 dated 8th August 2019 and the issue involved in the interpretation of Section has a cascading effect.

3. Since we are deciding the petitions on a preliminary point of maintainability, it is not necessary to burden the Judgment with the facts of each case. URS 2 of 9

4. Before considering the issue about the maintainability of writ petitions, it is necessary to refer to the Circulars of CBDT dated 8th August 2019, 11th July 2018 and 20th August 2018. The CBDT vide Circular No.3 of 2018 dated 11th July 2018, prescribed revision of monetary limits for filing of appeals by Department before ITAT, High Courts and SLPs / appeals before the Supreme Court as a measure for reducing litigation. The circular dated 8th August 2019 provided that no appeal shall be filed in the High Court in respect of an assessment year or years in which the tax effect is less than the monetary limit of Rupees One Crore. It is not in dispute that the tax effect involved in the writ petition is below the monetary limit of Rupees One crore as prescribed in CBDT Circular No.17 of 2019. Paragraph 10 of Circular No.3 of 2018 as amended by Circular dated 20th August 2018 reads as under: “10. 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 or there is no tax effect; (a) Where the Constitutional validity of the provisions of an Act or Rule is 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, or

(d) Where the addition relates to undisclosed foreign income / undisclosed foreign assets (including financial assets) / undisclosed foreign bank account. (e) Where addition is based on information received from external sources in the nature of law enforcement agencies URS 3 of 9 such as CBI / ED / DRI / SFIO / Directorate General of GST Intelligence (DGGI). (f) Cases where prosecution has been filed by the Department and is pending in the Court."

5. It is undisputed that the subject-matter of present writ petitions does not fall within any criterion prescribed in clause 10 of Circular No.3 of 2018 as amended by Circular dated 20th August 2018.

6. At this stage, it would be relevant to consider the Judgment of the Supreme Court in the case of CIT, Central-III Vs. Surya Herbal Ltd. [(2011) 15 SCC 482 ] wherein the Supreme Court has observed as under: "1. Delay condoned.

2. Liberty is given to the Department to move the High Court pointing out that the Circular dated 9th February, 2011, should not be applied ipso facto, particularly, when the matter has a cascading effect. There are cases under the Income Tax Act, 1961, in which a common principle may be involved in subsequent group of matters or large number of matters. In our view, in such cases if attention of the High Court is drawn, the High Court will not apply the Circular ipso facto. For that purpose, liberty is granted to the Department to move the High Court in two weeks." The said Judgment is subsequently followed by the Supreme Court in the case of Director of Income Tax, Circle 26(1) Vs. S.R.M.B. Dairy Farming (P) Ltd. [(2018) 13 Supreme Court Cases 239] wherein the Supreme Court has held as under: URS 4 of 9 "23. We are of the view that the matter needs to be put to rest and a clarity be obtained in view of the impact of this issue on pending cases before the High Courts as well as the cases which have been disputed of by various High Courts by applying the Circular of 2011 to pending litigations. In our view the matter has been squarely put to rest taking further care of the interest of the Revenue by the order passed by the three-Judge Bench of this Court in Surya Herbal Ltd. case, which had put two caveats even to the retrospective application of the Circular. The subsequent orders have been passed by the two-Judge Bench without those orders being brought to the notice of the Court, a duty which was cast on the Department to have done so to avoid the ambiguity which has arisen. Thus, the said view of the three-Judge Bench would hold water and the Circular would apply even to pending matters but subject to the two caveats provided in Surya Herbal Ltd. case."

7. At this stage, it is necessary to quote para 7 of Circular No.3 of 2018 which reads as under: "7. In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Pr. Commissioner of Income-tax / Commissioner of Income Tax shall specifically record that "even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this Circular". Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits." URS 5 of 9

8. Reading of para 7 makes it clear that merely because the Department has not challenged a decision on the ground of tax effect being less than the monetary limit specified, there will be no presumption that the Income Tax Department has reached the said decision on the disputed issue.

9. If the revenue was of the opinion that the issue involved has a cascading effect, it was necessary for the revenue to have filed an appeal under Section 260A of the Act demonstrating that the Circular dated 8th August 2019 as amended by Circular dated 20th August 2018 will not ipso-facto apply as the issue involved is having a cascading effect.

10. The power conferred by Article 226 of the Constitution of India is designated to effectuate the law, to enforce the rule of law and to ensure that the authorities and organs of the State act in accordance with law. The said power cannot be invoked for directing the statutory authority to act contrary to law.

11. The powers conferred under Section 268A(4) of the Income Tax Act to issue directions appears to be conferred with an intention to reduce the burden on the Courts and Tribunal in respect of matters where tax effect is less than the limits prescribed. The Income Tax authorities URS 6 of 9 who are creatures of the Income Tax Act, are bound by the directions by the CBDT in exercise of power under Section 268A(4). Even before issuing such instructions, the CBDT has been issuing such instructions where the monetary limit had been fixed. The only exceptions are the cases where there is cascading effect as laid down by the Apex Court in the case of Surya Herbal Ltd. (supra).

12. The right to challenge the order passed by the Tribunal by way of statutory appeal has been circumscribed by the involvement of substantial questions of law to be decided by the High Court. While a High Court would normally not exercise its writ jurisdiction under Article 226 of the Constitution if an effective and efficacious alternate remedy is available, the existence of an alternate remedy does not by itself bar the High Court from exercising its jurisdiction in certain contingencies. This principle has been crystallized by the Supreme Court in Whirpool Corporation v. Registrar of Trademarks, Mumbai reported in 1998 (1) SCC 1. Recently, in Radha Krishan Industries v. State of Himachal Pradesh reported in 2021 SCC OnLine SC 334 Supreme Court has summarized the principles governing the exercise of writ jurisdiction by the High Court in the presence of an alternate remedy. The Supreme Court has observed: URS 7 of 9 “28. The principles of law which emerge are that: